Class X
Economics
Chapter - 3
Money and Credit
Practice Set
Very
Short Answer Type Questions.
Q1:
What is Double Coincidence of Wants?
Answer:
It refers to a situation wherein what a person wishes to sell is exactly the
same as that the other person wishes to buy.
Q2:
What is the form of money in Ancient Period?
Answer:
Grain and cattle (Barter System)
Q3:
What is the form of money in Medieval Period?
Answer:
Metallic coins of gold, silver, copper
Q4:
What is the modern form of money?
Answer:
Modern forms of money include currency - paper notes and coins, Deposits with
Banks.
Q5:
How does paper currency has value?
Answer:
Paper currency has value because it has got the sanction of the government.
Q6:
Name the organization in India which is authorized to issue currency notes on
behalf of GOI?
Answer:
Reserve Bank Of India (RBI)
Q7:
Justify money is the most liquid asset?
Answer:
Money is the most liquid asset because it can easily be acquired or disposed of
without high transaction costs. People can easily convert money to other asset
forms.
Q8:
Why are bank deposits called demand deposits?
Answer:
Because the deposited money can be withdrawn from banks as and when required on
demand.
Q9:
How does banks facilitate transfers of money?
Answer:
Through cheques, demand drafts, credit/debit cards, ATMs and internet banking.
Q10:
What is a cheque?
Answer:
A cheque is a document issued by an account holder to the bank, instructing the
bank to pay a specific amount from the issuer’s account to the person in whose
name the cheque has been issued.
Q11:
What is the main source of income of banks?
Answer:
The interest provided by banks to depositors is less than the interest charged
by banks from borrowers on loans. This difference is the main source of income
of banks.
Q12:
Define Debt Trap?
Answer:
It is a situation in which a person is caught in the vicious cycle of debts.
He/she takes loans for meeting his/her requirements and on being unable to pay
back the loan, takes a fresh loan to repay the old loan. This leaves him/her
indebted all through his/her life.
Q13:
Define terms of credit.
Answer:
The terms of credit include rate of interest, collateral and mode of repayment.
The terms of credit varies from one loan agreement to another and also on the
nature of the lender and the borrower.
Q14:
What is collateral?
Answer:
Collateral is an asset owned by the borrower like land, building, vehicle,
livestock etc. It is kept with the bank as a guarantee against a loan until the
loan is repaid. In case of failure in repaying the loan, the bank has the
rights to sell/auction the collateral to recover the loan amount.
Q15:
What are the formal sources of credit?
Answer:
Banks and cooperative societies.
Q16:
What are the informal sources of credit?
Answer:
Money lenders, friends and relatives, merchants and landlords.
Q17:
How does Self Help Group mitigates the risk of debt trap?
Answer:
Self Help Group pools the savings of its members, who in general are poor
people. Time to time money from the pool is given to its members as loans at
cheap rate of interest. It helps borrowers overcome the problem of lack of
collateral and avoids taking loans from private lenders at high rate. Thus the
dependence on informal sources of credit reduces.
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