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Case Based Questions Test: Money & Credit - Grade 10 MCQ


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8 Questions MCQ Test Economics for Grade 10 - Case Based Questions Test: Money & Credit

Case Based Questions Test: Money & Credit for Grade 10 2024 is part of Economics for Grade 10 preparation. The Case Based Questions Test: Money & Credit questions and answers have been prepared according to the Grade 10 exam syllabus.The Case Based Questions Test: Money & Credit MCQs are made for Grade 10 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Case Based Questions Test: Money & Credit below.
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Case Based Questions Test: Money & Credit - Question 1

Read the extract given below and answer the questions that follows:

Bartering is the act of trading one good or service for another without using a medium of exchange such as money. A bartering economy differs from a monetary economy in a variety of ways. When barter was used as an exchange medium, the needs of people were very limited. This trading method doesn’t involve money and it relies solely on exchanging goods and services for other services and goods in return. The use of money spans a very large part of our everyday life. To understand the usefulness of money, we must consider what the world would be like without money. How would people exchange goods and services? Economies without money typically engage in the barter system. Barter is highly inefficient for trying to coordinate the trades in a modern advanced economy. In an economy without money, an exchange between two people would involve a double coincidence of wants, a situation in which both the parties have to agree to sell and buy each other’s commodities. This is known as double coincidence of wants. What a person desires to sell is exactly what the other wishes to buy. In a barter system where goods are directly exchanged without the use of money, double coincidence of wants is an essential feature. Another problem with the barter system is that it does not allow us to easily enter into future contracts for purchasing many goods and services. Money solves the problems that the barter system creates. Money serves as a medium of exchange, which means that money acts as an intermediary between the buyer and the seller. Modern forms of money include currency — paper notes and coins. The other form in which people hold money is as deposits with banks.

Answer the following MCQs by choosing the most appropriate option

Q. Which of the following can be considered a modern form of Money?

Detailed Solution for Case Based Questions Test: Money & Credit - Question 1
Modern forms of money include currency paper notes and coins. Currency is accepted as a medium of exchange as it is authorised by the government of the country.
Case Based Questions Test: Money & Credit - Question 2

Read the extract given below and answer the questions that follows:

Bartering is the act of trading one good or service for another without using a medium of exchange such as money. A bartering economy differs from a monetary economy in a variety of ways. When barter was used as an exchange medium, the needs of people were very limited. This trading method doesn’t involve money and it relies solely on exchanging goods and services for other services and goods in return. The use of money spans a very large part of our everyday life. To understand the usefulness of money, we must consider what the world would be like without money. How would people exchange goods and services? Economies without money typically engage in the barter system. Barter is highly inefficient for trying to coordinate the trades in a modern advanced economy. In an economy without money, an exchange between two people would involve a double coincidence of wants, a situation in which both the parties have to agree to sell and buy each other’s commodities. This is known as double coincidence of wants. What a person desires to sell is exactly what the other wishes to buy. In a barter system where goods are directly exchanged without the use of money, double coincidence of wants is an essential feature. Another problem with the barter system is that it does not allow us to easily enter into future contracts for purchasing many goods and services. Money solves the problems that the barter system creates. Money serves as a medium of exchange, which means that money acts as an intermediary between the buyer and the seller. Modern forms of money include currency — paper notes and coins. The other form in which people hold money is as deposits with banks.

Answer the following MCQs by choosing the most appropriate option

Q. Which of the following features of money acts as an intermediate in the exchange process?

Detailed Solution for Case Based Questions Test: Money & Credit - Question 2
In a Barter System, where goods are directly exchanged without the use of money, double coincidence of wants is essential. By serving as a medium of exchange, money removes the difficulties associated with the Barter System. Thus, it can be concluded that money acts as an intermediate in the exchange process.
Case Based Questions Test: Money & Credit - Question 3

Read the extract given below and answer the questions that follows:

Bartering is the act of trading one good or service for another without using a medium of exchange such as money. A bartering economy differs from a monetary economy in a variety of ways. When barter was used as an exchange medium, the needs of people were very limited. This trading method doesn’t involve money and it relies solely on exchanging goods and services for other services and goods in return. The use of money spans a very large part of our everyday life. To understand the usefulness of money, we must consider what the world would be like without money. How would people exchange goods and services? Economies without money typically engage in the barter system. Barter is highly inefficient for trying to coordinate the trades in a modern advanced economy. In an economy without money, an exchange between two people would involve a double coincidence of wants, a situation in which both the parties have to agree to sell and buy each other’s commodities. This is known as double coincidence of wants. What a person desires to sell is exactly what the other wishes to buy. In a barter system where goods are directly exchanged without the use of money, double coincidence of wants is an essential feature. Another problem with the barter system is that it does not allow us to easily enter into future contracts for purchasing many goods and services. Money solves the problems that the barter system creates. Money serves as a medium of exchange, which means that money acts as an intermediary between the buyer and the seller. Modern forms of money include currency — paper notes and coins. The other form in which people hold money is as deposits with banks.

Answer the following MCQs by choosing the most appropriate option

Q. Which of the following has an essential feature of double coincidence?

Detailed Solution for Case Based Questions Test: Money & Credit - Question 3
Barter system is direct exchange of goods and services. It requires the double coincidence of wants. Barter system eliminates the use of money.
Case Based Questions Test: Money & Credit - Question 4

Read the extract given below and answer the questions that follows:

Bartering is the act of trading one good or service for another without using a medium of exchange such as money. A bartering economy differs from a monetary economy in a variety of ways. When barter was used as an exchange medium, the needs of people were very limited. This trading method doesn’t involve money and it relies solely on exchanging goods and services for other services and goods in return. The use of money spans a very large part of our everyday life. To understand the usefulness of money, we must consider what the world would be like without money. How would people exchange goods and services? Economies without money typically engage in the barter system. Barter is highly inefficient for trying to coordinate the trades in a modern advanced economy. In an economy without money, an exchange between two people would involve a double coincidence of wants, a situation in which both the parties have to agree to sell and buy each other’s commodities. This is known as double coincidence of wants. What a person desires to sell is exactly what the other wishes to buy. In a barter system where goods are directly exchanged without the use of money, double coincidence of wants is an essential feature. Another problem with the barter system is that it does not allow us to easily enter into future contracts for purchasing many goods and services. Money solves the problems that the barter system creates. Money serves as a medium of exchange, which means that money acts as an intermediary between the buyer and the seller. Modern forms of money include currency — paper notes and coins. The other form in which people hold money is as deposits with banks.

Answer the following MCQs by choosing the most appropriate option

Q. In a barter system:

Detailed Solution for Case Based Questions Test: Money & Credit - Question 4
A barter system is known as an old method of exchange. This system has been practised for centuries and long before money was introduced. People started exchanging services and goods for other services and goods in return. The value of bartering items is negotiable with the other party.
Case Based Questions Test: Money & Credit - Question 5

Read the source given below and answer the questions that follows:

Banks use the major portion of 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 (the depositors) and those who are in need of these funds (the borrowers). Banks charge a higher interest rate on loans than what they offer on deposits. A large number of transactions in our day-to-day activities involve credit in some form or the other. Credit (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. In rural areas, the main demand for credit is for crop production. Crop production involves considerable costs on seeds, fertilisers, pesticides, water, electricity, repair of equipment, etc. The various types of loans can be conveniently grouped as formal sector loans and informal sector loans. Among the former are loans from banks and cooperatives. The informal lenders include moneylenders, traders, employers, relatives and friends, etc. The Reserve Bank of India supervises the functioning of formal sources of loans. For instance, we have seen that the banks maintain a minimum cash balance out of the deposits they receive. The RBI monitors the banks in actually maintaining cash balance. There is no organisation which supervises the credit activities of lenders in the informal sector. They can lend at whatever interest rate they choose. There is no one to stop them from using unfair means to get their money back. Compared to the formal lenders, most of the informal lenders charge a much higher interest on loans. Thus, the cost to the borrower of informal loans is much higher. In recent years, people have tried out some newer ways of providing loans to the poor. The idea is to organise rural poor, in particular women, into small Self-Help Groups (SHGs) and pool (collect) their savings.

Answer the following MCQs by choosing the most appropriate option

Q. Compared to the formal lenders, most of the informal lenders charge a much ................... interest on loans

Detailed Solution for Case Based Questions Test: Money & Credit - Question 5
Compared to the formal lenders, most of the informal lenders charge a much higher interest on loans. Thus, the cost to the borrower of informal loans is much higher. Higher cost of borrowing means a larger part of the earnings of the borrowers is used to repay the loan.
Case Based Questions Test: Money & Credit - Question 6

Read the source given below and answer the questions that follows:

Banks use the major portion of 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 (the depositors) and those who are in need of these funds (the borrowers). Banks charge a higher interest rate on loans than what they offer on deposits. A large number of transactions in our day-to-day activities involve credit in some form or the other. Credit (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. In rural areas, the main demand for credit is for crop production. Crop production involves considerable costs on seeds, fertilisers, pesticides, water, electricity, repair of equipment, etc. The various types of loans can be conveniently grouped as formal sector loans and informal sector loans. Among the former are loans from banks and cooperatives. The informal lenders include moneylenders, traders, employers, relatives and friends, etc. The Reserve Bank of India supervises the functioning of formal sources of loans. For instance, we have seen that the banks maintain a minimum cash balance out of the deposits they receive. The RBI monitors the banks in actually maintaining cash balance. There is no organisation which supervises the credit activities of lenders in the informal sector. They can lend at whatever interest rate they choose. There is no one to stop them from using unfair means to get their money back. Compared to the formal lenders, most of the informal lenders charge a much higher interest on loans. Thus, the cost to the borrower of informal loans is much higher. In recent years, people have tried out some newer ways of providing loans to the poor. The idea is to organise rural poor, in particular women, into small Self-Help Groups (SHGs) and pool (collect) their savings.

Answer the following MCQs by choosing the most appropriate option

Q. Banks use the major portion of the deposits to

Detailed Solution for Case Based Questions Test: Money & Credit - Question 6
Major portion of the deposits is used by banks for extending loans to borrowers. Some portion is used as cash reserve ratio with the RBI. Some portion of money is used as statutory liquid ratio deposit with the bank itself as set by RBI.
Case Based Questions Test: Money & Credit - Question 7

Read the source given below and answer the questions that follows:

Banks use the major portion of 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 (the depositors) and those who are in need of these funds (the borrowers). Banks charge a higher interest rate on loans than what they offer on deposits. A large number of transactions in our day-to-day activities involve credit in some form or the other. Credit (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. In rural areas, the main demand for credit is for crop production. Crop production involves considerable costs on seeds, fertilisers, pesticides, water, electricity, repair of equipment, etc. The various types of loans can be conveniently grouped as formal sector loans and informal sector loans. Among the former are loans from banks and cooperatives. The informal lenders include moneylenders, traders, employers, relatives and friends, etc. The Reserve Bank of India supervises the functioning of formal sources of loans. For instance, we have seen that the banks maintain a minimum cash balance out of the deposits they receive. The RBI monitors the banks in actually maintaining cash balance. There is no organisation which supervises the credit activities of lenders in the informal sector. They can lend at whatever interest rate they choose. There is no one to stop them from using unfair means to get their money back. Compared to the formal lenders, most of the informal lenders charge a much higher interest on loans. Thus, the cost to the borrower of informal loans is much higher. In recent years, people have tried out some newer ways of providing loans to the poor. The idea is to organise rural poor, in particular women, into small Self-Help Groups (SHGs) and pool (collect) their savings.

Answer the following MCQs by choosing the most appropriate option

Q. Formal sector loans include loans from

(i) Banks

(ii) Moneylenders

(iii) Cooperatives

(iv) Traders

Detailed Solution for Case Based Questions Test: Money & Credit - Question 7

The loan extended by banks and cooperative institutions constitutes formal sector of credit. The functioning of these financial institutions is supervised by the Reserve Bank of India.

Case Based Questions Test: Money & Credit - Question 8

Read the source given below and answer the questions that follows:

Banks use the major portion of 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 (the depositors) and those who are in need of these funds (the borrowers). Banks charge a higher interest rate on loans than what they offer on deposits. A large number of transactions in our day-to-day activities involve credit in some form or the other. Credit (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. In rural areas, the main demand for credit is for crop production. Crop production involves considerable costs on seeds, fertilisers, pesticides, water, electricity, repair of equipment, etc. The various types of loans can be conveniently grouped as formal sector loans and informal sector loans. Among the former are loans from banks and cooperatives. The informal lenders include moneylenders, traders, employers, relatives and friends, etc. The Reserve Bank of India supervises the functioning of formal sources of loans. For instance, we have seen that the banks maintain a minimum cash balance out of the deposits they receive. The RBI monitors the banks in actually maintaining cash balance. There is no organisation which supervises the credit activities of lenders in the informal sector. They can lend at whatever interest rate they choose. There is no one to stop them from using unfair means to get their money back. Compared to the formal lenders, most of the informal lenders charge a much higher interest on loans. Thus, the cost to the borrower of informal loans is much higher. In recent years, people have tried out some newer ways of providing loans to the poor. The idea is to organise rural poor, in particular women, into small Self-Help Groups (SHGs) and pool (collect) their savings.

Answer the following MCQs by choosing the most appropriate option

Q. An agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment.

Detailed Solution for Case Based Questions Test: Money & Credit - Question 8
An agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment is called credit agreement. As in this agreement the consideration is paid by the borrower later, generally with interest.
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