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Unit Test: Money and Credit | Social Studies (SST) Class 10 PDF Download

Time: 1 hour       
M.M.: 30
Instructions: Attempt all questions.
 Question numbers 1 to 5 carry 1 mark each.
 Question numbers 6 to 8 carry 2 marks each.
 Question numbers 9 to 11 carry 3 marks each.
 Question numbers 12 & 13 carry 5 marks each.

Q1.  Which of the following is a function of money? (1 Mark)
 (a) Source of entertainment
 (b) Medium of exchange
 (c) Symbol of culture
 (d) Unit of inheritance

Q2.  Who issues currency notes on behalf of the central government in India? (1 Mark)
 (a) State Bank of India
 (b) Finance Ministry
 (c) Reserve Bank of India
 (d) Planning Commission

Q3.  What is the major drawback of the barter system? (1 Mark)
 (a) Lack of variety
 (b) Double coincidence of wants
 (c) Low production
 (d) Lack of labor

Q4.  Define credit in simple terms. (1 Mark)

Q5.  Name any one modern form of money. (1 Mark)

Q6.  How does a cheque function as a medium of exchange? (2 Marks)

Q7.  Give any two features of demand deposits. (2 Marks)

Q8. Mention any one positive and one negative effect of credit, using examples. (2 Marks)

Q9. Explain any three terms that make up the Terms of Credit. (3 Marks)

Q10.  What is the difference between formal and informal sources of credit? Give any three points. (3 Marks)

Q11. Describe the role of the Reserve Bank of India in supervising banks. (3 Marks)

Q12. What are Self Help Groups (SHGs)? Explain any four ways in which they benefit the rural poor. (5 Marks)

Q13. Explain the need for increasing formal sector credit in India. How can this help in reducing dependence on informal loans? (5 Marks)

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FAQs on Unit Test: Money and Credit - Social Studies (SST) Class 10

1. What is the importance of money in an economy?
Ans. Money serves as a medium of exchange, a unit of account, and a store of value. It facilitates trade by eliminating the inefficiencies of barter systems, allowing for more efficient transactions. Additionally, money helps in measuring the value of goods and services, providing a standard for pricing, and preserving wealth over time.
2. What are the different forms of money?
Ans. The different forms of money include commodity money, which has intrinsic value (like gold or silver), fiat money, which has value by government decree (like paper currency), and digital money, which exists in electronic form (like cryptocurrencies). Each form plays a significant role in the economy and reflects the evolution of monetary systems.
3. How do banks create credit?
Ans. Banks create credit through a process called fractional reserve banking. When a bank receives deposits, it is required to keep only a fraction of that amount as reserves. The remainder can be loaned out, creating new money in the economy. This process allows banks to expand the money supply and facilitate borrowing for individuals and businesses.
4. What are the risks associated with using credit?
Ans. The risks associated with using credit include the potential for accumulating debt that exceeds one's ability to repay, leading to financial distress. High-interest rates can exacerbate this issue, making it difficult to pay off borrowed amounts. Additionally, mismanagement of credit can negatively impact credit scores, affecting future borrowing opportunities.
5. What role do central banks play in regulating money and credit?
Ans. Central banks play a crucial role in regulating the money supply and credit through monetary policy. They set interest rates, control inflation, and ensure financial stability by managing the banking system. By influencing the availability of credit and the cost of borrowing, central banks aim to promote economic growth and maintain confidence in the financial system.
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