Important Questions From Money and Credit

Important Past year Questions for Class 10th Money and Credit

Q. 1. Why are transactions made in money?

Ans. A person holding money can easily exchange it for any commodity or service that he or she might want.

Q. 2. How is money beneficial in transactions?

Ans. Money beneficial in transactions It eliminates the need for double coincidence of wants. It acts as a medium of exchange.

Q. 3. Why one cannot refuse a payment made in rupees in India?

Ans. 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.

Q. 4. Highlight the inherent problem in double coincidence of wants.

Ans. The inherent problem in double coincidence of wants is that both parties have to agree to sell and buy each others commodities.

Q. 5. In India, who is authorised to issue notes and currency?

Ans. In India, ‘Reserve Bank of India’ issues currency notes on behalf of the central government

Q. 7. Why is currency accepted as a medium of exchange?

• Ans.Modern forms of money include currency—paper notes and coins.
• Modern currency is not made of precious metals such as gold, silver and copper.
• The modern currency is without any use of its own.
• In India, Reserve Bank of India issues currency notes on behalf of the Central government.
• As per the Indian law, no other individual or organisation is allowed to issue currency.
• No individual in India can legally refuse a payment made in rupees.

Q. 8.“Banks are efficient medium of exchange.” Support the statement with arguments.

Ans. Banks are efficient medium of exchange:

(i) Demand deposits share the essential features of money.

(ii) The facility of cheque against demand deposit makes it possible to directly settle payment without the use of cash.

(iii) Demand deposits are accepted widely as a means of payment.

Q. 9. What are ‘demand deposits’?

• Ans. Workers who receive their salaries at the end of each month have extra cash at the beginning of the month.
• This extra cash is deposited with the bank by opening a bank account in their name.
• Banks accept the deposits and also pay an interest rate on the deposits.
• In this way, people’s money is safe with the banks and it earns an interest as well.
• People also have the provision to withdraw the money as and when they require.
• Since the deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits

10. Explain any two features each of formal sector loans and informal sector loans.

Ans. Formal Sector Loans

(i) It provides loans at a fixed rates and terms.

(ii) It gives loans not just to profit-making businesses and traders but also to

small cultivators, small-scale industries to small borrowers etc.

Informal Sector Loans

(i) Rates of interest are not fixed. Moneylenders can charge whatever interest rate they choose.

(ii) There is no one to stop them from using unfair means to get their money Back

How is the facility of cheque useful?

Ans. A cheque is a paper instructing the bank to pay a specific amount from a person’s

account to the person in whose name the cheque has been issued. The payer,

who has an account with the bank, makes out a cheque for a specific amount.

The facility of cheques against demand deposits makes it possible to directly

settle payments without the use of cash.

Q11. Why are the deposits in the banks called ‘demand deposits’? What are the benefits of deposits with the banks?

Ans. People deposit extra cash with the bank by opening a bank account in their name. Banks accept the deposits and also pay an amount as interest on the deposits. In this way people’s money is safe with the banks and it earns an amount of interest. People also have the provision to withdraw the money as and when they require. Since the deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits.

Q11. What is credit? What is its importance?

Ans. Credit refers to an agreement in which the lender supplies the borrowers with money, goods and services in return for the promise of future payments.

Importance of credit

(i) In some situation, credit helps to increase earnings and therefore the person is better off than before.

(ii) We can understand it with an example. Salim obtains credit to meet the working capital needs of production. The credit helps him to meet the ongoing expenses of production, complete production on time and thereby increase his earnings. Thus, credit plays a rival and positive role in this situation.

12. What are Self-Help Groups? Describe, in brief, their functioning.

Ans.

• Self-Help Groups consist of certain members who pool their savings and constitute a fund which is further used in making finance and advances to other members.
• A typical Self-Help Group has 15 to 20 members.
• The members pool their savings and after some time, it becomes a large amount which is used to give loans to the needy ones at a very nominal rate of interest.
• This helps to reduce the functioning of informal sectors of credit.
• After a year, if such a group is regular in its savings, it becomes eligible for availing loan from the bank.
• Loan is sanctioned in the name of the group and is meant to create self-employment opportunities for the members.
• Loans are provided for releasing mortgaged land, for meeting working capital needs as buying seeds, fertilisers, raw materials, for acquiring assets like sewing machine, handlooms, cattle, etc.
• Important decisions regarding the savings and loan activities are taken by the group members.
• The group decides the purpose, amount, interest to be charged, repayment schedule etc. Non-repayment is taken seriously.
• Because of this feature, banks are willing to lend loan especially to the poor women when organised in SHG.

13. Write the reasons for the increase in Popularity of Self help Groups SHGs are becoming popular for the following reasons:

(i) They help borrowers overcome the problem of lack of collateral.

(ii) They can get timely loans for variety of purposes and at a reasonable interest rate.

(iii) They are building blocks of the organisation of the rural poor.

(iv) It helps women to become self-reliant.

(v) The regular meetings of the group provide a platform to discuss and act on various social issues such as health, nutrition, domestic violence etc.

14. Grameen Bank of Bangladesh has done a great job in the rural areas of the country. Which values according to you is it able to support?

Ans.

• Grameen Bank of Bangladesh was started in the 1970s as a small project.
• But soon it achieved grand success in removing poverty from the country.
• It helps the poor to meet their credit needs at reasonable rates. Almost all of the borrowers are women who belong to poorest sections of the society.
• These borrowers have proved themselves very reliable.
• They use the money in a number of income generating activities and thus empower themselves and their families.
• The values that Grameen Bank of Bangladesh supports are:
  • Removal of poverty.
  • Women empowerment.
  • Self-sufficiency.