Social
Science
Class
10 Economics.
Money
and Cradit Short Queston Answer.
Social Science Class 10 Important Questions Economics Chapter 3 Money and Credit Class 10 Important Questions
1. Why are transactions made i money?
Answer: A person holding money can easily
exchange it for any commodity or service that he or
she might want.
2. How is money beneficial in transactions? [CBSE
(F) 2017]
Answer: Money beneficial in transactions. It
eliminates the need for double coincidence of
wants. It acts as a medium of exchange.
3. What is ‘double coincidence of wants’?
Answer: What a person desires to sell is exactly
what the other wishes to buy.
4. What is barter system?
Answer: When goods are directly exchanged for
goods and there is no use of money, it is called
barter system.
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exchange things? Give an example.
Answer: A person holding money can easily
exchange it for any commodity or service that he or
she might want.
Example: The shoe manufacturer will first
exchange shoes that he has produced for money
and then exchange the money for wheat.
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6. Why one cannot refuse a payment made in
rupees in India? [CBSE (Delhi) 2016]
Answer: One cannot refuse a payment made in
rupees in India: Because it is accepted as a
medium of exchange. The currency is authorized by
the government of the country.
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7. Highlight the inherent problem in double
coincidence of wants. [CBSE (Delhi) 2017]
Answer: The inherent problem in double
coincidence of wants is that both parties have to
agree to sell and buy each other’s commodities.
8. What was used as money in early ages in India?
Answer: In the very early ages, Indians used grains
and cattle as money.
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9. Which metals were used for making coins in
India in later stages?
Answer: Gold, Copper, Silver coins were used in
later stages for making coins in India.
10. What does modern form of money include?
Answer: Modern form of money includes currency—
that is paper notes and coins.
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11. Does modern currency have any use of its own?
Answer:
Unlike the things that were used as money earlier,
modern currency is not made of
precious metal such as gold, silver and copper. And
unlike grain and cattle, they are neither of
everyday use. The modern currency is without any
use of its own.
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12. Why is modern currency accepted as a medium
of exchange?
Answer:
It is accepted as a medium of exchange because
the currency is authorised by the
government of the country.
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13. In India, who is authorised to issue notes and
currency?
Answer:
In India, ‘Reserve Bank of India’ issues currency
notes on behalf of the central
government.
14. What are ‘demand deposits’?
Answer:
People deposit their money in the bank as it earns
interest. Since the deposits in the
bank accounts can be withdrawn on demand, these
deposits are called demand deposits.
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15. What is a ‘cheque’? [CBSE (F) 2017]
Answer:
A cheque is a paper, instructing the bank to pay a
specific amount from the person’s
account to the person on whose name the cheque
has been issued.
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16. What do the banks do with the deposits which
they accept from the public?
Answer:
(i) Banks keep only a small proportion of their
deposits as cash with themselves.
(ii) Major portion of the money deposits are used to
extend loans.
17. How do banks act as a mediator?
Answer:
Banks mediate between those who have surplus
funds (depositors) and those who are
in need of these funds (the borrowers).
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18. Why is it difficult for poor to get loan from
Banks? [CBSE (AI) 2017]
Answer:
Absence of Collateral is one of the major reasons
which prevent the poor from getting
bank loans.
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19. What is the main source of income of the
banks, if they forward the depositor’s money to
the lender?
Answer: Banks charge a higher rate of interest on
loans than what they offer on deposits. The
difference between what is charged from
borrowers and what is paid to depositors is their
main source of income.
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20. What is ‘credit’?
Answer:
Credit (loan) refers to an agreement in which the
lender supplies the borrowers with
money, goods or services in return for the promise
of future payment.
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21. What do the farmers in rural areas take loans
for?
Answer:
Farmers take loans for crop production which
involves considerable costs on seeds,
fertilizers, pesticides, water, electricity, repair of
equipment, etc.
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22. What is a ‘debt trap’?
Answer:
Credit in some cases pushes the borrower into a
situation from which recovery is very
painful.
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23. What is ‘credit’? What is ‘collateral’?
Answer:
Credit (loan) refers to an agreement in which the lender
supplies the borrowers with money, goods or services in return
for the promise of future payment.
‘Collateral’ is an asset that the borrower owns
(such as land, building, vehicle, live
stocks, deposits with banks) and uses this as a
guarantee to a lender until the loan is repaid.
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24. What are the main ‘terms of credit’?
Answer: Interest rate, collateral and
documentation requirement and the mode of
repayment together comprise what is called ‘terms
of credit’.
25. What are informal sectors of loan?
Answer: Informal sectors include moneylenders,
traders, employers, relatives and friends, etc.
26. What are the formal sectors of loan?
Answer: Formal sectors of loan include all the
banks and cooperatives.
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27. Why are most of the poor households deprived
from the formal sector of loans? [CBSE (AI)
2016]
Answer: Most of the poor households are deprived
from the formal sector of loans because of:
(i) Lack of collateral.
(ii) They are illiterate.
(iii) Cannot fulfill the formalities of the formal
sector of loans.
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28. What report is submitted periodically by all the
banks to RBI?
Answer: Periodically, banks have to submit
information to the RBI on how much they are
lending, to whom and at what rate.
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29. Why do informal sectors charge interest rate at
their own risks?
Answer: There is no organisation which supervises
the credit activities of lenders in the informal
sector. Therefore, they lend at whatever interest
rate they choose. No one stops them from using
unfair means to get their money back.
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30. Why do banks and cooperatives need to lend
more?
Answer: Banks and cooperative societies need to
lend more. This would lead to higher incomes
and many more could then borrow cheaply for a
variety of needs. Cheap and affordable credit is
crucial for the country’s development.
31. Why should credit at reasonable rates be
available to all?
Answer: At present, it is the rich households who
receive formal credit whereas the poor have to
depend on the informal sources. It is important that
the formal credit is distributed more equally
so that the poor can benefit from the cheaper
loans.
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32. What prevents the poor from getting bank
loans?
Answer:
Bank loans require proper documents and
collateral. Absence of collateral is one of the
major reasons which prevents the poor from
getting bank loans.
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33. Prove with an argument that there is a great
need to expand formal sources of credit in
rural India. [CBSE (AI) 2016]
Answer:
To expand formal sources of credit in rural India,
dependence on informal sources of
credit has to be reduced.
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34. What are SHGs?
Answer:
They are Self Help Groups, who provide mutual
support to each other.
35. For what purposes do SHGs give loans to its
members?
Answer: Small loans are provided to the members
for releasing mortgaged land, for meeting
working capital needs like buying seeds, fertilizers,
raw materials like bamboo and cloth for
housing, materials for acquiring assets like sewing
machines, handloom, cattle, etc.
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36. Give any two advantages of SHGs.
Answer:
(i) SHGs help borrowers overcome the problem of
collateral.
(ii) They can get timely loans for a variety of
purposes and at reasonable rates.
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37. How does the use of money make it easier to
exchange things?
Answer:
In an economy where money is in use, it eliminates
the need for double coincidence of
wants by providing the crucial intermediate step.
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38. What do you mean by the term ‘collateral’?
[CBSE Sample Paper 2017]
Answer:
It is an asset that the borrower owns and uses this
guarantee to a lender until the loan
is repaid.
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39. Recognize the situation when both the parties
in a barter economy have to agree to sell
and buy each other’s commodities? What is it
called? [CBSE Sample Paper 2016]
Answer:
This is known as double coincidence of wants.
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40. Amit is using his money to buy assets like
house, commercial land and machines. Write
what is he actually doing? [CBSE Sample Paper
2016]
Answer:
He is investing his money with a hope of earning
profits from these assets.
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41. How do the deposits with banks become their
source of income? [CBSE (Delhi) 2016]
Answer:
The Source of income of bank: Banks charge
higher interest rate on loans than what
they offer on deposits. The difference of interest is
the main source of income of banks.
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42. Compare formal sector loans with informal
sector of loans regarding interest only. [CBSE
(Delhi) 2016]
Answer:
Comparison of formal sector loans with informal:
Most of the informal lenders charge a
much higher interest on loans than the formal
sector loans.
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43. Why is the supervision of the functioning of
formal sources of loans necessary? [CBSE (AI)
2016]
Answer:
Supervision of the functioning of formal sources of
loans is necessary because—Banks have to submit
information to the RBI on how much they are
lending to when they are lending and what interest
rate, etc.
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44. How does money eliminate the need for double
coincidence of wants? [CBSE (F) 2016]
Answer:
If you have money in your pocket, you can purchase
anything at any time as you wish
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