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Class 10 Economics Chapter 3 Question Answers - Understanding Economic Development

Q1: Why are transactions made in money?
Ans:
A person holding money can easily exchange it for any commodity or service that he or she might want.

Q2: How is money beneficial in transactions? [CBSE (F) 2017]
Ans:
Money beneficial in transactions. It eliminates the need for double coincidence of wants. It acts as a medium of exchange.

Q3: What is ‘double coincidence of wants’?
Ans:
What a person desires to sell is exactly what the other wishes to buy.

Q4: What is barter system?
Ans: 
When goods are directly exchanged for goods and there is no use of money, it is called barter system.

Q5: How does the use of money make it easier to exchange things? Give an example.
Ans:
A person holding money can easily exchange it for any commodity or service that he or she might want.
Example: The shoe manufacturer will first exchange shoes that he has produced for money and then exchange the money for wheat.

Q6: Why one cannot refuse a payment made in rupees in India? [CBSE (Delhi) 2016]
Ans: 
One cannot refuse a payment made in rupees in India: Because it is accepted as a medium of exchange. The currency is authorized by the government of the country.

Q7: Highlight the inherent problem in double coincidence of wants. [CBSE (Delhi) 2017]
Ans:
The inherent problem in double coincidence of wants is that both parties have to agree to sell and buy each other’s commodities.

Q8: What was used as money in early ages in India?
Ans: 
In the very early ages, Indians used grains and cattle as money.

Q9: Which metals were used for making coins in India in later stages?
Ans:
Gold, Copper, Silver coins were used in later stages for making coins in India.

Q10: What does modern form of money include?
Ans:
Modern form of money includes currency—that is paper notes and coins.

Q11: Does modern currency have any use of its own?
Ans: 
Unlike the things that were used as money earlier, modern currency is not made of precious metal such as gold, silver and copper. And unlike grain and cattle, they are neither of everyday use. The modern currency is without any use of its own.

Q12: Why is modern currency accepted as a medium of exchange?
Ans:
It is accepted as a medium of exchange because the currency is authorised by the government of the country.

Q13: In India, who is authorised to issue notes and currency?
Ans:
In India, ‘Reserve Bank of India’ issues currency notes on behalf of the central government.

Q14: What are ‘demand deposits’?
Ans:
People deposit their money in the bank as it earns interest. Since the deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits.

Q15: What is a ‘cheque’? [CBSE (F) 2017]
Ans: 
A cheque is a paper, instructing the bank to pay a specific amount from the person’s account to the person on whose name the cheque has been issued.

Q16: What do the banks do with the deposits which they accept from the public?
Ans:
(i) Banks keep only a small proportion of their deposits as cash with themselves.
(ii) Major portion of the money deposits are used to extend loans.

Q17: How do banks act as a mediator?
Ans:
Banks mediate between those who have surplus funds (depositors) and those who are in need of these funds (the borrowers).

Q18: Why is it difficult for poor to get loan from Banks? [CBSE (AI) 2017]
Ans:
Absence of Collateral is one of the major reasons which prevent the poor from getting bank loans.

Q19: What is the main source of income of the banks, if they forward the depositor’s money to the lender?
Ans: 
Banks charge a higher rate of interest on loans than what they offer on deposits. The difference between what is charged from borrowers and what is paid to depositors is their main source of income.

Q20: What is ‘credit’?
Ans:
Credit (loan) refers to an agreement in which the lender supplies the borrowers with money, goods or services in return for the promise of future payment.

The document Class 10 Economics Chapter 3 Question Answers - Understanding Economic Development is a part of the Class 10 Course Social Studies (SST) Class 10.
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FAQs on Class 10 Economics Chapter 3 Question Answers - Understanding Economic Development

1. What is money?
Ans. Money is a medium of exchange that is widely accepted in transactions for goods and services. It can be in the form of coins, banknotes, or digital currency.
2. How does credit work?
Ans. Credit allows individuals or businesses to borrow money with the promise to repay it later, usually with interest. It provides immediate access to funds and enables purchases or investments that may not be affordable with cash on hand.
3. What is the role of banks in the credit system?
Ans. Banks play a crucial role in the credit system by providing loans and credit to individuals and businesses. They act as intermediaries, taking deposits from savers and lending those funds to borrowers. Banks also assess creditworthiness, set interest rates, and manage the overall flow of credit in the economy.
4. How does a credit card work?
Ans. A credit card is a plastic card issued by a financial institution that allows the cardholder to borrow funds to make purchases. When a credit card is used, the issuer pays the merchant on behalf of the cardholder, and the cardholder later repays the amount borrowed, often with interest.
5. What are the advantages and disadvantages of using credit?
Ans. The advantages of using credit include the ability to make purchases and investments immediately, build a credit history, and have access to emergency funds. However, the disadvantages include the risk of accumulating debt, paying interest, and potentially damaging one's credit score if payments are not made on time.
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