Important Questions for Class 10 Economics Ch 3 Money and Credit (Social Science)
Fill in the Blanks
1. ...................... is an Apex Bank of India. (RBI/SBI)
Answer: RBI
2. Central bank issues ..................... (note/news)
Answer: Notes
3. In a self help group, most as the decisions regarding savings and loan activities are taken by ...............
Answer: members
Choose the 'True' or 'False'
1. Coins are issued by Central Bank. (True/False)
Answer: True
2. Bank pay interest on people's deposits. (True/False)
Answer: True
3. In India 100 ₹ note is issued by RBI. (True/False)
Answer: True
4. In India one ₹ note and coins are issued by the Govt. of India. (True/False)
Answer: False
5. Is the employer include informal source of borrowing ? (Yes/No)
Answer:
Yes, the employer include informal source of borrowing.
6. Money is used under barter system of exchange. (True/False)
Answer:
False
Very Short Answer Type Questions
1. Why transactions are made in money ?
Answer:
A person holding money can easily exchange it for any commodity or service that he or she might want. Thus everyone prefers to receive paymets in money and then exchange the money for things that they want.
2. What is double co-incidence of wants ?
Answer:
Double co-incidence of wants is an essential feature in a barter system where goods are directly exchanged without the use of money. It means exchange of goods between two persons matched.
3. What is money ?
Answer:
Money is something that can act as a medium of exchange in transactions.
4. What is demand deposits ?
Answer:
The deposit in the bank accounts can be withdrawn on demand, these deposits are called demad deposits.
5. What is cheque ?
Answer:
A cheque is a paper instructing the bank to pay a specific amount from the person's account to the person in whose name the cheque has been made.
6. Define currency.
Answer:
It is a modern forms of money like paper notes and coins.
7. What is loan ?
Answer:
It refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment.
8. What is debt-trap ?
Answer:
It is a situation when loan repayment is impossible.
9. Define collateral.
Answer:
Collateral is an asset that the borrower owns and uses this as a guarantee to a lender until loan is rapid.
10. What is formal sector loans ?
Answer:
Formal sector loans included loans from banks and co-operatives.
11. What are informal sector loans ?
Answer:
Informal sector loans include loans from moneylenders, traders, employers, relatives and friends etc.
12. What is Self-help Group ?
Answer:
It is a group of 15-20 memebers who can take small loans from the group itself to meet their needs.
13. Who issues the ₹ 10 note in India ?
Answer:
The Reserve Bank of India.
14. Give one function of money.
Answer:
Medium of exchange
15. Is interest rate a term of credit or not ?
Answer:
Yes
Short Answer Type Questions
1. Explain any two sources of institutional and non-institutional rural credit of India. Tell any two benefits of institutional sources of credit.
Answer:
Following are the two institutional sources of credit :
- Commercial banks
- Co-operative socities
Following are the two non-institutional sources of rural credit :
- Moneylender
- Traders family members etc.
Advantages of institutional sources of credit.
- Institutional sources of credit provide loans at low rate of interest.
- Institutional sources of credit do not use any unfair practices as are used by moneylenders.
2. The following table shows the sources of credit for rural households in India in 2003.
On the basis of the above table answer the following questions -
(i) What is the share of formal sector in the total credit ?
Answer:
The share of formal sector in the total credit is 52% (i.e 27% + 25%)
(ii) Suggest two measures for improving the share of formal sector in total credit.
Answer:
Following are the two measures -
- Banks and co-operatives should increase their lending particularly in the rural areas, so that the dependence in informal sources of credit reduces.
- Formal sector loans need to expand. It is also necessary that every one receives these loans.
(iii) Why is money lender still the largest single source of credit ?
Answer :
Moneylender is still the largest single source of credit because getting a loan from a bank is much more difficult than taking a loan from a money lender. Money-lender does not require proper documents and collateral as he knows the borrowers personally.
3. Why is money 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. The Reserve Bank of India issues currency notes on behalf of the central government. As per Indian law, no other individual or organisation is allowed to issue currency. Moreover the law legalises the use of rupee as a medium of payment that cannot be refused in setting transactions in India. Hence the rupee is widely accepted as a medium of exchange.
4. What are the reasons that make Swapna's situation so risky ?
Answer:
Swapna, a small farmer, grows groundnut on her three acres of land. She takes a loan from the moneylender to meet the expenses of cultivation, hoping that her harvest would help to repay the loan. Midway through the season the crop is hit by pests and the crop fails. She is unable to repay the moneylender and the debt grows over the year into a large amount. The failure of the crop made loan repayment impossible.
5. Write a note on Bangladesh Grameen Bank.
Answer:
Grameen Bank of Bangladesh is one the biggest success stories in reaching the poor to meet their credit needs at reasonable rates. Started in the 1970s as a small project, Grameen Bank now have over 6 million borrowers in about 40,000 villages spread across Bangladesh. Almost all of the borrowers are women and belong to poorest sections of the society. These borrowers have proved that not only are poor women reliable borrowers, but that they can start and run a variety of small income - generating activities successfully.
6. Write a note on Deshra Co-operative society.
Answer:
Deshra co-operative society has 2300 farmers as members. It accepts deposits from its members. With these deposits as collateral the co-operative has obtained a large loan from the bank. These funds are used to provide loans to members. It provides loans for the purchase of agricultural implements, loans for the cultivation and agricultural trade, fishery loans, loans for construction of houses and for a variety of other expenses.
7. Why are banks willing to lend to women organised in SHGs ?
Answer:
Banks are willing to lend to women organsied in SHGs because loan is sanctioned in the name of the group and is meant to create self employment opportunities for the women. It is the group which is responsible for the repayment of the loan.
8. The modern currency is without any use of its own as a commodity. Why is it accepted as money ?
Answer:
Modern forms of money include currency-paper notes and coins. 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. But it is accepted as money because the currency is authorised by the government of the country. And Reserve Bank of India issues currency notes on behalf of the Central Government.
9. Why do we need to expand formal sources of credit in India ?
Answer:
The formal sector still meets only about half of the total credit needs of the rural people. The remaining credit needs are met from informal sources. Most loans from informal lenders carry a very high interest rate and do little to increase the income of the borrowers. Thus it is necessary that banks and co-operatives increase their lending partivularly in rural areas, so that the dependence on informal sources of credit reduces.
10. Write and three points of differences between formal and Informal Sources of 'Credit'.
Answer:
Answer:
Credit can play a important role for country's development. For this, banks and co-operative socities need to lend more. This would lead to higher incomes because many people could then borrow cheaply for a variety of different needs. They could grow crops, do business, set up small scale Industries etc. They could set up new industries or trade in goods. If credit can be made available to the poor people on terms and conditions that are appropriate and reasonable these millions of small people with their millions of small pursuits can add up to create the biggest development wonder.
12. Briefly explain any two functions of money.
Answer:
Two functions of money are given below :
- Money as a Unit of Value - The first function of money is to be a unit of value or a unit of account. The monetary unit is the unit in terms of which the value of all goods and services is measured and expressed. The value of each good or service is expressed as a price which is the number of monetary units for which the good or service can be exchanged. If the price of a pen is ₹ 10 then a pen can be had in exchange for ten monetary units. Money is a useful measuring rod of value only if the value of money is itself remains constant or purchasing power remains constant.
- Money as a Medium of Exchange - Money also acts as a medium of exchange or as a medium of payments. This function of money is served by anything that is generally accepted by people in exchange of goods and services. Anything has been quite a variety of things across places and times. Money will then reduce the time and energy spent in barter. The person who owned a cow can now simply sell it to the person who offers the most money for it and then buy the bullock cart from the person who offers him the best bargain.
Long Answer Type Questions
1. What is meant by Rural Loan or credit ? How is it divided into parts ?
Answer:
Loans for agriculture and allied activities are known as rural creditot loan. The rural credit are of following three types.
- Short term credit - These credit are taken to meet the current needs of the farmers such as purchase of seeds, fertilizers, etc. to pay land revenue and wages to the labourers.
- Medium Term credit - The duration of the credit is 15 months to 5 years. For digging wells, purchasing bullocks, fencing and agricultural tools and implements, these credit are needed.
- Long Term credit - The duration of this credit is 5 years to 15 or 20 years. These loans are needed to make permanent improvements on land such as reclamation of land, soil conservation, digging tube-wells etc.
2. What are the problems of Rural credit or loans ?
Answer:
The following are the main problems of Rural credit or loans :-
- Agriculturist is to pay a very high rate of interest for his loans.
- The moneylender is still the prominent source of rural finance.
- There is lack of co-ordination among the various agencies of rural credit.
- Despite many institutions adequate rural credit is not available. The institutional finance is only 50 percent of the total requirement of the farmer.
- The commercial Banks hesitate to provide credit to poor farmer.
3. Why are money exchange system is better from barter System ? Give example.
Answer:
Money exchange system is better from barter system in many ways. A person holding money can easily exchange if for many commodity or services that he or she might want. The another reason for why are money exchange system is better from barter system is that money exchange system is free from double co-incidence of want. For example a shoe maker wants to sell shoes in the market and buy wheat. The shoe maker will first exchange shoes that he has produced for money, and then exchange the money for wheat. Imagine how much more difficult it would be if the shoe maker had to directly exchange shoe for wheat without the use of money. He would have to look for a wheat growing farmer who not only wants to sell wheat but also want to buy the shoes in exchange.
4. What is credit ? Discuss the loan activities of the banks.
Answer:
Credit - Credit is a contractual agreement in which a borrower receives something of value and agrees to repay the lender at some later date.
Loan activities of the banks - Banks receives deposits from the public. Banks keeps only a small proportion of their deposits as cash with themselves. On any particular day only some of its many depositor come to withdraw cash the bank is able to manage with this cash. Banks use the major portion as the deposits to extend loans. There is a huge demand for loans for various economic activities. Banks make use of the deposits to meet the loan requirements of the people. In this way, banks mediate between those who have surplus funds and those who are in need of these funds. Banks charge a higher interest rate on loans than what they offer on deposits. The difference between what is charged from borrower and what is paid to depositors is their main source of income.
5. What are self help groups ? How do these groups function ? Descibe.
Answer:
It is a group of 15-20 members who can take small loans from the group itself to meet their needs.
Functions :
- A typical SHG has 15-20 members, usually belonging to one neighbourhood, who meet and work together.
- These member meet and save regularly. These saving depending on the ability of the people to save.
- Members can take small loans from the group itself to meet their needs. The group charges interest on these loans but this is still less than what the moneylender charges.
- Most of the important decisions regarding the saving and loan activities are taken by the group members.
- Moreover, SHGs are the building blocks of organisation of the rural poor.