Previous Year Questions - Money and Credit Class 10 Notes | EduRev

Short Answer Type Questions

Q.1. Explain the values which a borrower should observe for the proper use of loan taken.    [CBSE 2018]
Ans.

• The borrower should use the loan for the purpose for which it was taken.
• He should pay the instalment on due date.
• In case of any problem in repayment, he should inform the bank etc., about the same and get the date extended as per rules.
• At the time of taking loan, he should inform the facts clearly, and nothing should be concealed.
  
  

Q.2. How is money transferred from one bank to another bank account? 
Or
Describe how cheque payments are made and realised.    [CBSE 2016]
Ans. 

• If a person has to make a payment, he issues a cheque for a specific amount in his name such as TPDDL.
• The TPDDL will deposit the cheque in their own account in the bank. Thereafter, the money is transferred from one bank to another bank account in a couple of days. Thus, transaction takes place without any payment of cash from one bank account to another bank account.
  
  

Q.3. What is the basic feature of double coincidence of wants? In which system is it practised?    [CBSE 2015]
Ans. Basic feature is that both parties agree to sell and buy each other’s commodities. What a person desires to sell is exactly what the other wishes to buy. It is practised in Barter system.

Q.4. What is meaning of Barter system? Why is double coincidence of wants an essential feature of a Barter system?    [CBSE 2015]
Ans. (a) A system in which goods are directly exchanged without the use of money is called barter system.
(b) Double coincidence of wants means when both the parties - seller and purchaser - agree to sell and buy each other’s commodities. It implies that what a person desires to sell is exactly what the other wishes to buy. No money is used in such an arrangement. Therefore, it is an essential feature of barter system.

Long Answer Type Questions

Q.1. Why is it necessary that banks and cooperatives increase their lending in rural areas? Explain.    [CBSE 2018]
Ans.

• It will increase the income of poor farmers.
• It will reduce the dependence of the rural people on moneylenders and traders, i.e., the informal sources of credit.
• The poor rural people will not fall in debt trap because they could borrow on easy terms.
• It will improve the standard of living of rural people.
• The improvement in the conditions of rural people will help in the overall development of the country as they will set up small scale industries and grow more crops.
  
  

Q.2. Describe the pattern of formal and informal sources of credit in urban areas. Why do we need to expand formal sources of credit?
Or
The credit activities of informal sector should be discouraged. Support the statement.    [CBSE 2018]
Ans: (a) The graph given below shows the pattern of formal and informal sources of credit in urban areas:
(b) The informal lenders carry a very high-interest rate and do little to increase the income of the borrowers. So we need to expand formal sources of credit. At the same time, it is necessary that everyone receives these loans.
(c) It reduces the possibility of people getting into debt trap.

Q.3. Deposits in the banks are beneficial to the depositors as well as to nation.    [CBSE 2016]
Ans.

(a) To Depositors

• Banks accept the deposit and pay as interest rate on the deposits.
• Money is safe with the bank.
• People (depositors) may withdraw the money as and when they require.
• Depositors may make payments through cheques instead of cash.

(b) To the Nation

• Banks use the major portion of the deposits to extend loans.
• There is huge demand for loans for various economic activities. Banks make use of the deposits to meet the loan requirements of the people.
• Businessmen and other entrepreneurs take loans from the banks and open factories.
• They help in the advancement of the economy.
  Thus, the deposits are beneficial to the nation.
  
  

Q.4. Describe two different credit situations where credit plays a positive role and a negative role.
Or
Explain an example of good credit, as mentioned in the book.    [CBSE 2016]
Ans.
(a) Positive Role

• Salim, a shoe manufacturer, has received an order for 3000 pairs of shoes.
• He takes loans from leather supplier and advance payment from trader.
• He supplies the shoes in time and makes good profit and returns the loan too.

(b) Negative Role

• In another case, Swapna takes loan from moneylender to meet the expenses of cultivation. 
• Her crops, however, fail and she is not able to repay the loan. She takes a fresh loan next year. 
• Though it is a normal crop but earnings are not enough to pay the loan. 
• She is caught in a debt trap and is compelled to sell a part of land to pay off the debt. It is a case of bad loan.
  
  

Q.5. Explain three terms of credit. How these differ in different cases?    [CBSE 2016]
Ans. 

(a) The terms of credit are as mentioned below:
(i) Interest rate.
(ii) Collateral and documentation requirement.
(iii) Mode of repayment.

(b) The terms of credit vary substantially from one credit arrangement to another.

(c) Interest rate in the formal sector, i.e., banks and cooperative is about 9-10 per cent, but in the informal sector, the moneylender and grain merchants etc. charge much higher interest.
(d) Moneylenders charge higher rate of interest and exploit the borrowers by taking control of the collateral, i.e., land.
(e) Banks insist on documentation requirement and collateral, and therefore it becomes difficult for time-poor to get loans from the banks.

Q.6. Why is modem currency accepted as a medium of exchange without any use of its own? Find out the reason.    [CBSE 2015]
Ans: Modem currency is accepted as a medium of exchange without any use of its own due to reasons as mentioned below:

• In India, the Reserve Bank of India issues currency notes on behalf of the central government.
• As per Indian law, no other individual or organisation is allowed to issue currency.
• The law legalises the use of rupee as a medium of payment that cannot be refused in settling transactions in India.
• No individual in India can legally refuse a payment made in rupees. Hence, the rupee is widely accepted as a medium of exchange.