important question for class10 money and credit. please
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Money and Credit Questions and Answers CBSE Class 10 Board Exam
Sasmita Sasmita
2 years ago
1 Mark Questions
Question 1. Give any two examples of informal sector of credit.
Answer : The two examples of informal sector of credit are moneylenders and friends.
Question 2. Highlight the inherent problem in double coincidence of wants.
Answer : The inherent problem in double coincidence of wants is both the parties (seller and the buyer) have to agree to buy and sell each other’s commodities.
Question 3. How does the use of money make it easier to exchange things? Give an example.
Answer : In barter system, if a shoe manufacturer wants to sell shoes and buy wheat, first he has to look for a wheat-growing farmer who wants to buy shoes and needs to sell wheat.
Money can make it easier to exchange the things. The shoe manufacturer can sell the shoes for money and then with that money he can bed to buy wheat.
Question 4. How is money beneficial in transactions?
Answer : Money is beneficial in transactions as we can directly settle the transaction with use of it.
Question 5. How do the deposits with the banks become their source of income?
Answer : With the deposits in the bank, the bank use it to extend loan to the borrowers with the high rate of interest. Bank pays less rate of interest to the depositors. The difference is the source of income of the banks.
Question 6. Why can one not refuse a payment made in rupees in India?
Answer : One cannot refuse a payment made in rupees in India because it is authorized by the government of the country.
Question 7. Compare formal sector loans with informal sector loans regarding interest only.
Answer : The rate of interest charged by the formal sector is low whereas it is high in case of the informal sector.
Question 8. Why is the supervision of the functioning of the formal sources of loans necessary?
Answer : The supervision of the functioning of the formal sources of loans necessary to protect the borrowers from any kind of harassment as done in the informal sector.
Question 9. Prove with an argument that there is a great need to expand formal sources of credit in rural India.
Answer : There is a great need to expand formal sources of credit in rural India so that the people can be protected from the clutch of the moneylenders and improve their economic condition.
Question 10. Why are most of the poor households deprived from the formal sector of loans?
Answer : As the banks are not available everywhere in the rural areas and also due to its documentation process, most of the poor households are deprived from the formal sector of loans.
Question 11. How does money eliminate the need for double coincidence of wants?
Answer : Money acts as an intermediate in the exchange process and thus eliminates the need for double coincidence of wants.
Question 12. What is the meaning of barter system?
Answer : In the earlier times, before the introduction o f money, goods and services were exchanged with goods and services. This system of exchange was termed as barter system.
Question 13. What is meant by double coincidence of wants?
Answer : An essential feature of barter system is double coincidence of wants in which, both the parties (seller and the buyer) have to agree to buy and sell each other’s commodities.
Question 14. How does money act as a medium of exchange?
Answer : Money acts as an intermediate in the exchange process and eliminates the need for double coincidence of wants. As money acts as intermediate, it is also called medium of exchange.
Question 15. What is a cheque?
Answer : A cheque is a paper that instructs the bank to pay a specific amount from the holder’s account to the person in whose name the cheque has been issued.
Question 16. Who supervises the functioning of the formal sources of loans?
Answer : The functioning of the formal sources of loans is supervised by the Reserve Bank of India.
Question 17. What are the two forms o f modern currency?
Answer : Paper notes and coins are the two forms of modern currency.
Question 18. What is collateral?
Answer : It is an asset that the borrower owns and given to the lender as a guarantee that he will repay the loan. If the borrower is unable to repay the loan then the lender has the right to sell it and get the money back.
Question 19. Define credit.
Answer : Credit is an agreement between the lender and the borrower in which the borrower promises to pay the lender in the future.
Question 20. Which are the two major sources of formal loan for rural households.
Answer : The two major sources of formal loan for rural households are Banks and Cooperatives.
- 3
Very Short Answer Type Questions [1 Mark]
Question 1.
How do the deposits with the banks become their source of income?
Answer:
Banks use a major portion of deposits to extend loans. They 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 the depositors is the main source of income for the banks.
Question 2.
Why can one not refuse a payment made in rupees in India?
Answer:
One cannot refuse a payment made in rupees in India because it is authorised
by the government of India. It is accepted as a medium of exchange all over the country.
Question 3.
Compare formal sector loans with informal sector loans regarding interest only.
Answer:
In formal sector, the rate of interest is low. It is fixed by the Reserve Bank of India, who supervises the functioning of formal sources of loan.
In informal sector, the rate of interest is very high as there is no organisation to supervise the functioning of informal sources of loan.
Question 4.
Why is the supervision of the functioning of formal sources of loans necessary?
Answer:
It is necessary to supervise the functioning of formal sources of loans because the banks have to maintain a minimum cash balance out of the deposits they receive. They should also provide loans to small cultivators, mall scale industries etc.
Question 5.
Prove with an argument that there is a great need to expand formal sources of credit in rural India.
Answer:
There is a great need to expand the formal sources of credit in rural India because:
There is no organisation to supervise credit activities of the informal sector. It could lead to increasing debt among the borrowers.
The rate of interest is very high in informal sector.
Question 6.
Why are most of the poor households deprived from the formal sector of loans?
Answer:
Most of the poor households are deprived from the formal sector of loans because they do not have the collateral to keep with the banks.
Question 7.
How does money eliminate the need for double coincidence of wants?
Answer:
Money solves the problem of double coincidence of wants by acting as a medium of exchange.
Short Answer Type Questions [3 Marks]
Question 8.
How can money be easily exchange for goods or services? Give an example to explain.
Answer:
Transactions are made in money because a person holding money can easily exchange it for any commodity or a service. It solves the problem of double coincidence of wants by acting as a medium of exchange.
For example, a shoe manufacturer wants to sell shoes in the market and wants to buy rice. Under barter system, both parties selling shoes and rice have to agree to buy and sell each other’s commodities and this creates a problem which is referred to as double coincidence of wants. This problem is overcome by the introduction of money. Now, the shoe manufacturer will sell the shoes for money and with that money he can buy rice.
Question 9.
“The credit activities of the informal sector should be discouraged.” Support the statement with arguments.
Answer:
The credit activities of the informal sector should be discouraged because:
There is no organisation to supervise the credit activities of the lenders in informal sector.
The informal sector lends at a very high rate of interest and use unfair means to get the money back.
Higher cost of borrowing means a large part of the earnings of the borrowers is used to repay the loan. Hence, the borrowers have less income left for themselves.
Sometimes, due to higher rate of interest, the amount to be repaid becomes higher than the income of the borrower due to that there ig always a risk for borrowers to fall in debt-trap.
Question 10.
“Cheap and affordable credit is crucial for the country’s development.” Assess the statement.
Answer:
Cheap and affordable credit is crucial for a country’s development because:
More lending would lead to higher incomes and encourage people to invest in agriculture, engage in business and set up small industries.
Cheap credit will enable more investment. This leads to acceleration of economic activity.
Cheap credit would also allow weaker sections of society to access formal sector of lending and get rid of from informal moneylenders.
Affordable credit would also end the cycle of debt trap.
Cheap and easy terms of credit would inspire better investment in technology and thus increase competition.
Explanation:
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