Money And Credit - Olympiad Level MCQ, Class 10 SST - Class 10 MCQ

Portion of deposits kept by banks for day-to-day transactions:
The portion of deposits kept by banks for their day-to-day transactions is a key factor in determining a bank's liquidity and ability to meet the demands of its customers. In this case, we are given four options to choose from: 10%, 15%, 20%, and 25%. Let's evaluate each option to determine the correct answer.
Option A: 10%
- This option suggests that banks keep 10% of their deposits for day-to-day transactions.
- This percentage seems relatively low and may not provide enough liquidity for the bank's operations.
Option B: 15%
- This option suggests that banks keep 15% of their deposits for day-to-day transactions.
- This percentage is slightly higher than the previous option and may provide a better level of liquidity for the bank's operations.
Option C: 20%
- This option suggests that banks keep 20% of their deposits for day-to-day transactions.
- This percentage is higher than the previous options and may indicate a higher level of liquidity for the bank.
Option D: 25%
- This option suggests that banks keep 25% of their deposits for day-to-day transactions.
- This percentage is the highest among the given options and may indicate a conservative approach to liquidity management.
Based on the given options, the correct answer is B: 15%. This suggests that banks typically keep 15% of their deposits for day-to-day transactions. However, it is important to note that this percentage can vary depending on various factors such as regulatory requirements, the specific bank's risk appetite, and market conditions.

To determine which households take more loans from the formal sector, we need to consider the options provided and analyze the characteristics of each household group.
A: Poor households and rich households.
- Poor households are likely to take loans from the formal sector to meet their basic needs and overcome financial constraints.
- Rich households may also take loans from the formal sector for various purposes, such as investments or expanding their businesses.
B: Well off households and households with few assets.
- Well off households, who have a higher income and financial stability, may choose to take loans from the formal sector to finance their luxuries or investments.
- Households with few assets may rely on loans from the formal sector to acquire assets or improve their living conditions.
C: Poor households and well off households.
- Poor households, as mentioned earlier, are likely to take loans from the formal sector to fulfill their basic needs.
- Well off households, due to their higher income and financial status, may have better access to loans from the formal sector for various purposes.
D: Well off households and rich households.
- Well off households, with their higher income and financial stability, are more likely to take loans from the formal sector to finance their desires or investments.
- Rich households, who have substantial wealth and assets, may not necessarily rely on loans from the formal sector as they have the means to finance their needs without external borrowing.
Based on the analysis, it can be concluded that the correct answer is option D: Well off households and rich households.

Why bank deposits are known as demand deposits?

Bank deposits are known as demand deposits because:

1. Withdrawal Provision:

People have the provision to withdraw the money when they require.

2. Flexibility:

Depositors have the flexibility to withdraw their funds on demand without any restrictions.

3. Easy Access:

Depositors can access their funds through various means such as checks, debit cards, and online transfers.

4. No Fixed Term:

Unlike fixed deposits, demand deposits do not have a fixed maturity period. Depositors can withdraw their funds at any time without penalty.

5. Immediate Availability:

The deposited funds are readily available to the depositor whenever they need it, ensuring liquidity.

6. Current Account:

Most demand deposits are held in current accounts which are specifically designed for frequent transactions and easy access to funds.

Overall, bank deposits are referred to as demand deposits because they provide depositors with the flexibility and convenience to withdraw their funds on demand without any restrictions.

Answer:
The main source of credit for rich households is Formal credit. Here is a detailed explanation:
Definition:
- Formal credit refers to credit that is provided by financial institutions such as banks, credit unions, and other regulated lenders.
- Informal credit, on the other hand, refers to credit that is provided by individuals or non-regulated lenders, such as family members, friends, or moneylenders.
Explanation:
- Rich households have a higher income and wealth compared to other households, which makes them more creditworthy.
- They often have access to a wide range of financial products and services provided by formal financial institutions.
- These institutions offer various types of credit, such as loans, credit cards, lines of credit, and mortgages, that are tailored to the needs of wealthy individuals.
- Rich households can easily meet the eligibility criteria and requirements set by formal lenders, which makes it easier for them to obtain credit.
- They can provide collateral or security for the loans, which further reduces the risk for the lenders.
- Moreover, formal credit offers advantages such as lower interest rates, longer repayment periods, and better legal protections for both the borrower and lender.
In conclusion, the main source of credit for rich households is Formal credit provided by financial institutions.

Essential Feature of Barter System: Double Coincidence of Wants

A key feature of the barter system is the requirement for a double coincidence of wants. This means that in order for a transaction to occur, both parties involved must have something that the other party desires. This feature is essential for the smooth functioning of the barter system and distinguishes it from other forms of exchange.

Here are the reasons why the double coincidence of wants is an essential feature of the barter system:

1. Mutual Benefit:
- The double coincidence of wants ensures that both parties involved in a barter transaction find value in the exchange. It allows individuals to trade goods or services they have for something they need or desire, creating a mutually beneficial arrangement.
2. Direct Exchange:
- The barter system relies on direct exchange, where goods or services are traded directly without the need for a medium of exchange like money. The double coincidence of wants facilitates this direct exchange by ensuring that both parties have something the other wants.
3. Lack of Standardization:
- Unlike money, which is a universally accepted medium of exchange, the barter system lacks standardization. Each transaction is unique and depends on the specific desires and needs of the individuals involved. The double coincidence of wants allows for this flexibility and customization in trading.
4. Limited Scope:
- The barter system is limited in its scope and applicability. It is most commonly used in small-scale transactions between individuals or communities. The double coincidence of wants is essential in such scenarios as it ensures that both parties can find a suitable exchange partner with complementary needs.
5. Need for Negotiation:
- In a barter system, negotiation plays a crucial role in determining the terms of the exchange. The double coincidence of wants provides a starting point for negotiation, as both parties must agree on the value of the goods or services being exchanged.
In conclusion, the double coincidence of wants is an essential feature of the barter system as it enables mutual benefit, facilitates direct exchange, accommodates the lack of standardization, addresses the limited scope of the system, and necessitates negotiation. Without this feature, the barter system would be impractical and inefficient in facilitating trade between individuals or communities.

Double Coincidence of Wants

The term "double coincidence of wants" refers to a situation in which both parties involved in a transaction have a mutual desire to sell and buy each other's commodities. It is a necessary condition for barter trade to occur smoothly, as it ensures that both parties are willing to exchange goods or services without the need for a medium of exchange such as money.

When both parties agree to sell and buy each other's commodities:

• It is known as double coincidence of wants. This means that both parties have a mutual desire to trade their goods or services with each other.


• This condition is essential for a barter trade to take place. In a barter system, goods or services are exchanged directly without the use of money as a medium of exchange.


• Double coincidence of wants eliminates the need for a medium of exchange and allows for a direct exchange between parties.


• It requires both parties to have a complementary demand and supply, where one party wants what the other party has to offer.


• Without double coincidence of wants, it would be difficult to facilitate a smooth exchange of goods or services, as one party may not have a desire for the goods or services offered by the other party.

Therefore, when both parties agree to sell and buy each other's commodities, it is known as the double coincidence of wants, which is a necessary condition for barter trade.

Explanation:
Banks use the major portion of the deposit to extend loans. Here is a detailed explanation of why this is the correct answer:
- Reserve Requirements: Banks are required to keep a certain percentage of their deposits as reserves. These reserves are held to ensure that the bank has enough liquidity to meet customer withdrawals. However, this is not the major portion of the deposit.
- Routine Expenses: Banks do have routine expenses such as salaries, rent, utilities, and other operational costs. However, these expenses are typically covered by the bank's income from various sources such as interest on loans, fees, and other financial activities. Therefore, routine expenses do not constitute the major portion of the deposit.
- Renovation of the Bank: While banks may allocate a portion of their funds for renovation or maintenance purposes, it is not the major portion of the deposit. Renovation expenses are usually a smaller part of the bank's overall expenditures.
- Extending Loans: Banks make money by lending out the deposits they receive. They earn interest on these loans, which is one of their primary sources of income. Therefore, the major portion of the deposit is used to extend loans.
In conclusion, banks use the major portion of the deposit to extend loans.

The Answer is: C. Demand deposit
Explanation:
Here is a detailed explanation of the answer:

What are demand deposits?

• Demand deposits are the deposits made by individuals or entities into their bank accounts that can be withdrawn at any time without any prior notice.


• These deposits are also known as current accounts or checking accounts.

Characteristics of demand deposits:

• They provide easy access to funds as the account holder can withdraw money whenever needed.


• Interest rates on demand deposits are generally low or even zero.


• No fixed maturity period is associated with demand deposits.

Examples of demand deposits:

• Regular savings accounts


• Current accounts


• Checking accounts

Importance of demand deposits:

• Demand deposits are an essential part of the banking system as they provide liquidity to individuals and businesses.


• They offer a safe and secure way to store money and conduct day-to-day financial transactions.


• They also serve as a basis for the creation of money through the fractional reserve banking system.

To summarize, demand deposits are bank deposits that can be withdrawn on demand without any prior notice. They are a convenient and accessible form of keeping money in a bank account.

Impact of Cheap and Affordable Credit

When credit is cheap and affordable, it leads to:

A: Good economic growth

• Cheap and affordable credit encourages borrowing and spending, which stimulates economic activity and leads to overall economic growth.


• It provides businesses and individuals with the necessary funds to invest, expand, and create jobs.


• Access to credit allows consumers to make purchases they may not be able to afford otherwise, boosting consumption and driving economic growth.

B: Creating a debt trap

• When credit is easily available and affordable, individuals may be tempted to take on more debt than they can handle.


• Excessive borrowing can lead to a debt trap, where individuals struggle to repay their loans and may face financial difficulties in the long run.


• High levels of debt can also lead to a decrease in consumer spending, which can have a negative impact on economic growth.

Therefore, the correct answer is D: Good economic growth. Cheap and affordable credit promotes borrowing and spending, which stimulates economic growth. However, it is important to manage credit responsibly to avoid falling into a debt trap.

Not the main source of credit for rural households in India:
- Traders: While traders may provide credit to rural households in certain cases, they are not considered the main source of credit for rural households in India. Traders typically extend credit for specific purposes, such as agricultural inputs or small-scale business needs, rather than serving as a primary source of credit for overall household expenses.
Main sources of credit for rural households in India:
- Relatives and friends: Rural households in India often rely on informal networks of relatives and friends for credit. This can involve borrowing money for various needs, such as agricultural activities, household expenses, or emergencies. Informal credit from relatives and friends is usually based on trust and personal relationships.
- Commercial Banks: Commercial banks play a significant role in providing credit to rural households in India. They offer various financial products, including loans, overdraft facilities, and microfinance services. These formal banking institutions often have specific schemes and programs targeting rural areas to promote financial inclusion and support rural development.
- Moneylenders: Moneylenders have traditionally been a major source of credit for rural households in India, particularly in areas with limited access to formal banking services. However, efforts have been made to reduce dependency on moneylenders due to concerns related to high-interest rates and exploitative practices.
In conclusion, while traders may provide credit in certain cases, they are not the main source of credit for rural households in India. Instead, rural households primarily rely on informal networks, such as relatives and friends, as well as formal institutions like commercial banks for their credit needs.

Answer:
The term of credit refers to the conditions or terms under which credit is extended to a borrower. It includes various aspects such as the amount of credit, repayment period, interest rate, mode of payment, and collateral.
Among the given options, the rate of saving is not included in the terms of credit. The rate of saving is a completely different concept and is not directly related to credit.
To summarize, the correct answer is:
C. Rate of saving

Formal Sources of Credit:
- Formal sources of credit are institutions or organizations that provide credit facilities to individuals, businesses, or governments.
- These sources typically follow a set of rules, regulations, and procedures in granting credit.
A: Commercial Banks
- Commercial banks are formal sources of credit.
- They provide various types of loans and credit facilities to individuals and businesses.
- They have specific terms and conditions for granting credit.
B: State Bank of India
- State Bank of India is a formal source of credit.
- It is a government-owned bank that provides a wide range of financial services, including loans and credit facilities.
C: Employers
- Employers are not considered formal sources of credit.
- While some employers may offer loans or salary advances to their employees, this is not a common practice and does not fall under the category of formal credit sources.
D: Co-operatives
- Co-operatives are formal sources of credit.
- They are member-owned organizations that provide financial services, including loans, to their members.
The correct answer is C: Employers.
- Employers are not considered formal sources of credit as they do not generally provide credit facilities on a regular basis.

Supervision of Formal Sources of Credit

The functioning of the formal sources of credit is supervised by the Reserve Bank of India (RBI).

Explanation:

The formal sources of credit refer to the financial institutions and organizations that provide credit to individuals and businesses. These sources include commercial banks, cooperative banks, regional rural banks, and non-banking financial companies (NBFCs).

The RBI, as the central bank of India, plays a crucial role in supervising and regulating the functioning of these formal sources of credit. Here's how the RBI ensures the proper functioning of these institutions:

• Licensing and Regulation: The RBI grants licenses to banks and NBFCs, ensuring that they meet the necessary criteria and comply with the regulatory guidelines. It regulates their operations, capital adequacy, risk management, and other aspects to maintain stability in the financial system.


• Prudential Norms: The RBI sets prudential norms for formal sources of credit, including guidelines for loan classification, provisioning, and asset quality. This ensures that these institutions maintain a healthy loan portfolio and manage risks effectively.


• Monitoring and Inspection: The RBI conducts regular inspections and monitoring of the formal sources of credit to assess their financial health, compliance with regulations, and adherence to best practices. It also takes corrective measures if any irregularities or deficiencies are found.


• Policy Formulation: The RBI formulates and implements monetary policies that impact the lending practices of formal sources of credit. It sets interest rates, reserve requirements, and other policy measures to influence credit flow and promote economic growth.


• Consumer Protection: The RBI ensures that formal sources of credit follow fair practices and protect the interests of borrowers. It establishes regulations related to transparency, disclosure of terms and conditions, grievance redressal mechanisms, and fair treatment of customers.

Overall, the RBI's supervision of formal sources of credit is aimed at maintaining the stability and integrity of the financial system, promoting responsible lending practices, and safeguarding the interests of borrowers.

Why banks do not give loans to small farmers, marginal farmers, and industries without proper collateral and documents?

1. Lack of collateral: Banks require collateral to secure the loan amount in case of default. Without proper collateral, banks may not be willing to lend money to borrowers.

2. Risk factor: Banks evaluate the creditworthiness and risk associated with borrowers before approving a loan. Small farmers, marginal farmers, and industries may be considered high-risk borrowers due to factors such as unstable income, lack of financial stability, or uncertain market conditions.

3. Insufficient documents: Banks require proper documentation to assess the financial health and repayment capacity of the borrowers. Small farmers, marginal farmers, and industries may face challenges in providing the required documents, making it difficult for banks to evaluate their creditworthiness.

4. Limited repayment capacity: Small farmers and marginal farmers often have limited income and may not be able to generate sufficient cash flow to repay the loan. Similarly, industries may face financial difficulties due to various factors such as market fluctuations, competition, or mismanagement, making it risky for banks to lend money without proper collateral and documents.

5. Regulatory requirements: Banks are regulated by authorities and need to comply with certain guidelines and regulations while lending money. These regulations often require banks to assess the creditworthiness and risk associated with borrowers, making it necessary to have proper collateral and documents.

Conclusion: Banks prioritize the security of their loans and the ability of borrowers to repay them. Without proper collateral, documents, and a reliable repayment capacity, banks may hesitate to provide loans to small farmers, marginal farmers, and industries.

Terms of credit refer to the conditions and requirements that borrowers must meet in order to obtain credit from a lender. These terms are typically outlined in a credit agreement or contract. They outline the terms and conditions under which the borrower receives credit, including the repayment terms and any associated fees or charges. However, terms of credit do not include:

1. Interest rate: The interest rate is the cost of borrowing money and is typically expressed as a percentage of the loan amount. It represents the lender's compensation for taking on the risk of lending and is an essential component of the terms of credit.

2. Collateral: Collateral refers to assets or property that a borrower pledges as security for a loan. It provides the lender with a form of recourse in case the borrower defaults on the loan. Collateral is an important consideration for lenders when determining the terms of credit.

3. Cheque: A cheque is a written order that directs a bank to pay a specific amount of money from the account of the person who writes the cheque, to the person named on the cheque. While cheques are commonly used for making payments, they are not a part of the terms of credit. Instead, they are a payment instrument that may be used by the borrower to fulfill their repayment obligations.

4. Mode of repayment: The mode of repayment refers to the method or schedule by which the borrower will repay the loan. It may include options such as monthly installments, lump-sum payments, or automatic deductions from a bank account. The mode of repayment is an important aspect of the terms of credit as it determines how the borrower will fulfill their repayment obligations.

Therefore, the correct answer is C: cheque. Cheque is not a part of the terms of credit, but rather a payment instrument that may be used by the borrower to fulfill their repayment obligations.

Answer:

The correct answer to the given question is barter.

Detailed

A detailed explanation of the concept of barter and why it is the correct answer to the given question is as follows:

1. Definition of Barter:

• Barter is a system of exchange where goods or services are directly exchanged for other goods or services without the use of money as a medium of exchange.


• It is an ancient method of trade that predates the use of money.

2. Characteristics of Barter:

• Barter involves the direct exchange of goods or services between two parties.


• It requires a mutual agreement between the trading parties on the value of the goods or services being exchanged.


• Barter can be a challenging system as it relies on the availability of parties with complementary needs and wants.

3. Importance of Barter:

• Barter was the primary method of trade before the introduction of money.


• It allowed individuals to acquire goods and services they needed by exchanging their own surplus goods or services.


• Barter still exists in some parts of the world, especially in rural communities or areas with limited access to money.

4. Comparison with Other Options:

• Money: While money is widely accepted as a medium of exchange, it is not the answer to the given question as the question specifically asks for a method of trade without the use of money.


• Credit: Credit refers to the ability of an individual or a business to borrow money or obtain goods or services before payment, which is not directly related to the exchange of goods and services.


• Loans: Loans also involve the borrowing of money, which is not the answer to the given question.

Therefore, based on the above explanations, it is clear that the correct answer to the given question is barter.

Formal Sources of Credit

Formal sources of credit refer to institutions or entities that provide credit in a regulated and official manner. These sources typically have established procedures, terms, and interest rates for lending.

Some examples of formal sources of credit include:

1. Money lenders: Money lenders are individuals or businesses that provide loans to individuals or businesses in exchange for interest payments. They typically operate within the legal framework and may be licensed or regulated by the government.


2. Co-operatives: Co-operatives are member-owned organizations that provide financial services to their members. They are often formed by a group of individuals with common interests or needs, such as farmers or workers. Co-operatives offer credit services and other financial products tailored to the needs of their members.


3. Employers: Some employers provide loans or credit facilities to their employees. This can be in the form of salary advances, employee loans, or credit lines. These credit facilities are usually provided as a benefit or support to employees and may have specific terms and conditions.


4. Finance companies: Finance companies are specialized institutions that provide loans and other financial services. They operate under specific regulations and may offer different types of credit, such as personal loans, business loans, or vehicle financing. Finance companies often have their own set of eligibility criteria and interest rates.

Based on the options provided, the correct answer is B: Co-operatives.

Answer:

Agency issuing currency notes on behalf of the government of India:

Reserve Bank of India (RBI)

• The Reserve Bank of India (RBI) is the central banking institution of India.


• It is responsible for issuing currency notes on behalf of the government of India.


• RBI is the sole authority to issue and manage the Indian rupee.


• The RBI ensures the availability of adequate quantity of currency notes in the economy.


• It also plays a crucial role in maintaining the stability and integrity of the Indian financial system.


• As the central bank, RBI regulates and supervises the functioning of commercial banks and financial institutions in the country.


• It formulates and implements monetary policies to control inflation, stabilize prices, and promote economic growth.


• RBI also acts as a banker to the government, managing the government's accounts and facilitating its borrowing needs.


• Overall, the Reserve Bank of India plays a crucial role in the monetary and financial system of the country.

Therefore, the correct answer is Option B: Reserve Bank of India (RBI).

Major reasons that prevent the poor from getting loans from banks:

• Lack of capital: Many poor individuals and families do not have enough capital or savings to meet the bank's requirements for loan eligibility.


• Not affordable due to high rate of interest: Banks often charge high interest rates on loans, making it difficult for the poor to afford the repayments.


• Absence of collateral security: Banks usually require collateral or security against the loan, such as property or assets. The poor often lack such assets, making it challenging for them to provide the required collateral.


• Absence of mediators: Poor individuals may lack access to intermediaries or loan facilitators who can help them navigate the loan application process and provide necessary guidance or support.

Among these reasons, the absence of collateral security (option C) is a major factor that prevents the poor from getting loans from banks. Without collateral, banks perceive a higher risk of default and are less likely to approve loans for individuals who cannot provide security.

Decision-making in Self Help Groups (SHGs) regarding loan activities

Background:

A Self Help Group (SHG) is a small voluntary association of individuals who come together to collectively save money and provide loans to their members. SHGs are an important part of microfinance initiatives, particularly in rural areas, to promote financial inclusion and empower marginalized communities.

Decision-making process:

In a SHG, most of the decisions regarding loan activities are taken by the members themselves. The decision-making process involves the following key steps:

• Discussion: Members discuss and identify the need for a loan within the group.


• Loan proposal: A member presents a loan proposal specifying the purpose, amount, and repayment plan.


• Group approval: The proposal is presented to the entire group for discussion and approval.


• Assessment: The group collectively assesses the feasibility of the loan proposal, considering factors such as repayment capacity and potential impact on the borrower's livelihood.


• Decision-making: Based on the assessment and group consensus, a decision is made regarding whether to approve or reject the loan proposal.


• Loan disbursement: If approved, the loan amount is disbursed to the borrower.


• Monitoring: The group collectively monitors the loan repayment and provides support and guidance to the borrower, if needed.

Conclusion:

In a SHG, the decision-making regarding loan activities is primarily carried out by the members themselves. This participatory approach empowers the members, promotes financial literacy, and ensures that loan decisions are made based on the collective wisdom of the group.

Money in Modern Day Economy:

• Gold: Gold is not considered as money in the modern day economy. While it has been historically used as a medium of exchange, it is not widely accepted as a form of payment in day-to-day transactions.


• Silver: Similar to gold, silver is not considered as money in the modern day economy. It is primarily used for industrial purposes and as a store of value, rather than as a medium of exchange.


• Interest: Interest is not money itself, but rather a cost or a return on borrowed or invested money. It represents the compensation for the use of money and does not serve as a direct medium of exchange.


• Demand Deposits: Demand deposits, also known as checking accounts, are considered as money in the modern day economy. They are accounts held by individuals or businesses at financial institutions that can be used to make payments or withdrawals. These deposits can be accessed through checks, debit cards, or electronic transfers, making them a widely accepted form of money.

Therefore, the correct answer is option D: Demand Deposits.

The important characteristic of modern form of currency:

Answer: D - It is authorised by the Government of the country

• Legal Tender: Modern currency is considered legal tender, which means it is recognized by the government as an official medium of exchange.


• Government Authorization: The government of a country authorizes the production and circulation of currency.


• Controlled Supply: The government has control over the supply of currency, regulating its issuance to maintain stability in the economy.


• Uniformity and Standardization: Modern currency is uniform in design and standardized in terms of size, shape, and security features to prevent counterfeiting.


• Widely Accepted: Currency authorized by the government is widely accepted within the country, facilitating transactions and trade.


• Legal Protection: The government provides legal protection for the use of currency, ensuring its acceptance in financial transactions and enforcing penalties for counterfeiting.


• Backing by Government: Modern currency is backed by the government's guarantee, providing confidence to users that it holds value and can be exchanged for goods and services.


• Medium of Exchange, Unit of Account, and Store of Value: Currency serves as a medium of exchange, allowing transactions; a unit of account, providing a common measure of value; and a store of value, preserving purchasing power over time.

These characteristics distinguish modern currency from other forms of money and ensure its acceptance and functionality within an economy.

Explanation:
The answer is A: Commercial Banks. Commercial banks are formal financial institutions that provide loans and other financial services to individuals and businesses. They are not considered part of the informal sector, which refers to economic activities that are not regulated or monitored by the government.
The other options, B: Moneylenders, C: Traders, and D: Landlords, are all examples of informal sector loans for poor rural households in India. These individuals or entities often provide loans to the poor and marginalized populations who do not have access to formal banking services. They may charge higher interest rates and operate outside of the legal framework.
To summarize:
- Commercial banks are not part of the informal sector and provide formal financial services.
- Moneylenders, traders, and landlords are examples of informal sector loans for poor rural households in India.

Explanation:

Barter exchange is a system of trade where goods and services are exchanged directly without the use of money as a medium of exchange. However, there are several inconveniences associated with barter exchange:

• Lack of double coincidence of want: In barter exchange, both parties involved in a trade must want what the other party has to offer. This can be difficult to achieve, as each person's wants and needs may not align with what others have to offer. This leads to inefficiencies and delays in trade.


• Absence of divisibility: Barter exchange often involves the exchange of whole units of goods or services. This can make it difficult to make exact trades or to divide goods into smaller portions for exchange.


• Difficulty in storing wealth: Barter exchange does not provide a convenient way to store wealth. Goods and services may not retain their value over time, and there is no standardized unit of value to measure wealth.


• Availability of money as a medium of exchange: This statement is not true. One of the main reasons money was introduced as a medium of exchange is to overcome the inconveniences of barter exchange. Money provides a standardized unit of value, facilitates trade by eliminating the need for double coincidence of want, and allows for the division of goods into smaller units for exchange.

Therefore, option D is the correct answer as it is not true regarding the inconvenience of barter exchange.

The Reserve Bank of India (RBI) authorizes money as a medium of exchange. Here is a detailed explanation:
Reserve Bank of India (RBI):
- The RBI is the central bank of India and is responsible for the issuance and control of the country's currency.
- It is the sole authority that has the power to issue currency notes and coins in India.
- The RBI regulates and supervises the functioning of banks and financial institutions in India.
- It formulates and implements monetary policies to control inflation, stabilize prices, and promote economic growth.
- The RBI manages the supply of money in the economy and ensures that there is an adequate amount of currency in circulation to facilitate transactions.
Other options:
- Self Help Groups (SHGs): SHGs are small groups of people who come together to save and borrow money for their mutual benefit. While they play a role in financial inclusion and empowerment, they do not have the authority to authorize money as a medium of exchange.
- The Central Government: While the central government has the power to regulate currency and monetary policies, the actual authorization of money as a medium of exchange lies with the central bank, which is the RBI in India.
- The President of India: The President of India is the ceremonial head of state and does not have the authority to authorize money as a medium of exchange.
Therefore, the correct answer is option A: Reserve Bank of India.

Explanation:
To determine which one of the following options is not a modern form of money, we need to understand the characteristics and functions of modern money.
Modern forms of money:
1. Demand Deposits: These are accounts held by individuals or businesses in banks, allowing them to withdraw funds on demand. Demand deposits are considered a modern form of money because they can be used for transactions and are widely accepted as a medium of exchange.
2. Paper currency: Paper currency, such as banknotes, is issued by the central bank of a country and is widely accepted as a medium of exchange. It is portable, durable, and easily divisible, making it a convenient form of money.
3. Coins: Coins are metallic currency issued by the government and are also widely accepted as a medium of exchange. They have intrinsic value based on the metal they are made of and are durable and easily recognizable.
Not a modern form of money:
4. Precious metals: While precious metals such as gold and silver have historically been used as forms of money, they are not considered modern forms of currency. In modern times, precious metals are primarily used as investment assets or for industrial purposes and are not widely accepted as a medium of exchange for everyday transactions.
Therefore, the correct answer is Option D: Precious metals as it is not considered a modern form of money.

Formal Source of Credit:

Cooperative societies

Explanation:

• Cooperative societies are formal institutions that provide credit to individuals and groups.


• They are registered under the Cooperative Societies Act and operate under specific regulations.


• Cooperative societies collect savings from their members and provide them with loans at reasonable interest rates.


• They promote financial inclusion and provide credit to individuals who may not have access to formal banking services.


• Cooperative societies often focus on specific sectors, such as agriculture, small-scale industries, and housing.


• They have a democratic structure, with members having a say in the decision-making process.


• Cooperative societies also provide other services like insurance, marketing, and training.

Collateral:
Collateral refers to a form of security or guarantee that a borrower provides to a lender in order to secure a loan or credit. It serves as a protection for the lender in case the borrower fails to repay the loan. The collateral can be in the form of assets, property, or financial instruments.
Here are the key points to understand about collateral:
1. Definition: Collateral is an asset or property that a borrower pledges to a lender as security for a loan.
2. Purpose: Collateral provides the lender with a form of assurance or guarantee that they will be able to recover their money if the borrower defaults on the loan.
3. Types of Collateral: Collateral can take various forms, including:
- Real estate: Property such as land, buildings, or homes.
- Vehicles: Cars, motorcycles, boats, or other motorized vehicles.
- Financial assets: Stocks, bonds, or other investment instruments.
- Equipment: Machinery or other valuable equipment.
- Inventory: Goods or products that can be sold.
4. Evaluation: The lender assesses the value and quality of the collateral to determine its suitability. This evaluation helps to determine the loan amount, interest rate, and terms of the loan.
5. Lien: When collateral is provided, a lien is placed on the asset. This means that the lender has a legal claim to the collateral until the loan is fully repaid.
6. Risk Reduction: Collateral reduces the lender's risk by providing an additional source of repayment. If the borrower defaults, the lender can seize and sell the collateral to recover their money.
7. Loan-to-Value Ratio: The loan-to-value (LTV) ratio is the percentage of the loan amount compared to the appraised value of the collateral. Lenders often set a maximum LTV ratio to limit their exposure to risk.
8. Release of Collateral: Once the borrower repays the loan in full, the lender releases the lien on the collateral, returning full ownership to the borrower.
In conclusion, collateral is a security or guarantee provided by a borrower to a lender to secure a loan. It serves as a form of protection for the lender in case of default and can take various forms such as property, assets, or financial instruments.

Not an Advantage of Self-Help Group:

• Grant of timely loans: Self-help groups often provide timely loans to their members, helping them meet their financial needs and start small businesses.


• Reasonable interests: Self-help groups usually charge lower interest rates compared to traditional lenders, making it more affordable for members to borrow money.


• A platform to discuss various issues: Self-help groups serve as a platform for members to come together, share their experiences, discuss various issues, and support each other.


• Does not help women to become self-reliant: This statement is incorrect. Self-help groups empower women by providing them with opportunities to learn new skills, gain financial independence, and become self-reliant.

Therefore, the correct answer is option D: Does not help women to become self-reliant. Self-help groups play a crucial role in empowering women and promoting self-reliance among its members.

Explanation:
The correct answer is C: Silver coins. Here's why:
- Paper notes: Paper notes, also known as banknotes or bills, are a widely accepted form of money in modern economies. They are issued by central banks and are used as a medium of exchange for goods and services.
- Demand deposits: Demand deposits refer to the funds held in checking accounts at banks. This form of money is commonly used for daily transactions. It can be accessed through various means, such as debit cards or online banking.
- Silver coins: While silver coins were historically used as a form of money, they are not commonly used in modern economies. The value of silver coins is primarily based on the metal content rather than the face value. They are more often collected as bullion or for numismatic purposes.
- None of the above: This option is incorrect because silver coins are not a modern form of money.
In conclusion, silver coins are not considered a modern form of money as they are not widely used for transactions in contemporary economies.