Chapter-3 Money and Credit- Class-10-Social Science-Topicwise Question Answers
Q1. What is Money?
Answer: Money is a medium of Exchange. Money is used in our everyday life to make transactions.Goods are being bought and sold with the use of money.
Q2. Explain the role/importance of money?
Answer:
a) Money can easily exchange it for any commodity or service that he or she might want.
b) Everyone prefers to receive payments in money.
c) It is easier to compare the value/worth of different goods and services.
d) Money can be saved and stored for future use.
e) Money reduces the time and effort required for transactions.
Q3. What means Barter system?
Answer: Barter system is exchange of goods and services with goods and services without use of money.
Q4. What is meant by double coincidence of whats?
Ans. It means when the parties, sellers and the buyers have to agree to sell and buy each other’s commodities. Goods are directly exchange without the use of money.
Q5. Mention any two problems of barter system.
Ans.
1. Problems of double coincidence of wants:-
It is very difficult to find out matching demand of two individuals all the time.
2. Problem of divisibility:-
Some goods are indivisible and, therefore , cannot be exchange with other small size goods. For example, heavy machine cannot be exchanged with 5 quintal of wheat.
Q6. How does money act as a medium of exchange? Explain with examples.
Ans.
1. Money is something that acts as a medium of exchange in transactions.
2. A person holding money can easily exchange it with any commodity or service he wants.
3. Everyone prefers to receive payment in money and then exchange the money for articles that they desire.
4. It is far better than the barter system. It solves all the problem of double coincidence of wants.
5. With the help of money, one can buy a commodity of his choice whenever he is so desires.
6. Money makes every transaction mature smoothly and satisfies both buyers and sellers of a commodity.
Q7. What are the modern forms of currency?
Ans.
The modern forms of currency are:-
1. Paper notes
2. Demand deposit
3. Cheques
4. Plastic money: Debit card and credit card.
Q8. Why modern currency is accepted as a medium of exchange without any use of its own? Find out the reasons.
Ans.
Modern currency is accepted as a medium of exchange without any use of its own because:
1. Modern currency is authorised by the government of a country.
2. In India, Reserve Bank of India issues all currency notes on behalf of Central Government.
3. No other individuals or organisation is allowed to issue currency.
4. Indian laws legalize the use of rupee as a medium of payment that cannot be refused in setting transactions in India.
5. No individuals in India can leagly refuse a payment made in rupees.
Q9. What is demand deposit? List two advantages of demand deposit.
Ans.
People save their money in banks by opening and account. The deposit in the bank account can be withdrawn on demand, so these deposits or called demand deposit.
Advantages:-
1. Banks except the deposits and also pay the interest rate on the deposites. In this way people’s money is safe with the banks and it earns an interest.
2. People also have the provision to withdraw the money as and when they required.
3. The facility of cheques against demand deposit make it possible to directly settle payment without the use of cash.
Q10. What is cheque? What is the advantages of using a cheque for payment?
Ans.
A cheque is a paper instructing the bank to pay a specific amount from the person’s account to the other person or the accountholder.
Advantages :-
1. We issue cheque against demand deposit, which make it possible to directly settle payment without the use of cash.
2. Since cheque/demand drafts are widely accepted as a means of payment along with currency, the constitute money in the modern economy.
Q11. What do the banks do with the deposits which they accept from the public?
or
How do banks mediate between those who have surplus money and those who need money?
Ans:
1. Banks keeps only small portion of their deposits (about 15% )as cash.
2. This is kept as provision to pay the depositors who might come to withdraw money from the bank on any given day.
3. Bank uses the major portion of the deposits to expand loans.
4. There is a huge demand for loans for various economic activities. Banks make use of the deposits to meet the loan requirement of the public.
5. In this way, banks mediate between those who has surplus funds and those who are in need of this funds.
6. Banks charge higher rate of interest on loans then what they offer on deposites.
7. The difference between what is charged from borrowers and what is paid to depositors is their main source of income.
Q12. What is credit?
Ans.
Credit (loan) refers to an agreement in which the landers supplies the borrowers with money goods or services in return for the promise of future payment.
Q13. What is a debt trap?
Ans. Repayment of loan and interest by getting another fresh loan is known as debt trap.
Q14. Why do farmers require credit?
Ans. Farmers require credit to purchase seeds, fertilizers, pesticides and for irrigation purposes.
Q15. How credit play a vital and positive role for development? Explain with examples.
or
Why is cheap and affordable credit important for the country development? Explain with reasons.
Ans.
1. Credit helps those people from all walks of life in setting up their business, increase their income and support their families.
2. Credit helps in the development of Primary, secondary and tertiary sector.
3. Credit helps the people to meet the ongoing expensive production, complete production on time and thereby increase his earnings.
4. Credit helps the farmers to purchase fertilizers, pesticides, the repair of agriculture equipments etc.
5. Farmers usually take crop loan at the beginning of this season and repay the loan after harvest.
6. Cheaper credit help rural and urban houseold in removing their poverty and improving their standard of living.
Q16. What is meant by the term of collateral security?
Ans.
It is an asset used by borrowers as a guarantee shown to lander while taking loan.
if the borawar fails to repair the loan, lender can recover it from the sale of such asset.
It may be land, a house deeds or fixed deposit etc.
Q17. What are the main terms of credit?
Ans.
The terms of credit include:
1. Collateral
2. Documentation
3. Interest rate
4. Mode of repayment.
5. Repayment period
Q18. Explain the difference between formal and informal source of credit.
or
What are the two sources of credit? Mention five features of each.
Ans.
Formal sector credit
1. Formal source of credit include banks, cooperative societies and government agencies.
2. It is a cheaper source of credit.
3. Banks requires collateral and proper documentation for getting a loan.
4. A part from profit making they also have an objective of social welfare.
5. The Reserve Bank of India supervises its functioning.
6. Rich urban households depends largely on formal source of credit.
Informal sector credit:-
1. Informal source of credit includes money lenders, traders, landlords and friends.
2. It charges very heavy interest on loans.
3. No collateral is required.
4. Their only motive is to extract profit as much as possible.
5. Banks do not supervis.
6. Poor households largely depends on informal source of credit.
Q19. “Most of the poor households are still depended on informal sources of credit.” Explain the statement.
Ans.
1. Banks are not present everywhere in rural India whereas informal sources are easily available in all villages.
2. Moneylenders provide loan to the poor people without any collateral.
3. They want to avoid frequent visits to banks, being illiterate.
4. The poor people have hesitation in making communication with the employees of the financial institutions.
5. The browers can, if necessary approach the moneylenders even without repaiying their earlier loans.
Q20. Why do we need to expand formal sources of credit?
Ans.
We need to expand formal sources of credit because:-
1. India’s rural sector had been in the grip of moneylenders with severally exploit illiterate farmers in several ways.
2. There is no organisation which supervises the credit activities of lenders in informal sector.
3. They exploit the poor farmers by charging high interest and through unfair accounting.
4. On the other hand banks and cooperative societies are supervised by Reserve Bank of India.
5. RBI ensures that loans are given no to only to profit making business man and traders but also small cultivators, small scale industries etc.
6. So formal sources of credit help in reducing the dependence on informal sources of credit.
Q21. How do banks play an important role in the economy of India?
Ans.
The banks play an important role in the economy of a country:-
1. They keep the money of the people in safe custody.
2. They give interest on the deposit money to the people.
3. Banks provide loan to the industry and the speed of the wheel of manufacturing units.
4. Debit/ Credit card, net banking and e-wallets are useful for shopping and withdrawal of fund anywhere in the world.
5. They promote agriculture and industrial sector by providing loan at cheaper rate.
6. They mediate between those who have surplus money and those who are in need of money.
7. Bank provide adequate funds for capital formation that helps in the promotion of economic growth.
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To Learn More Click Below:
* Chapter-1 Development
* Chapter-2 Sectors of the Indian Economy
* Chapter-3 Money and Credit
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