Please refer to Assignments Class 10 Social Science Money and Credit Chapter 3 with solved questions and answers. We have provided Class 10 Social Science Assignments for all chapters on our website. These problems and solutions for Chapter 3 Money and Credit Class 10 Social Science have been prepared as per the latest syllabus and books issued for the current academic year. Learn these solved important questions to get more marks in your class tests and examinations.
Money and Credit Assignments Class 10 Social Science
ONE MARK QUESTIONS
Question. What is meant by double coincidence of wants?
Ans : An essential feature of barter system is double coincidence of wants in which, both the parties (seller and the buyer) have to agree to buy and sell each other’s commodities.
Question. Define credit.
Ans : Credit is an agreement between the lender and the borrower in which the borrower promises to pay the lender in the future.
Question. What are the two forms of modern currency?
Ans : Paper notes and coins are the two forms of modern currency.
Question. What is the meaning of barter system?
Ans : In the earlier times, before the introduction of money, goods and services were exchanged with goods and services. This system of exchange was termed as barter system.
Question. Which are the two major sources of formal loan for rural households.
Ans : The two major sources of formal loan for rural households are Banks and Cooperatives.
Question. How does money act as a medium of exchange?
Ans : Money acts as an intermediate in the exchange process and eliminates the need for double coincidence of wants. As money acts as intermediate, it is also called medium of exchange.
Question. What is a cheque?
Ans : A cheque is a paper that instructs the bank to pay a specific amount from the holder’s account to the person in whose name the cheque has been issued.
Question. What is collateral?
Ans : It is an asset that the borrower owns and given to the lender as a guarantee that he will repay the loan. If the borrower is unable to repay the loan then the lender has the right to sell it and get the money back.
Question. How is money beneficial in transactions?
Ans : Money is beneficial in transactions as we can directly settle the transaction with use of it.
Question. How do the deposits with the banks become their source of income?
Ans : With the deposits in the bank, the bank use it to extend loan to the borrowers with the high rate of interest. Bank pays less rate of interest to the depositors. The difference is the source of income of the banks.
Question. ……………….. costs of brrowing increases the debt-burden.
Ans. High
Question. Bank charge a higher interst rate on loans than what they offer on ………………….
Ans. Deposits
Question. SHG is school help groups.
Ans. False
Question. The main source of Banks income is by interest.
Ans. True
Question. Double coincidence of wants occurs when goods or commodities are exchanged without the use of money.
Ans. True
Question. SHG provides loan to its membern.
Ans. True
THREE MARKS QUESTIONS
Question. Explain with an example, how credit plays a vital and positive role for development?
Ans : Credit plays a positive role when the borrower is able to return the loan amount on time and also made some profit with the use of that money. For example: Salim, a shoe manufacturer took a loan from different sources to complete the order of 3000 pair of shoes, in the end he delivered the order, made profit and repaid the loan.
Question. Illustrate with examples the role of loan in business.
Ans : The loan plays two different role in business:
a. Credit plays a positive role when the borrower is able to return the loan amount on time and also made some profit with the use of that money. For example, Salim, a shoe manufacturer took a loan from different sources to complete the order of 3000 pair of shoes. In the end he delivered the order, made profit and repaid the loan.
b. Sometimes credit is very painful as it pushes the borrower into such a situation from where recovery is very difficult. In this situation, the borrower is not able to repay the loan and many a times caught into the situation of debt-trap. For example, a small farmer Swapna took loan for crop cultivation but due to some reason she faced the situation of crop failure. So she took another loan for spraying pesticides but the production was not enough to repay the loan. So she was caught in debt-trap.
Question. Describe the utility of Cheque.
Ans : A Cheque is a paper that instructs the bank to pay a specific amount from the account holder’s account to the person in whose name the Cheque has been issued.
Demand deposits are accepted as a means of payment because the depositors get the facility of Cheque against it, which is used to settle the transaction without the use of money.
Question. What is a collateral? Why do lenders ask for collateral while lending? Explain.
Ans : It is an asset that the borrower owns and given to the lender as a guarantee that he will repay the loan. If the borrower is unable to repay the loan then the lender has the right to sell it and get the money back. The lenders ask for a collateral while lending due to the following reasons:
a. It is an asset that, the borrower owns and given to the lender as a guarantee that he will repay the loan.
b. If the borrower is unable to repay the loan then the lender has the right to sell it and get the money back.
c. By this the borrower is bound to pay the loan within the defined time period.
Question. ‘Cheap and affordable credit is essential for poor household both in rural and urban areas.’ In the light of the above statement, explain the social and economic values attached to it.
Ans : Due to the following three reasons cheap and affordable credit is important for the country’s development:
a. It will help people to take credit for variety of reasons.
b. It will help poor people to get rid of the problem of moneylenders and their high rate of interest.
c. It will be easy for the people to repay the loan. Social values: Due to cheap and affordable credit people will not be discriminated and ill-treated by the lenders.
Economic values: Due to the cheap and affordable credit the borrowers will easily repay the loan and there will be economic development.
Question. ‘Credit has its own unique role for development.’ Justify the statement with arguments.
Ans : Credit plays a positive role when the borrower is able to return the loan amount on time and also made some profit with the use of that money. For example, Salim, a shoe manufacturer took a loan from different sources to complete the order of 3000 pair of shoes. In the end he delivered the order, made profit and repaid the loan. Sometimes, credit is very painful as it pushes the borrower into such a situation from where recovery is very difficult. In this situation the borrower is not able to repay the loan and many a times caught into the situation of debt-trap. For example, a small farmer Swapna took loan for crop cultivation but due to some reason she faced the situation of crop failure. So she took another loan for spraying pesticides but the production was not enough to repay the loan. So she was caught in debt-trap.
Question. How is money transferred from one bank account to another bank account? Explain with an example.
Ans : In modern times we have different options to transfer the money from one bank account to another such as through Cheque, draft, internet banking etc.
A Cheque is a paper that instructs the bank to pay a specific amount from the holder’s account to the person in whose name the cheque has been issued.
In case of a Cheque, a person writes a Cheque in the name of the person in whose account the money is to be transferred. Then it is deposited by the person in his/ her bank. The bank transfers the amount to the person on whose name the cheque is drawn.
Question. Explain any four terms of credit with examples.
Ans : Terms of credit includes interest rate, collateral, documents, mode of repayment etc. Suppose a person taking a loan of 5 lakhs at 5% rate of interest from the bank. He has kept his house with the bank as a guarantee of repayment. He agreed to pay the monthly instalment.
Question. What are demand deposits? How is money safe in the banks? Explain.
Ans : Depositors are those who open an account and deposit money in the banks. Depositors can withdraw their money as and when they require therefore, these deposits are also called demand deposits.
Those having extra cash open a bank account in their name and deposit the surplus money there. Their money is safe with the banks and they get some interest rate on the amount they have deposited.
Question. “Whether credit will be useful or not, depends upon the situation.” Give two different examples in support of this statement.
Ans : It is true to say that the usefulness of credit depends on the situations.
Positive role of credit: credit plays a positive role when the borrower is able to return the loan amount on time and also made some profit with the use of that money. For example: Salim, a shoe manufacturer took a loan from different sources to complete the order of 3000 pair of shoes, in the end he delivered the order, made profit and repaid the loan.
Negative role of credit: sometimes credit is very painful as it pushes the borrower into such a situation from where recovery is very difficult. In this situation the borrower is not able to repay the loan and many a times caught into the situation of debt-trap. For example:-a small farmer Swapna took loan for crop cultivation but due to some reason she faced the situation of crop failure. So she took another loan for spraying pesticides but the production was not enough to repay the loan. So she was caught in debt-trap.
Question. Why do lenders ask for a collateral while lending? Give any three reasons.
Ans : The lenders ask for a collateral while lending due to the following reasons:
a. It is an asset that the borrower owns and given to the lender as a guarantee that he will repay the loan.
b. If the borrower is unable to repay the loan then the lender has the right to sell it and get the money back.
c. By this the borrower is bound to pay the loan within the defined time period.
Question. What are the modem forms of money? Why is rupee widely accepted as a medium of exchange? Explain two reasons.
Ans : In the modern phase, currency notes- paper notes and coins are used as a medium of exchange.
These are not made of any precious metals even though used as a medium of exchange because the government of the country authorizes the currency.
As the law legalizes the use of rupee, so no individual can refuse a payment made in rupees. Therefore, rupee is widely accepted as a medium of exchange.
Question. Explain two points of differences between formal and informal sources of credit.
Ans : The two points of differences between formal and informal sources of credit are:
a. Formal sector credit charge less rate of interest whereas informal sector credit charges very high rate of interest.
b. Formal sector credit is easy to repay whereas the informal sector credit is difficult to repay.
Question. How does the use of money make the exchange of things easier? Explain with examples.
Ans : In barter system, if a shoe manufacturer wants to sell shoes and buy wheat, and then first he has to look for a wheat growing farmer who wants to buy shoes and needs to sell wheat.
Money can make it easier to exchange the things. The shoe manufacturer can sell the shoes for money and then that money can bed to buy wheat.
FIVE MARKS QUESTIONS
Question. What are Self-Help Groups? How do they work? Explain.
Ans : This is a new idea to organize rural poor particularly women who pool their savings. Generally, this group has 15-20 members. Members belong to the neighbourhood so that they can meet and save regularly. Saving per member varies from ? 25 to ? 100 or more, depending on the economic condition of the member.
When the group is regular in saving for a year or two then the group is eligible for getting loan from the bank. Bank provide loan in the name of the group and then the SHG gives loan to its members at very low rate of interest.
Loan matter is taken very seriously, as if any one member is not able to repay the loan then it is followed by other members and because of this feature, they get loan from the bank even though they have no collateral.
Loan is provided to help them to create self- employment opportunities. All the group members together take decision regarding saving and loan activities. SHG helps women in making them financially self-reliant and provides platform to discuss and act on a variety of social issues.
Question. What is credit? How does credit play a vital and positive role? Explain with an example.
Ans : Credit is an agreement between the lender and the borrower in which the borrower promises to pay the lender in the future. Credit plays a positive role when the borrower is able to return the loan amount on time and also made some profit with the use of that money.
For example: Salim, a shoe manufacturer took a loan from different sources to complete the order of 3000 pair of shoes, in the end he delivered the order, made profit and repaid the loan.
Question. Review any three merits and any two demerits of ‘formal sector of credit’ in India.
Ans : Merits of formal sector credit in India:
a. It provides cheap and affordable credit.
b. Due to low cost of borrowing, the borrowers have to repay less and they will have more saving.
c. The loan activities of the formal sector is supervised by the RBI.
Demerits of formal sector credit in India:
a. Mostly people in the urban areas and the well-off households use it.
b. Formal sector credit need proper documents and collateral before lending.
Question. Why is it necessary for the’ banks and the cooperative societies to extend their lending activities in the rural areas? Explain.
Ans : Due to the following reasons it is necessary for the banks and the cooperative societies to extend their lending activities in the rural areas:
a. There is limited availability of the formal sector credit sources in the rural areas.
b. The poor borrowers are bound to take loan from the moneylenders at high rate of interest
c. Due to high rate of interest they are not able to repay the loan and caught in debt- trap.
d. Formal sector credit is required in the rural areas to expand the farming and small scale business activities.
e. It is important for the individual development of the people in the rural areas.
Question. “Banks are playing an important role in the development of the Indian economy.” Support the statement with examples.
Ans : Cheap and affordable credit is important for the country’s development because:
a. It will help people to take credit for variety of reasons.
b. It will help poor people to get rid of the problem of moneylenders and their high rate of interest.
c. It will be easy for the people to repay the loan.
Those having extra cash open a bank account in their name and deposit the surplus money there. Their money is safe with the banks and they get some interest rate on the amount they have deposited. Out of the total money deposited with the banks, 15% of it is kept as minimum cash balance to pay to the depositors who might come to withdraw money from the bank on any given day. Rest of the amount is used to extend loan to the borrowers.
This helps people to run and expand their business which will increase the individual income and finally the country’s income. Credit plays a positive role when the borrower is able to return the loan amount on time and also made some profit with the use of that money. For example: Salim, a shoe manufacturer took a loan from different sources to complete the order of 3000 pair of shoes, in the end he delivered the order, made profit and repaid the loan.
Question. How do banks play an important role in the economy of India? Explain.
Ans : People take credit from different sources, which can be grouped into two- formal sector loans and informal sector loans. Formal sector credit sources includes banks and cooperatives.
They charge less rate of interest in comparison to that of informal sector. Thus the cost of borrowing is less. Due to low cost of borrowing, the borrowers have to repay less and they will have more saving, which will cause individual economic development and ultimately will lead to the country’s economic development. Therefore, it can be said that formal sources of credit provides us cheap and affordable credit, which is important for country’s development.
Thus it is important that banks and cooperatives should increase their lending especially in the rural areas so that people will be less dependent on the informal sector.
Question. Which government body supervises the functioning of formal sources of loans in India? Explain its functions.
Ans : RBI is the government body which supervises the functioning of formal sources of loans in India. Functions of RBI:
a. RBI sees that the banks maintain the minimum cash balance or not.
b. RBI monitors that the loan is not just given to the profit-making businesses and traders but also to the small borrower.
c. RBI asks the banks to submit information like how much they are lending, to whom they are lending and at what rate of interest etc.
Question. Why the deposits in the banks are called demand deposits? What are the benefits of deposits with the banks?
Ans : Depositors are those who open an account and deposit money in the banks. Depositors can withdraw their money as and when they require therefore, these deposits are also called demand deposits. Demand deposits are accepted as a means of payment because the depositors get the facility of Cheque against it, which is used to settle the transaction without the use of money.
The benefits of deposits with the banks are:
a. People have extra cash with them. Those having extra cash open a bank account in their name and deposit the surplus money there.
b. Their money is safe with the banks.
c. They get some interest on the amount they have deposited.
SOURCE BASED QUESTIONS
Question. Credit is one of the major aspects that determine a countrys development. There is a huge demand for loans for various activities cheap and affordable loans give people an opportunity to develop their business. Credit plays a very crucial role in agricultural activities people can barrow money and use it to adopt modern farming methods to increase the crop production and grow crops which are more reliable than the traditional methods. By sanctioning loan to developing industries and trade, banks provide them with the necessary aid for improvement.
(i) By sanctioning loans to developing industries and trades ………….. provide them with necessary aid for improvement.
Ans. Banks
(ii) What is credit?
Ans. Credit: The activity of borrowing and landing money between two parties.
(iii) Define role of credit in the development.
Ans. Credit is one of the major aspects that determine a country’s development.