Class 10, Social Science - Economics
Understanding Economic Development
Chapter 3, Money and Credit
CBSE Sample Questions and NCERT Economics In-text Questions
Question.1:
What is money ?
Question.2:
What are the different kinds/types/forms of money ?
Question.3:
What is the meaning of “double coincidence of wants” ?
Question.4:
What is “Barter System” ?
Question.5:
Why money 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
Page 40
Question.7: How does the
use of money make it easier to exchange things ?
Question.8: Can you
think of some examples of good services being exchanged or wages being paid
through barter ?
Page 42
Question.9:
Mr. Salim wants to withdraw Rs 20,000 in cash for making payments. How would he
write a cheque to withdraw money ?
Question.10:
Why were demand deposits considered as money ?
NCERT In-text Questions
Question.11:
What would happen if all the depositors went to ask for their money at the same
time ?
Answer: Bank would
not be able to give money to the depositors if they all went to ask for their
money all at the same time. This is because, banks keep only about 15% and
would have already used the balance d portion of their deposits to extend
loans.
Question.12:
What were the reasons that make Swapna’s situations so risky ? Discuss factors:
pesticides, role of money lenders, climate.
Answer: Pest
attack, exploitation by money lenders and lack of monsoon are the reasons that
make Swapna’s situation so risky.
Pesticides – Pest attack can be controlled by
pesticides.
Role of Moneylenders – Generally moneylenders exploit
farmers. They charge very high rate of interest and keep them in debt-trap.
Climate – Nearly 60% of our agricultural land area
are still un-irrigated. Our farmers heavily depend on rainfall. So, climate
plays a vital role in agriculture.
Page 45
Question.13:
Why do lenders ask for collateral while lending ?
Answer: Lenders ask
for collateral as security against loans. If the borrower fails to repay the
loan, the lender has the right to sell the asset or collateral to recover the
payment.
Question.14:
Given that a large number of people in our country are poor, does it in any way
affect their capacity to borrow?
Answer: Lenders ask
for collateral as security against loans. If the borrowers fail to repay the
loan, the lender has the right to sell the asset or collateral to recover the
loan amount.
Question.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.
Answer: low, easy,
less.
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Question.16:
List the various sources of credit in Sonpur.
Answer: The various
sources of credit in Sonpur are –
1.
village moneylender
2.
agricultural trader
3.
landowner-employers.
4.
bank.
Question.17:
Why will Arun have higher income from cultivation compared to Shyamal ?
Answer: Arun will
have higher income from cultivation compared to Shyamal. This has following reasons:
1.
Arun has 7 acres of land compared to 1.5 acres land of Shyamal.
2.
Arun received bank loans at an interest rate of only 8.5% per annum. On the
other hand Shyamal has received loan at an interest rate of 36% per annum which
is much higher than Arun’s.
3.
Arun has to repay loan anytime in the next three years while Shyamal will have
to repay within 3-4 months.
4.
Shyamal received loan under the condition that he will sell the crop to the
trader at a lower price than the market price while there no such condition
with Arun.
Question.18:
Can everyone in Sonepur get credit at a cheap rate ? Who are the people who can
?
Answer: No,
everyone in Sonepur can not get credit at a cheap rate. This is because,
collateral is required for taking bank loan at cheap rate.
Only
those people, who can fulfill collateral and documentation requirements, get
credit from bank at a much rate.
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Question.19:
What are the differences between formal and informal sources of credit ?
Answer: The various
differences between formal and informal sources of credit are shown in the
following table:
|
Formal Sources of Credit
|
Informal Sources of Credit
|
|
1. They
cover those sources of credit which are registered by the Government and have
to follow its rules and regulations e.g. Banks, Cooperatives.
2. The RBI supervises the functioning of
formal sources of credit.
3. Apart
from profit-making, they have also an objective of social welfare.
4. The
rate of interest charged by formal sources is always much lower than that of
informal sources.
5. The
terms of credit are also fair and reasonable.
|
1. They
include those small and scattered units which are outside the control of the
Government e.g. individual moneylenders, traders, employers, etc.
2. There
is no organizational supervision or adherence to rules and regulations in the
credit extending activities in this sector.
3. Their
only motive is to extract profit as much as possible.
4. They
charge random and much higher interests in comparison to formal sectors.
5. They
impose very tough and sometimes even, unreasonable terms of credit on the
borrower.
|
Question.20:
Why should credit at reasonable rates be available for all ?
Answer: Credit
should be available at reasonable rates for all as other wise it will not be
useful for the borrower. Higher cost of borrowing means a larger part of the
earnings of the borrowers is used to repay the loans. Credit given at high
interest rate can sometimes result into the amount to be repaid is greater than
the income of the borrower. This could lead to increasing debt and debt-trap as
we saw for Rama in Sonpur.
Credit
is a crucial element in economic activities. It has a major role in the
development of the country as it helps people in setting up their business, in
increasing their earnings and social status. Therefore, cheap and affordable
credit is crucial for the country’s development.
Question.21:
Why do you think that the share of formal sector credit is higher for the
richer households as compared to the poorer households ?
Answer:
Undoubtedly, the share of formal sector credit is for the richer households as
compared to the poorer households. It is because; poverty affects poor
households’ capacity to borrow. Formal sector credit requires proper documents
and collateral as security against loans. But poor people lack in providing
such things which affect their capacity to get loans from formal sector.
That
is why, the formal sector are sometimes, unwilling to lend to poor households
and thus, their share of formal sector credit is lower than the rich
households.
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