Class X, NCERT (CBSE) Social Science Economics
Understanding Economic Development
Chapter 3, Money and Credit
Sample and Intext Questions - Answers
Question.1: What is money ?Answer: Money is a medium of exchange and measure of value.
Question.2: What are the different kinds/types/forms of money ?
Answer: Money can be classified into the following types or forms:
(i) Coins such as gold, silver, copper coins. (ii) Paper notes, (iii) Fiat money, (iii) Credit money or deposits with Banks, and (iv) Commodity money in the form of grains, cattle etc.
Question.3: What is the meaning of “double coincidence of wants” ?
Answer: When two parties agree to sell and buy each others commodities, this situation is known as double coincidence of wants. That is, what a person desires to sell is exactly what the other wishes to buy. In a barter system, where goods are directly exchanged for another type of goods or service without the use of money, double coincidence of wants is a must.
Question.4: What is “Barter System” ?Answer: It is the system in which one type of goods or service is directly exchanged for another type of goods or service without the use of money. Double coincidence of wants is an essential feature of this system. Before the evolution of money, exchange was done through this system.
Question.5: Why money is called a medium of exchange?
Answer: Since money acts as an intermediate in the exchange process, it is called a medium of exchange.
Question.6: Define - (a) Credit (b) Terms of Credit (c) Collateral (d) Fiat Money (e) Cheque (f) Demand Deposits
Credit : Credit or Loan refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment. Credit is a crucial element in economic life and plays an important role in the development of the country.
Terms of Credit : The interest rate, collateral, documentation requirement and the mode of payment are the various factors which together comprise the “Terms of Credit”.
Collateral : Collateral is an asset that the borrower owns and uses this as a guarantee to a lender until the loan is repaid. Collaterals can be land, building, vehicle, stocks, cattle, bank deposits etc.
Fiat Money : The ‘Fiat Money’ is meant for that money which serves as money on the basis of fiat or order of government.
Cheque : 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.
Demand Deposits : The deposits in the bank account which can be withdrawn on demand are known as ‘Demand Deposits’.
Question.7: How does the use of money make it easier to exchange things ?Answer: As we know, in a barter system where goods are directly exchanged without the use of money, double coincidence of wants is a necessary condition. By serving as a medium of exchange, money removes the need for double coincidence of wants and the difficulties associated with barter system. In this way, the use of money makes it easier to exchange things.
Question.8: Can you think of some examples of good services being exchanged or wages being paid through barter ?
Answer: Yes, in rural areas generally crops and food-grains are directly exchanged without the use of money. Similarly, agricultural labourers are normally paid not in cash but in kind, e.g. 5kg. wheat or rice per day.
Question.9: Mr. Salim wants to withdraw Rs 20,000 in cash for making payments. How would he write a cheque to withdraw money ?Answer: Mr.Salim would write date on the space given. He would instruct the bank to pay ‘Self’ and also write ‘Twenty thousands only’ further to Rupees and fill up the amount and account number e.g. ‘20000/-‘etc. at the proper spaces as mentioned over the cheque. Then he would have to put his signature on the right hand lower side of the cheque. Now he would submit it on the counter of the bank.
Question.10: Why were demand deposits considered as money ?
Answer: Since demand deposits are accepted widely as a means of payment along with currency, they are also considered as money in the modern economy.
Q.11: What would happen if all the depositors went to ask for their money at the same time ?
Q.12: What were the reasons that make Swapna’s situations so risky ? Discuss factors: pesticides, role of money lenders, climate.
Q.13: Why do lenders ask for collateral while lending ?
Q.14: Given that a large number of people in our country are poor, does it in any way affect their capacity to borrow?
Q.15: Fill in the blanks choosing correct option from the brackets:
While taking a loan, borrowers look for easy terms of credit. This means _________ (low/high) interest rate, ______ (easy/tough) conditions for repayment, ____________ (less/more) collateral and documentation requirements.
Q.16: List the various sources of credit in Sonpur.
Q.17: Why will Arun have higher income from cultivation compared to Shyamal ?
Q.18: Can everyone in Sonepur get credit at a cheap rate ? Who are the people who can ?
Q.19: What are the differences between formal and informal sources of credit ?
Q.20: Why should credit at reasonable rates be available for all ?
Q.21: Why do you think that the share of formal sector credit is higher for the richer households as compared to the poorer households ?
See the Answers for Q.No. 11-21
NCERT Solutions - Related Post
Understanding Economic Development, Chapter - 3, Money and Credit | Class 10 NCERT (CBSE) Solutions Social Science (Economics) | NCERT Answers for Textbook Exercise [Read]