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Test: Money & Credit - 1 - Class 10 MCQ


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20 Questions MCQ Test Social Studies (SST) Class 10 - Test: Money & Credit - 1

Test: Money & Credit - 1 for Class 10 2024 is part of Social Studies (SST) Class 10 preparation. The Test: Money & Credit - 1 questions and answers have been prepared according to the Class 10 exam syllabus.The Test: Money & Credit - 1 MCQs are made for Class 10 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Money & Credit - 1 below.
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Test: Money & Credit - 1 - Question 1

What is one of the advantages of Self Help Groups (SHGs) mentioned?

Detailed Solution for Test: Money & Credit - 1 - Question 1

One of the advantages of Self Help Groups (SHGs) highlighted is that they help women become financially self-reliant. By engaging in group savings and loan activities, women in SHGs can access financial resources, develop financial independence, and participate in economic activities that contribute to their empowerment and self-sufficiency.

Test: Money & Credit - 1 - Question 2

According to the information provided, what role do banks play in lending to small borrowers?

Detailed Solution for Test: Money & Credit - 1 - Question 2

Emphasizes that banks and cooperative societies need to lend more to support small borrowers, including small cultivators, small-scale industries, and other individuals in need of credit. By increasing lending to these segments, banks can help raise incomes, enable borrowing at lower interest rates, and facilitate the growth of various economic activities such as agriculture, small-scale industries, and trade. This expanded access to credit can have a positive impact on economic development and financial inclusion.

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Test: Money & Credit - 1 - Question 3

What is the collateral of credit agreements?

Detailed Solution for Test: Money & Credit - 1 - Question 3

Collateral refers to an asset owned by the borrower, such as land, building, vehicle, livestock, or deposits with banks, that is offered as security to the lender until the loan is repaid. In the event of loan default, the lender has the right to sell the collateral to recover the outstanding amount. Collateral provides a level of assurance to the lender and reduces the risk associated with lending, making it a common practice in credit agreements.

Test: Money & Credit - 1 - Question 4
What factors typically constitute the terms of credit in a loan agreement?
Detailed Solution for Test: Money & Credit - 1 - Question 4
The terms of credit encompass various elements that define the conditions of a loan agreement. These typically include the interest rate charged on the borrowed amount, the collateral provided by the borrower as security, and the specified mode of repayment. These terms can vary significantly based on the nature of the lender, borrower, and the specific credit arrangement, highlighting the importance of understanding and negotiating favorable terms when entering into a credit agreement.
Test: Money & Credit - 1 - Question 5

what is the primary demand for credit?

Detailed Solution for Test: Money & Credit - 1 - Question 5

In rural areas, the predominant demand for credit is often related to crop production. Farmers require credit to cover expenses associated with agricultural activities such as purchasing seeds, fertilizers, pesticides, and other inputs necessary for cultivation. The timing of credit usage is crucial, with farmers typically obtaining loans at the beginning of the season and repaying them after the harvest, highlighting the seasonal nature of agricultural credit needs.

Test: Money & Credit - 1 - Question 6
What sector supervises the functioning of formal loans in India, ensuring transparency in lending activities?
Detailed Solution for Test: Money & Credit - 1 - Question 6
The Reserve Bank of India supervises the functioning of formal sources of loans in India, ensuring that banks and cooperatives disclose information regarding their lending activities. This oversight helps maintain transparency and accountability in the formal credit sector.
Test: Money & Credit - 1 - Question 7
In 2003, what percentage of rural households in India relied on informal sources of credit for their financial needs?
Detailed Solution for Test: Money & Credit - 1 - Question 7
In 2003, around 75% of the credit needs of rural households in India were met through informal sources. This indicates a significant reliance on non-formal credit sources for financial support in rural areas.
Test: Money & Credit - 1 - Question 8
Why is it important for formal credit to be distributed more equally in India, especially in rural areas?
Detailed Solution for Test: Money & Credit - 1 - Question 8
It is crucial for formal credit to be distributed more equally in India, particularly in rural areas, so that the poor can benefit from cheaper loans. This equitable distribution helps in reducing the dependence on informal sources of credit, promoting financial inclusion and economic development among marginalized communities.
Test: Money & Credit - 1 - Question 9

What is a key recommendation to reduce the reliance on informal sources of credit in India?

Detailed Solution for Test: Money & Credit - 1 - Question 9

One key recommendation to reduce the dependence on informal sources of credit in India is for banks and cooperatives to increase their lending activities, particularly in rural areas. By expanding formal sector loans, the accessibility of affordable credit can be improved, benefiting individuals who would otherwise resort to informal credit options.

Test: Money & Credit - 1 - Question 10
What is one of the key differences between formal lenders and informal lenders in terms of the interest rates they charge on loans?
Detailed Solution for Test: Money & Credit - 1 - Question 10
Informal lenders typically charge much higher interest rates compared to formal lenders. This higher cost of borrowing from informal lenders can lead to a larger portion of the borrower's earnings being used to repay the loan, potentially resulting in a debt trap situation. This difference in interest rates highlights the importance of accessing affordable credit options for borrowers.
Test: Money & Credit - 1 - Question 11
How do Self Help Groups (SHGs) help borrowers overcome the problem of lack of collateral?
Detailed Solution for Test: Money & Credit - 1 - Question 11
Self Help Groups (SHGs) assist borrowers in overcoming the lack of collateral by organizing individuals into groups where members collectively take responsibility for loan repayment. This collective approach reduces the risk for lenders, enabling them to provide loans to group members even without traditional forms of collateral. This arrangement fosters a sense of mutual accountability among group members and promotes access to credit for individuals who might not have collateral to offer.
Test: Money & Credit - 1 - Question 12
What was a major drawback of the barter system that led to its limitations?
Detailed Solution for Test: Money & Credit - 1 - Question 12
One of the major drawbacks of the barter system was the double coincidence of wants, which means that in a barter exchange, both parties must have what the other wants. This made transactions difficult and sometimes impractical, leading to limitations in economic activities.
Test: Money & Credit - 1 - Question 13
What institution in India is responsible for issuing currency notes on behalf of the central government?
Detailed Solution for Test: Money & Credit - 1 - Question 13
In India, the Reserve Bank of India plays a crucial role in issuing currency notes on behalf of the central government. This responsibility ensures that the currency in circulation is regulated and maintained at a national level. By centralizing the issuance of currency notes, the government can effectively manage the monetary supply and ensure the stability of the financial system.
Test: Money & Credit - 1 - Question 14
What factor did the introduction of money primarily eliminate in the process of exchange?
Detailed Solution for Test: Money & Credit - 1 - Question 14
The introduction of money as a medium of exchange eliminated the need for barter systems, where goods were directly exchanged for other goods without a standardized medium of exchange. By using money, individuals no longer had to rely on finding a direct match for what they had to offer and what they wanted in return, simplifying transactions and enabling smoother economic activities.
Test: Money & Credit - 1 - Question 15

What is the significance of demand deposits as explained?

Detailed Solution for Test: Money & Credit - 1 - Question 15

Demand deposits are deposits in bank accounts that can be withdrawn by the account holders at any time they require. This flexibility makes them highly liquid and easily accessible, allowing for transactions to be settled without the need for physical cash.

Test: Money & Credit - 1 - Question 16

What is the primary function of banks in relation to deposits according?

Detailed Solution for Test: Money & Credit - 1 - Question 16

Banks primarily safeguard deposits and pay interest to depositors. This process ensures the safety of people's money while allowing it to earn interest. Banks play a crucial role in managing deposits and providing the option for withdrawal as needed by the depositors.

Test: Money & Credit - 1 - Question 17
How do banks serve as intermediaries in the financial system, based on the information provided?
Detailed Solution for Test: Money & Credit - 1 - Question 17
Banks act as intermediaries by facilitating the transfer of funds between those who have surplus funds (depositors) and those who require funds (borrowers). This mediation role enables banks to channel deposits into loans, supporting various economic activities and fostering financial transactions in the economy.
Test: Money & Credit - 1 - Question 18
What crucial statement can be found on a currency note issued by the government in India?
Detailed Solution for Test: Money & Credit - 1 - Question 18
Currency notes issued by the government in India typically contain a crucial statement promising to pay a specific amount to the bearer of the note. This promise signifies the government's guarantee that the currency note holds a certain value and can be exchanged for goods and services up to the stated amount. This assurance helps maintain trust in the currency and facilitates its widespread acceptance in economic transactions.
Test: Money & Credit - 1 - Question 19

What is the main source of income for banks, as mentioned?

Detailed Solution for Test: Money & Credit - 1 - Question 19

The primary source of income for banks is the difference between the interest they charge on loans and the interest they offer on deposits. By charging a higher interest rate on loans than what they pay on deposits, banks earn revenue that contributes significantly to their profitability.

Test: Money & Credit - 1 - Question 20

What is the primary purpose of credit (loan) as described?

Detailed Solution for Test: Money & Credit - 1 - Question 20

Credit, in the context of a loan, serves the purpose of assisting the borrower in meeting their financial needs by providing money, goods, or services with the agreement of future repayment. It enables individuals like Salim to manage working capital requirements, complete production, and boost earnings. However, as seen in Swapna's case, credit can also lead to adverse outcomes such as being trapped in debt, emphasizing the importance of evaluating risks and support systems when utilizing credit effectively.

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