All questions of Money and Credit for Class 10 Exam

*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 metals such as gold, silver, and copper.

* Hence option" D" is correct

Money acts as a medium of exchange. For example - we gave money to shopkeeper and in return they gave us food items, clothes, etc . Money are printed in form of paper notes and coins and also in DD. Therefore, option A) is correct answer.

Old method of exchange goods . In this type of system , when both parties have to sell and buy each others commodities , i.e., Double Coincidence Of Wants .

1: Introduction to Economics

1. Which of the following is not a factor of production?
a) Labour
b) Capital
c) Natural resources
d) Money

Answer: d) Money

2. Which of the following is not a basic economic problem?
a) What to produce?
b) How to produce?
c) When to produce?
d) For whom to produce?

Answer: c) When to produce?

3. Opportunity cost is:
a) The cost of producing one more unit of a good
b) The cost of producing one unit of a good in terms of another good
c) The cost of producing one unit of a good in terms of money
d) The cost of producing one unit of a good in terms of time

Answer: b) The cost of producing one unit of a good in terms of another good

4. The law of demand states that:
a) As price increases, quantity demanded also increases
b) As price decreases, quantity demanded also decreases
c) As price increases, quantity demanded decreases
d) As price decreases, quantity demanded increases

Answer: d) As price decreases, quantity demanded increases

5. Which of the following is not a determinant of demand?
a) Income
b) Price of the good itself
c) Price of related goods
d) Cost of production

Answer: d) Cost of production

6. Which of the following is a characteristic of a market economy?
a) Government control of prices
b) Private ownership of resources
c) Central planning
d) Limited consumer choice

Answer: b) Private ownership of resources

7. Which of the following is a characteristic of a command economy?
a) Private ownership of resources
b) Consumer sovereignty
c) Central planning
d) Competition among firms

Answer: c) Central planning

8. Which of the following is not a goal of macroeconomic policy?
a) Full employment
b) Price stability
c) Economic growth
d) Profit maximization

Answer: d) Profit maximization

9. The circular flow diagram shows that:
a) Firms supply goods and services to households
b) Households supply goods and services to firms
c) Firms and households are completely independent of each other
d) The government plays no role in the economy

Answer: a) Firms supply goods and services to households

10. Which of the following is not a factor that affects the level of economic development in a country?
a) Natural resources
b) Education and training
c) Political stability
d) Population density

Answer: d) Population density

The formal sector refers to the sector of the economy that is regulated by the government and includes registered businesses and workers who receive regular salaries or wages, benefits, and legal protections. In contrast, the informal sector includes unregistered businesses and workers who often operate outside the legal system and do not receive the same benefits and protections.

In India, the formal sector accounts for a relatively small proportion of the total credit available to poor households. According to a report by the Reserve Bank of India, the percentage of formal sector credit in total credit for poor households in India is around 15%.

Some possible reasons for this relatively low percentage of formal sector credit include:

- Limited access: Poor households may have limited access to formal sector credit due to factors such as lack of collateral, poor credit history, or limited financial literacy.
- High costs: Formal sector credit may be relatively expensive for poor households due to high interest rates, fees, and other charges.
- Limited outreach: Formal sector lenders may not have a strong presence in rural and remote areas where many poor households live, making it difficult for them to access formal credit.
- Preference for informal credit: Poor households may prefer to obtain credit from informal sources such as moneylenders, friends, and family members who may be more flexible and accessible than formal lenders.

Overall, increasing access to formal sector credit for poor households in India is an important policy goal that could help to reduce poverty and promote economic development. This could involve measures such as improving financial literacy, expanding outreach of formal lenders, and reducing the costs of formal credit.

People deposit their savings in banks. They can withdraw their money whenever required. Because the deposits in the bank account can be withdrawn on demand, these deposits are called demand deposits. Cheques against a deposit settle payments without the use of direct cash.

Option B since statement A is about discouragement of informal sector whereas statement R is about in difficulty I'm taking loan from formal sector. Both the statement doesn't match so B is correct

Kisan credit card scheme was introduced in 1998-99. Providing credit in agricultural sector.

Option A correct because Indian government providing all the facilities to the citizens of India for to sell the goods of the people or to buy the goods from the people through the currency which is mainly rupee only

Banks in India hold about 15 percent of their deposits as cash as the remaining deposits are used to provide loans. The interest charged on Loans is higher than the interest paid on deposits and the difference between the two interest rates is the major source of income for banks.

The cooperative society is a voluntary association of persons who join together with the motive of welfare of members. It may have farmers, workers and women as it's members.

Whether credit would be useful or not depends on the risks in the situation and whether there is some support, in case of loss.

The correct answer is option 'A', which states that banks keep 15% of deposits as cash. This is known as the cash reserve ratio (CRR), which is a policy tool used by central banks to control the money supply in an economy.

The cash reserve ratio is the percentage of deposits that banks are required to keep with the central bank as a reserve. It is a crucial tool used by central banks to maintain stability in the financial system and control inflation. By regulating the amount of cash that banks must keep on hand, central banks can influence the lending capacity of commercial banks and ultimately control the money supply.

Now, let's understand why the correct answer is option 'A' in more detail:

1. Cash Reserve Ratio (CRR):
- The cash reserve ratio (CRR) is the percentage of deposits that banks are required to keep with the central bank.
- It is a statutory requirement imposed by the central bank on commercial banks.
- The purpose of CRR is to ensure that banks have enough cash to meet their obligations and maintain liquidity.

2. Role of the Central Bank:
- The central bank is responsible for regulating the banking system and controlling the money supply.
- By adjusting the cash reserve ratio, the central bank can influence the lending capacity of banks.
- If the central bank increases the CRR, banks are required to keep a higher percentage of their deposits as cash, reducing their lending capacity.
- Conversely, if the central bank decreases the CRR, banks can keep a lower percentage of their deposits as cash, increasing their lending capacity.

3. Significance of the Cash Reserve Ratio:
- The cash reserve ratio plays a vital role in controlling inflation and maintaining financial stability.
- By regulating the amount of cash that banks can lend, the central bank can control the money supply in the economy.
- If the central bank wants to reduce inflation, it can increase the CRR, reducing the amount of money available for lending and reducing aggregate demand.
- On the other hand, if the central bank wants to stimulate economic growth, it can decrease the CRR, allowing banks to lend more money and increasing aggregate demand.

In conclusion, the correct answer is option 'A' because banks are required to keep 15% of their deposits as cash under the cash reserve ratio (CRR) policy imposed by the central bank. This policy ensures that banks have enough liquidity to meet their obligations and helps the central bank control the money supply in the economy.

National Sample Survey Organisation (NSSO) is a government organisation responsible for collecting data on various socio-economic aspects of the Indian population. It is one of the largest organisations conducting national surveys in India and operates under the Ministry of Statistics and Programme Implementation.

Functions of NSSO:
NSSO collects data on various aspects of the Indian population, including employment, education, health, housing conditions, consumer expenditure, and household amenities.

NSSO conducts surveys to collect data on various aspects of the Indian economy, such as agriculture, industry, and services.

NSSO also collects data on informal sector credit, which is not covered by formal banking institutions.

NSSO conducts surveys on the impact of government policies and programs on the population, such as the National Rural Employment Guarantee Act (NREGA).

NSSO also conducts surveys to assess the impact of natural disasters, such as floods or droughts, on the population.

Conclusion:
In conclusion, the NSSO is an important organisation responsible for collecting data on various socio-economic aspects of the Indian population. Its data is used by policymakers, researchers, and analysts to make informed decisions and develop policies that improve the lives of the Indian people.

Under Section 22 of the Reserve Bank of India Act, RBI has sole right to issue currency notes .

However one rupee note is issued by the Ministry of Finance but distributed by the RBI throughout the country

Banks keep only a small proportion of their deposits as cash with themselves because they use the major portion of the deposits to extend loans as there is a huge demand for Loans for various economic activities.

In Self-Help Groups (SHGs), the decisions regarding savings and loan activities are primarily taken by the members of the group. SHGs are small voluntary associations of people who come together to address their common socio-economic needs. These groups are formed with the objective of promoting savings and providing access to credit to their members.

Here's a detailed explanation of why the correct answer is option 'B' - Members:

1. Empowerment of Members:
- The main goal of SHGs is to empower their members, particularly women, by enhancing their financial capabilities.
- By involving the members in decision-making processes related to savings and loan activities, SHGs aim to promote self-reliance and confidence among the members.

2. Collective Decision-Making:
- SHGs operate on the principle of collective decision-making, where all the members have an equal say in shaping the group's activities.
- The decisions regarding savings and loan activities are taken through discussions and consensus among the members.
- This participatory approach ensures that the decisions are made in the best interest of the members and the group as a whole.

3. Savings Mobilization:
- SHGs encourage their members to save a portion of their income regularly.
- The decision to save and the amount to be saved are made by the individual members based on their financial capacity and needs.
- The savings collected by the members are then pooled together and utilized for providing loans to the members.

4. Loan Disbursement:
- SHGs also provide credit facilities to their members for various purposes like entrepreneurship, education, healthcare, etc.
- The decision regarding loan disbursement is taken collectively by the members based on the loan requirements and repayment capacity of the individual members.
- The loan amount, interest rate, and repayment schedule are determined by the members themselves, ensuring transparency and fairness in the process.

5. Monitoring and Accountability:
- SHGs maintain proper records of savings, loans, and repayments to ensure transparency and accountability.
- The members collectively monitor the utilization of funds and repayment of loans by fellow members.
- In case of any default, the members collectively take necessary actions and decisions to address the issue.

Overall, the involvement of members in decision-making regarding savings and loan activities in SHGs fosters a sense of ownership, responsibility, and empowerment among the members. It also promotes financial discipline and helps in creating a supportive and sustainable environment for economic development at the grassroots level.

The RBI oversees the functioning of commercial banks. The reason statement substantiates the assertion but it is not the explanation for the assertion.

Ya bro both are correct but both are not related to each other so option is b

Assertion: The facility of demand deposits makes it possible to settle payments without the use of cash.
Reason: Demand deposits are paper orders which make it possible to transfer money from one person’s account to another person’s account.

The correct option is D, if both assertion and reason are false.

Explanation:

Demand deposits refer to the funds deposited in a bank account that can be withdrawn by the depositor at any time. These deposits are the most liquid form of money and can be used for various purposes, including settling payments.

Assertion is false: The facility of demand deposits does make it possible to settle payments without the use of cash. Demand deposits can be used to make electronic transfers, write checks, or use debit cards for transactions. These methods eliminate the need for physical cash and provide a convenient way to settle payments.

Reason is false: Demand deposits are not paper orders. Instead, they represent the balance held in a bank account that can be accessed through various means, such as online banking or ATMs. While checks may be used to transfer funds from one person's account to another, they are not the only method. Electronic transfers, mobile payments, and other digital payment methods can also be used to transfer money between accounts.

Conclusion: Since both the assertion and reason are false, the correct option is D. The facility of demand deposits does make it possible to settle payments without the use of cash, but demand deposits are not paper orders for transferring money.

The terms of credit vary substantially from one credit arrangement to another. They may vary depending on the nature of the lender and the borrower.

The Reserve Bank of India supervises the functions of banks in the following ways: It ensures that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small scale industries, to small borrowers etc.

Explanation:

Assertion and Reason Analysis:
- The assertion states that modern currency is used as a medium of exchange but does not have a use of its own.
- The reason given is that modern currency is easy to carry.

Correct Explanation:
- The reason provided for the assertion is not the correct explanation because the ease of carrying modern currency does not directly address the fact that currency itself does not have intrinsic value.
- Modern currency is essentially a medium of exchange that is widely accepted in transactions. Its value is derived from the trust people have in the issuing authority and the stability of the economy.
- Unlike commodities like gold or silver, modern currency does not have inherent value but serves as a convenient way to facilitate transactions.

Conclusion:
- Both the assertion and reason are true, but the reason given is not the correct explanation of the assertion. Therefore, option 'B' is the most suitable choice for this question.

Reserve Bank of India issues currency notes in India.

Bank laying down norms for bank is option A.) Reserve Bank of India (RBI).

I think Option A.) informal credit will be right answer..Any way pls check it out and say wat is right answer

The law legalizes the use of rupee as a medium of payment that cannot be refused in settling transactions in India.

A credit agreement is a legally binding contract made between a person who borrows money and the lender. It is agreed upon by both parties and outlines the terms of repayment, the fees, other costs and all the rules and requirements pertaining to the loan.

Modern Forms of Money

Currency, plastic money, and demand deposits are all considered modern forms of money. Let's explore each of these forms in detail:

Currency:
Currency refers to physical money in the form of coins or banknotes that are issued by the government and circulated within an economy. It is the most widely recognized and commonly used form of money. Currency notes are printed with specific denominations and are accepted as a medium of exchange for goods and services. The value of currency is guaranteed by the government, and it serves as a legal tender within a particular country.

Plastic Money:
Plastic money, also known as digital or electronic money, is a form of non-physical currency that exists only in electronic form. It includes various electronic payment methods such as credit cards, debit cards, and digital wallets. Plastic money allows individuals to make transactions electronically without the need for physical cash. These forms of payment are widely accepted by merchants and provide convenience and security for both consumers and businesses.

Demand Deposits:
Demand deposits are a type of money that can be accessed on demand by depositors. They are funds held in a bank account that can be withdrawn at any time without prior notice. Demand deposits include checking accounts and current accounts, where individuals and businesses can deposit and withdraw money as needed. These deposits are considered a form of money because they can be used for transactions, transfers, and payments.

Conclusion:
In conclusion, currency, plastic money, and demand deposits are all modern forms of money. Currency represents physical money in the form of coins and banknotes, plastic money includes electronic payment methods such as credit cards and digital wallets, and demand deposits refer to funds held in bank accounts that can be accessed on demand. These forms of money provide individuals and businesses with various options for conducting transactions and managing their finances.

The credit made Rohan better off in this situation, however, Rohan would have been worse off if he had failed to deliver the goods on time or he had made a loss in the production process. The latter two situations may have caused Rohan to fall in a debt trap

The bill of exchange contains an unconditional order to pay a certain amount on an agreed date while the promissory note contains an unconditional promise to pay a certain sum of money on a certain date. In India these instruments are governed by the Indian Negotiable Instruments Act 1881.

Poor households still depend on informal sources of credit.
- This statement is correct. Poor households often lack access to formal financial institutions such as banks, and therefore rely on informal sources of credit such as money lenders, friends, and family members.

RBI supervises the functioning of informal sources of loans.
- This statement is incorrect. The Reserve Bank of India (RBI) is the central banking institution of the country and is primarily responsible for supervising and regulating formal financial institutions such as banks. It does not directly supervise or regulate informal sources of loans.

Banks are not present everywhere in the rural areas.
- This statement is correct. While there has been significant progress in expanding the reach of formal banking services in rural areas, there are still many remote and underdeveloped regions where banks are not present. This lack of access to formal banking services contributes to the reliance on informal sources of credit in these areas.

RBI monitors the banks in actually maintaining cash balance.
- This statement is correct. The RBI monitors banks to ensure that they maintain an adequate cash balance to meet the withdrawal demands of their customers. This is important for maintaining financial stability and ensuring that banks can honor their obligations.

Explanation:
- The incorrect option is B, which states that the RBI supervises the functioning of informal sources of loans. The RBI's role is primarily focused on formal financial institutions and it does not directly regulate or supervise informal sources of credit. Informal sources of credit operate outside the purview of the RBI's regulatory framework. These sources are often unregulated and can sometimes charge high interest rates, leading to potential exploitation of borrowers.

Banks keep only a small proportion of their deposits as cash with themselves. This is kept as a provision to pay the depositors who might come to withdraw money from the bank on any given day.