Question

CBSE Class–10 Social Science
NCERT Solutions
Economics Chapter 3
Money and Credit

Question 1. In situations with high risks, credit might create further problems for the borrower. Explain.
Answer: This statement is true "In situations with high risks, credit might create further problems for the borrower". This is also known as a high uncertainty, debt trap is common. Thus, in situations with high risks, if the risks affect a borrower badly, then he ends up losing more than he would have without the loan.

Question 2. How does money solve the problem of double coincidence of wants? Explain with an example of your own.
Answer: In a barter system where goods are directly exchanged without the use of money, the double coincidence of wants is an essential feature. By serving as a medium of exchanges, money removes the need for double coincidence of wants and the difficulties associated with the barter system. For example, it is no longer necessary for the farmer to look for a book publisher who will buy his cereals at the same time sell his books. All he has to do is find a buyer for his cereals. If he has exchanged his cereals for money, he can purchase any goods or service which he needs. This is because money acts as a medium of exchange.Medium of exchange is one of the three fundamental functions of money in mainstream economics. It is a widely accepted token which can be exchanged for goods and services.

Question 3. How do banks mediate between those who have surplus money and those who need money?
Answer: Banks accept deposits from people who have surplus money, paying interest on these deposits. The banks use the major portion of the deposits to extend loans to those who need money, charging them slightly higher interest than what they pay to the depositors. It is with the banks help both the people benefit,person having surplus money and the person in need of money. In this way, banks mediate between those who have surplus money and those who need money.

Question 4. Look at a 10 rupee note. What is written on top? Can you explain this statement?
Answer: The following words are written on the top of a 10 rupee note:

Reserve Bank Of India
Guaranteed by the Central Government of India
I promise to pay the bearer the sum of Ten Rupee

A 10 rupee note is acceptable as a medium of exchange because it is authorized by the government of India. In India, Reserve Bank of India ​

Answer 1

Answer:

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Answer 2

Explanation:

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