I want some important question answers of the chapter money and credit class 10 economics. don't don't post irrelevant answers. don't don't Google. please please help me
Answers
Explanation:
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 debt-trap. Taking credit involves an interest rate on the loan and if this is not paid back, then the borrower is forced to give up his collateral or asset used as the guarantee, to the lender. If a farmer takes a loan for crop production and the crop fails, loan payment becomes impossible. To repay the loan the farmer may sell a part of his land making the situation worse than before. The farmer had taken a loan to improve his situation but his situation worsens due to nonpayment of loans. Since farming is associated with 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 issues currency notes on behalf of the central government. The statement means that the currency is authorized or guaranteed by the Central Government. That is, Indian law legalizes the use of rupee as a medium of payment that can not be refused in setting transaction in India. As a promise written on a promissory note, the RBI promises the bearer to pay the given sum of money.
Question 5. Why do we need to expand formal sources of credit in India?
Answer: We need to expand formal sources of credit in India due to:
To reduce dependence on informal sources of credit because the latter charge high interest rates and do not benefit the borrower much.
Cheap and affordable credit is essential for country’s development. The formal sector still meets only about half of the total credits needs of the rural people.
Banks and co-operatives should increase their lending, particularly, in rural areas. Rural borrowers depend on informal sources like moneylenders who charge them a high rate of interests, which can sometimes land them into a debt-trap.
This would lead to higher incomes and many people will be able to borrow cheaply for a variety of needs. They will be able to grow crops, do business, set up small scale industries etc
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