Short Answer type Questions (1).pdf”.
Here’s a clean set of questions with their short answers (Class 10 CBSE, Economics – Money & Credit):
Q1. Highlight the inherent problem in double coincidence of wants.
Answer:
In the barter system, exchange takes place only when two persons desire each other’s goods or services. This is called double coincidence of wants, and it makes trade difficult and time-consuming.
Q2. How does the use of money make it easier to exchange things? Give an example.
Answer:
Money acts as a medium of exchange, so one does not need to look for a person with matching wants.
Example: A farmer can sell wheat for money and use that money to buy clothes, without searching for a cloth seller who wants wheat.
Q3. How is money beneficial in transactions?
Answer:
Money removes the difficulty of barter, allows easy storage of value, facilitates large transactions, and helps in comparing the value of goods and services.
Q4. How do the deposits with the banks become their source of income?
Answer:
Banks keep a portion of deposits for daily transactions and lend the rest to borrowers. They charge higher interest on loans than what they pay on deposits. The difference is their main source of income.
Q5. Why can one not refuse a payment made in rupees in India?
Answer:
Because rupee is the legal tender issued by the Reserve Bank of India (RBI). It is officially accepted for all payments in India.
Q6. Compare formal sector loans with informal sector loans regarding interest only.
Answer:
- Formal sector loans: Low interest rates, fixed by RBI/government.
- Informal sector loans: Very high interest rates, exploitative in nature.
Q7. Why is the supervision of the functioning of the formal sources of loans necessary?
Answer:
Supervision ensures fair practices, prevents banks from charging high rates, protects borrowers, and ensures that loans are given for productive purposes.
Q8. Prove with an argument that there is a great need to expand formal sources of credit in rural India.
Answer:
Most rural households depend on informal loans with very high interest, leading to debt-traps. Expanding formal sources will provide cheaper, reliable credit and improve rural livelihoods.
Q9. Why are most of the poor households deprived from the formal sector of loans?
Answer:
They lack collateral, proper documents, and steady income, which banks usually demand before giving loans.
Q10. How does money eliminate the need for double coincidence of wants?
Answer:
Since money is accepted by everyone, one can sell goods for money and use that money to buy anything else. No need for direct matching of wants.
Q11. List various ways through which digital transactions are made.
Answer:
- Debit/Credit cards
- UPI (Google Pay, PhonePe, Paytm, BHIM, etc.)
- Net banking
- Mobile wallets
Q12. What is the main objective to promote digital transactions?
Answer:
To create a cashless economy, reduce corruption, increase transparency, and make transactions faster and convenient.
Q13. Why is money called ‘a medium of exchange’?
Answer:
Because money is accepted in exchange for goods and services, making trade simple and efficient.
Q14. What objects were used as money in India, before the introduction of coins?
Answer:
Cowries (shells), grains, and valuable metals were used as money in ancient India.
Q15. Give the modern forms of money.
Answer:
- Currency notes and coins
- Demand deposits (cheques, online transfers)
Q16. The modern currency is accepted as a medium of exchange. Why?
Answer:
Because it is backed by the government and guaranteed by the RBI. People have faith in it as a legal tender.
Q17. What determines the main source of income for the banks?
Answer:
The difference between the interest charged on loans and the interest paid on deposits is the main source of income for banks.
Q18. For what purpose is credit mainly demanded in rural areas?
Answer:
Mainly for agriculture-related activities like buying seeds, fertilizers, irrigation, and equipment.
Q19. What are the main ‘terms of credit’?
Answer:
- Interest rate
- Collateral/security
- Mode of repayment
- Documentation required
Q20. Why are banks unwilling to lend loans to small farmers?
Answer:
Because small farmers often lack collateral, have irregular income, and are considered risky borrowers.
Q21. Besides banks, what are the other sources of credit from which the small farmers borrow?
Answer:
Moneylenders, landlords, relatives, traders, and cooperatives.
Q22. What does the stock of money consist of?
Answer:
Currency (notes and coins) + demand deposits in banks.
Q23. For which purpose are a major portion of the deposits with the banks used?
Answer:
A major portion is used by banks to lend as loans to individuals and businesses for productive activities.
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