UPSC Exam > UPSC Videos > NCERT Video Summary: Class 6 to Class 12 (English) > Money & Credit
Money & Credit Video Lecture | NCERT Video Summary: Class 6 to Class 12 (English) - UPSC
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FAQs on Money & Credit Video Lecture - NCERT Video Summary: Class 6 to Class 12 (English) - UPSC
| 1. What is the role of money in the economy? |  |
Ans. Money plays a crucial role in the economy as a medium of exchange, unit of account, and store of value. It facilitates transactions, simplifies the exchange of goods and services, and serves as a common measure of value. Additionally, money enables economic growth by promoting specialization, investment, and economic stability.
| 2. How does credit contribute to economic growth? | |
Ans. Credit plays a significant role in economic growth by providing individuals, businesses, and governments with access to funds that they can use for consumption or investment purposes. It enables people to make purchases or investments they might not be able to afford immediately, thereby stimulating economic activity, creating jobs, and fostering economic development.
| 3. What is the difference between secured and unsecured credit? | |
Ans. Secured credit refers to loans or lines of credit that are backed by collateral, such as a house or a car. In case of default, the lender can seize the collateral as repayment. On the other hand, unsecured credit does not require collateral and is typically based on a borrower's creditworthiness. Examples include credit cards and personal loans. Unsecured credit carries higher interest rates to compensate for the increased risk for the lender.
| 4. How does the central bank control the money supply? | |
Ans. The central bank controls the money supply through various tools, such as open market operations, reserve requirements, and setting the discount rate. Open market operations involve buying or selling government securities, which influences the amount of money in circulation. Reserve requirements mandate the minimum amount of reserves banks must hold, affecting their ability to lend money. The discount rate is the interest rate at which banks can borrow from the central bank, which influences the cost of borrowing and lending.
| 5. What are the potential risks associated with excessive credit growth? | |
Ans. Excessive credit growth can lead to several risks, including financial instability and economic downturns. It can create asset bubbles, such as housing or stock market bubbles, which can burst and cause significant financial losses. Excessive credit can also lead to overleveraging, where individuals or businesses accumulate too much debt, making it difficult to repay. Additionally, it can contribute to inflationary pressures and increase the vulnerability of the banking system to defaults and financial crises.
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Nov 16, 2024 Last updated |
Video Description: Money & Credit for UPSC 2024 is part of NCERT Video Summary: Class 6 to Class 12 (English) preparation.
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