CBSE Class 7 > Class 7 Notes > Social Science - New NCERT ( Part 1 and Part 2) > Unit Test: Banks and the Magic of Finance
Unit Test: Banks and the Magic of Finance
M.M: 30
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. Fill in the blank:
A __________ is a financial institution that collects money from people in the form of deposits and lends money to people or borrowers as loans. (1 Mark)
Q2. Which of the following bank accounts does not earn interest? (1 Mark)
(i) Savings Account
(ii) Current Account
(iii) Fixed Deposit Account
(iv) All accounts earn interest
Q3. What does RBI stand for? (1 Mark)
Q4. What is a cheque? (1 Mark)
Q5. In which year was the UPI launched in India? (1 Mark)
Q6. What is financial infrastructure? Explain briefly. (2 Marks)
Q7. Explain the difference between debit and credit in a bank passbook. (2 Marks)
Q8. What was the purpose of the Pradhan Mantri Jan Dhan Yojana launched in 2014? (2 Marks)
Q9. Explain how compound interest works with an example. (3 Marks)
Q10. Describe the three types of bank accounts. (3 Marks)
Q11. What is a stock exchange, and what happens there? Explain with reference to India. (3 Marks)
Q12. How do banks make money? Explain with an example. (5 Marks)
Q13. What is UPI and how does it work? Explain its benefits. (5 Marks)
The document Unit Test: Banks and the Magic of Finance is a part of the Class 7 Course Social Science Class 7 - New NCERT ( Part 1 and Part 2).
All you need of Class 7 at this link: Class 7
FAQs on Unit Test: Banks and the Magic of Finance
| 1. What are the primary functions of banks? |  |
Ans. The primary functions of banks include accepting deposits, providing loans, facilitating money transfers, and offering financial services such as investment advice. They play a crucial role in the economy by mobilising savings and providing credit to individuals and businesses.
| 2. How do banks create money? | |
Ans. Banks create money through a process called fractional reserve banking. When banks receive deposits, they are required to hold a fraction of these deposits in reserve. The remaining amount can be lent out to borrowers, which increases the money supply in the economy as the borrowed funds are deposited back into the banking system.
| 3. What is the role of the Reserve Bank of India (RBI)? | |
Ans. The Reserve Bank of India (RBI) is the central bank of India, responsible for regulating the country's monetary policy, managing currency issuance, and overseeing the banking sector. It aims to ensure financial stability and economic growth by controlling inflation and maintaining the value of the currency.
| 4. What are interest rates and how do they affect loans? | |
Ans. Interest rates are the cost of borrowing money, expressed as a percentage of the loan amount. They affect loans by determining the amount of money that borrowers must repay in addition to the principal. Higher interest rates can discourage borrowing, while lower rates can encourage it, influencing economic activity.
| 5. What is the relationship between savings and investments in the context of banks? | |
Ans. Banks serve as intermediaries between savers and investors. When individuals deposit money into savings accounts, banks use these funds to provide loans to borrowers for investments. This relationship helps facilitate economic growth, as savings are transformed into productive investments that can generate returns.
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Apr 22, 2026 Last updated
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Document Description: Unit Test: Banks and the Magic of Finance for Class 7 2026 is part of Social Science Class 7 - New NCERT ( Part 1 and Part 2) preparation. The notes and questions for Unit Test: Banks and the Magic of Finance have been prepared according to the Class 7 exam syllabus. Information about Unit Test: Banks and the Magic of Finance covers topics like and Unit Test: Banks and the Magic of Finance Example, for Class 7 2026 Exam. Find important definitions, questions, notes, meanings, examples, exercises and tests below for Unit Test: Banks and the Magic of Finance.
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