Money and Credit · Class 10 Economics: 225 MCQs with answers

Q1. A shoe maker wants wheat. Under barter, which condition must be met for him to get it?

Q2. A potter wants rice, but the rice farmer wants a bicycle, not pots. What problem of barter does this show?

Q3. In an economy where money is used, what does the shoe maker need to find to be able to buy wheat?

Q4. Why is money called a medium of exchange?

Q5. Which of these was used as money in India in very early ages?

Q6. Which body issues currency notes in India on behalf of the central government?

Q7. Which of these is an example of wages being paid through barter?

Q8. Which of these was NOT a metal used for coins before modern currency?

Q9. Which statement about the chapter's barter cartoon is correct?

Q10. Which of these was shown in the chapter as an old form of money from Akbar's reign?

Q11. Which of the following is NOT a feature of modern currency in India?

Q12. The double coincidence of wants is a problem money gets rid of. Show how, using an example of your own.

Q13. Why is modern currency accepted as a medium of exchange even though it has no use of its own?

Q14. Trace the different forms of money used in India over time.

Q15. Give two examples of goods or services being exchanged, or wages being paid, through barter.

Q16. Explain how money acts as a medium of exchange. How is it better than barter?

Q17. A factory worker gets her salary at the end of the month and does not need all of it at once. What does the chapter say people usually do with such extra cash?

Q18. Why are bank deposits that can be withdrawn whenever the holder asks called demand deposits?

Q19. M. Salim pays his leather supplier Prem by cheque. After the transaction, what happens to their balances?

Q20. Which statement correctly describes a cheque?

Q21. Which statement best describes the role banks play in the economy?

Q22. Which three details does the chapter's cheque diagram label?

Q23. What does a depositor get in return for keeping money in a bank?

Q24. In the cheque payment example, what does Prem do after receiving Salim's cheque?

Q25. Why is there a huge demand for bank loans, according to the chapter?

Q26. A worker wants to pay her rent without carrying cash. Which facility of her demand deposit allows this?

Q27. Which statement about how banks use deposits is correct?

Q28. Which of these activities is NOT something banks do with depositors' money, according to the chapter?

Q29. Which of these is an example of a transaction completed without any payment of cash?

Q30. Which pair of words correctly completes this: Banks charge a ______ interest rate on loans than what they offer on ______.

Q31. Why are demand deposits considered as money?

Q32. How are cheque payments made? Explain with the chapter's example.

Q33. What is the main source of income of banks?

Q34. Why do people deposit money in banks?

Q35. A grocer receives sacks of rice from a wholesaler and promises to pay for them after thirty days. Which term describes this arrangement?

Q36. Salim receives an order for 3,000 pairs of shoes before the festival season. Why does he need credit?

Q37. Swapna's groundnut crop is destroyed by pests, and she cannot repay the moneylender. Next year's normal crop cannot clear the old loan. What situation is this?

Q38. A bank asks a borrower to pledge her gold jewellery before giving a loan. What is the jewellery serving as?

Q39. A borrower looks for 'easy terms of credit'. Which combination is she looking for?

Q40. Megha borrows Rs 5 lakh from a bank at 12% a year, to be repaid over 10 years. Which of these is the mode of repayment?

Q41. What did the bank keep as collateral for Megha's house loan?

Q42. Which is the correct pairing of a credit situation with its outcome?

Q43. Which of these costs is a farmer's crop loan typically used for?

Q44. What do interest rate, collateral, documentation and mode of repayment together make up?

Q45. Which term of credit is described by 'the loan is to be repaid in 10 years in monthly instalments'?

Q46. A lender asks a borrower for ownership papers of a shop before sanctioning a loan. Which term of credit is this?

Q47. Why do lenders ask for collateral while lending?

Q48. Compare Salim's and Swapna's credit situations.

Q49. Why is the main demand for credit in rural areas for crop production?

Q50. Shyamal once paid a moneylender 5% interest a month. What annual rate does this equal?

Q51. Rama borrows from her employer at 5% a month and takes fresh loans before clearing old ones. Over the years, what will happen to her debt?

Q52. Which pair are both formal sources of credit?

Q53. Formal sources of credit do NOT include which of these?

Q54. Which body supervises the functioning of formal sources of loans in India?

Q55. According to Graph 1 (2019), which single source provided the largest share of credit to rural households?

Q56. According to Graph 2, what percentage of loans taken by poor urban households come from informal sources?

Q57. Majority of the credit needs of which households are met from informal sources?

Q58. Which of Sonpur's borrowers faced the lowest cost of credit?

Q59. What source provided the chapter's data on rural credit in 2019?

Q60. What are the differences between formal and informal sources of credit?

Q61. What is the case for widening formal credit in India?

Q62. A moneylender lends to a poor widow without any collateral. According to the chapter, why is he willing to do this?

Q63. Which set of problems does the chapter associate with borrowing from moneylenders?

Q64. Eighteen women from one neighbourhood meet monthly, each saving Rs 50, and lend small sums to members. What have they formed?

Q65. An SHG member borrows from the group's savings. How does the group's interest rate compare with the moneylender's?

Q66. Within a self-help group, who decides most questions about saving and lending?

Q67. Which of these is a working capital need that an SHG loan might meet?

Q68. What is the basic idea behind SHGs for the poor?

Q69. Where did the Grameen Bank begin its work?

Q70. Read the Assertion and Reason and choose the correct option. Assertion (A): Money eliminates the need for double coincidence of wants. Reason (R): A seller can exchange goods for money and then use the money to buy from anyone.

Q71. Arrange the forms of money in the order they appeared in India: 1. Paper currency 2. Grains and cattle 3. Metallic coins

Q72. A ten-rupee note is made of paper and has no use of its own. Why do shopkeepers still accept it?

Q73. A shopkeeper refuses to accept genuine rupee notes and demands payment in goods instead. What does Indian law say?

Q74. A private company starts printing its own notes to pay its workers. Why is this not allowed in India?

Q75. Consider the following statements about modern currency. 1. It is not made of precious metals. 2. It is authorised by the government. 3. It has great use of its own, like grain. Which of the statements given above are correct?

Q76. How is modern currency different from grain and cattle used as money earlier?

Q77. A weaver wants to buy oil. With money in use, what is the simplest way for her to get it?

Q78. Which statement best describes a situation where no money is transferred at the time of the deal?

Q79. Read the Assertion and Reason and choose the correct option. Assertion (A): The rupee is widely accepted as a medium of exchange in India. Reason (R): Currency notes are made of precious metals such as gold and silver.

Q80. According to the chapter, how long did the phase of metallic coins continue?

Q81. Consider the following statements about barter. 1. Goods are exchanged directly. 2. Double coincidence of wants is essential. 3. Money acts as the intermediate step. Which of the statements given above are correct?

Q82. The line 'I promise to pay the bearer the sum of ten rupees' on a note is signed by whom?

Q83. A farmer sells vegetables for Rs 500 and uses the money to pay a barber and buy seeds. What role did money play?

Q84. Why would a shoe maker in a money economy not need to look for a farmer who wants shoes?

Q85. Which of these best explains why money makes it easier to exchange things?

Q86. A student says, 'Money is valuable because of the paper it is printed on.' What is the correct view?

Q87. Which of these is the most important reason the rupee is widely accepted in India?

Q88. In barter, a fisherman who wants cloth must find a weaver who wants fish. In a money economy, how many separate exchanges does the fisherman make?

Q89. A child asks why money was invented at all. Which answer fits the chapter best?

Q90. Look at a 10 rupee note. What is written on top? Explain the statement.

Q91. Why does everyone prefer to receive payment in money rather than in goods?

Q92. Describe the forms money has taken in India, and explain why modern currency is accepted.

Q93. Read the Assertion and Reason and choose the correct option. Assertion (A): Demand deposits are considered money in the modern economy. Reason (R): Demand deposits are held in bank accounts and can be withdrawn on demand.

Q94. M. Salim needs Rs 20,000 in cash for his own payments. How can he get it from his account using a cheque?

Q95. Which of these together make up money in the modern economy, according to the chapter?

Q96. Why can a bank manage with only about 5% of its deposits kept as cash?

Q97. A bank pays 4% interest on deposits and charges 10% interest on loans. What does the gap of 6 percentage points represent?

Q98. Consider the following statements about banks in India. 1. They pay interest on deposits. 2. They keep about 5% of deposits as cash. 3. They keep all deposits in their vaults. Which of the statements given above are correct?

Q99. Without banks, which of these would not exist, according to the chapter?

Q100. A shopkeeper pays a wholesaler Rs 50,000 by cheque instead of cash. What is one advantage of this for both of them?

Q101. Read the Assertion and Reason and choose the correct option. Assertion (A): Banks use the major portion of their deposits to give loans. Reason (R): Banks pay a higher interest rate on deposits than they charge on loans.

Q102. A student deposits Rs 1,000 in a savings account. The bank then lends Rs 950 of it to a small trader. What has the bank done?

Q103. A farmer in a village makes a UPI payment to a seed dealer from his bank account. Which form of money is being used?

Q104. Consider the following statements about demand deposits. 1. They can be withdrawn on demand. 2. They earn interest. 3. They can be used for payments through cheques. Which of the statements given above are correct?

Q105. A bank's deposits total Rs 200 crore, and it keeps Rs 10 crore as cash. What percentage of deposits is kept as cash?

Q106. What is the main difference between a depositor and a borrower in their relation with a bank?

Q107. Why does the chapter describe the modern forms of money as 'closely linked' to banking?

Q108. A worker keeps Rs 30,000 at home in a tin box instead of a bank. Which two benefits does she lose, according to the chapter?

Q109. Why would a trader prefer to receive a large payment by cheque rather than in cash?

Q110. How does a bank stand between people with money spare and people who need it?

Q111. Explain the loan activities of banks. How do banks earn their income?

Q112. 'Modern forms of money are closely linked to the working of the modern banking system.' Explain.

Q113. The leather supplier gives Salim leather now and accepts payment later. Which form of credit is this?

Q114. Why did credit improve Salim's position but worsen Swapna's?

Q115. Read the Assertion and Reason and choose the correct option. Assertion (A): Credit can push some borrowers into a debt trap. Reason (R): When a venture such as a crop fails, the borrower may be unable to repay and the debt keeps growing.

Q116. According to the chapter, what decides whether credit is useful or harmful to a borrower?

Q117. What makes the start of the season the moment a farmer borrows for the crop?

Q118. Which of these makes repayment of a farmer's crop loan most uncertain?

Q119. A borrower fails to repay a loan for which he pledged his tractor. What right does the lender have, according to the chapter?

Q120. Which of these is NOT an example of collateral given in the chapter?

Q121. Consider the following statements about the terms of credit. 1. They include the interest rate. 2. They include collateral and documentation. 3. They are the same for every borrower. Which of the statements given above are correct?

Q122. Why did Megha have to submit her employment records and salary to the bank?

Q123. A poor labourer with no land, house or savings asks a bank for a loan. Which term of credit is he most likely unable to meet?

Q124. Read the Assertion and Reason and choose the correct option. Assertion (A): Lenders ask for collateral only from borrowers who have already failed to repay once. Reason (R): Collateral lets the lender recover the money by selling the asset if the borrower fails to repay.

Q125. Which of these was a factor making Swapna's situation especially risky?

Q126. Consider the following statements about Swapna. 1. She grew groundnut on three acres. 2. She borrowed from a moneylender. 3. Her second crop cleared the old loan. Which of the statements given above are correct?

Q127. A weaver borrows to buy yarn for a large order, delivers it and repays from the sale. Which case from the chapter does this resemble?

Q128. A farmer pledges his land to a moneylender and then cannot repay after two bad harvests. What is he most at risk of?

Q129. Why does the chapter say that credit plays a 'vital and positive role' in Salim's case?

Q130. Why might two borrowers taking loans of the same amount face very different terms of credit?

Q131. Which of these best explains why credit is risky for small farmers in particular?

Q132. Which combination shows the principal and the interest in Megha's loan?

Q133. Where the risk is high, borrowing can leave the borrower worse off. Explain how.

Q134. What are the terms of credit? Explain with Megha's house loan.

Q135. Given that many people in India are poor, how does this affect their capacity to borrow?

Q136. 'Credit can help, or in some situations leave the borrower worse off.' Explain with examples from the chapter.

Q137. Explain the various terms of credit. Why do they vary between borrowers?

Q138. Shyamal now borrows from a trader at 3% a month but must sell his crop to him. How does this condition benefit the trader?

Q139. Arun borrows from a bank at 8.5% a year while Shyamal borrows from a trader at 3% a month. Why will Arun earn more from cultivation?

Q140. What puts Arun among the handful in Sonpur who borrow from a bank?

Q141. Why does Rama continue working for a landowner who does not treat her well?

Q142. Krishak Cooperative has 2,300 farmer members. How does it get funds to lend beyond members' own deposits?

Q143. Read the Assertion and Reason and choose the correct option. Assertion (A): Informal lenders can charge whatever interest rate they choose. Reason (R): The Reserve Bank of India supervises the lending activities of informal lenders.

Q144. Which of these is one way the RBI supervises banks, according to the chapter?

Q145. Consider the following statements about informal lenders. 1. Most charge much higher interest than formal lenders. 2. They are supervised by the RBI. 3. They may use unfair means to get their money back. Which of the statements given above are correct?

Q146. A borrower pays such high interest that the repayment amount exceeds her income. What is the likely result?

Q147. Using Graph 1, what is the combined share of commercial banks, cooperatives and other formal agencies in rural credit?

Q148. Graph 1 shows moneylenders at 23%, relatives and friends at 7%, landlords at 1% and other informal agencies at 3%. What is the total informal share?

Q149. Graph 2 shows the informal share falling from 54% for poor households to 17% for rich ones. What does this pattern suggest?

Q150. Why is the share of formal sector credit higher for richer households than for poorer ones?

Q151. What two steps does the chapter recommend to reduce dependence on informal credit?

Q152. Read the Assertion and Reason and choose the correct option. Assertion (A): Cheap and affordable credit is crucial for the country's development. Reason (R): With cheap credit, people can grow crops, do business and set up small-scale industries.

Q153. A landless labourer in a village needs money for her child's illness. According to the chapter's Sonpur study, where is she most likely to borrow?

Q154. Consider the following statements about Krishak Cooperative. 1. It has 2,300 farmer members. 2. It accepts deposits from members. 3. It lends only for house construction. Which of the statements given above are correct?

Q155. Which reason explains why moneylenders are often willing to lend to the poor without collateral?

Q156. Which statement correctly compares the terms of credit of a small farmer, a medium farmer and a landless worker in Sonpur?

Q157. What does the chapter mean when it says the formal sector must also be 'distributed more equally'?

Q158. A small trader borrows from a moneylender who keeps no written record of repayments. Which risk does the chapter point out?

Q159. Why does the chapter say banks and cooperatives need to lend more, particularly in rural areas?

Q160. Which household type in Graph 2 gets 73% of its loans from formal sources?

Q161. How does the Reserve Bank of India keep watch over what banks do, and why does that matter?

Q162. Set the terms of credit offered to Sonpur’s small farmer, medium farmer and landless worker against one another.

Q163. Why should credit at reasonable rates be available for all?

Q164. Why do you think the share of formal sector credit is higher for richer households?

Q165. Describe the various credit arrangements in Sonpur. What do they show about the terms of credit?

Q166. Distinguish between formal and informal sources of credit. Why is it necessary to expand formal credit and make it reach the poor?

Q167. Even where a bank branch exists in a village, why do many poor families still borrow from moneylenders?

Q168. An SHG has 20 members, each saving Rs 75 a month. How much does the group save in one month?

Q169. An SHG has saved regularly for two years. Which new opportunity does this open, according to the chapter?

Q170. Why are banks willing to lend to poor women organised in SHGs even though they have no collateral?

Q171. Read the Assertion and Reason and choose the correct option. Assertion (A): SHGs help borrowers overcome the problem of lack of collateral. Reason (R): A self-help group is typically formed of fifteen to twenty members from one neighbourhood.

Q172. An SHG member borrows to buy a handloom and starts weaving saris for sale. What kind of SHG loan use is this?

Q173. A member's family land is mortgaged to a moneylender at high interest. How can an SHG loan help?

Q174. Consider the following statements about SHGs. 1. A typical SHG has 15-20 members. 2. Loans from banks are sanctioned in the group's name. 3. Each member must give land as collateral. Which of the statements given above are correct?

Q175. An SHG meeting spends time discussing children's nutrition and a case of domestic violence in the village. What does this show?

Q176. An SHG member stops repaying her loan. What does the chapter say usually happens?

Q177. Grameen Bank's borrowers are almost all poor women. What have they proved, according to the chapter?

Q178. In a village with no money, a carpenter needs medicine from a healer who wants only goats. What must happen for the carpenter to get medicine?

Q179. Why might a barter economy trade far fewer goods than a money economy?

Q180. What does the phrase 'Guaranteed by the Central Government' on a rupee note tell us?

Q181. A tourist in India tries to pay a taxi fare in US dollars, and the driver asks for rupees instead. Which idea from the chapter explains why rupees are the accepted money in India?

Q182. Why can a paper note work as money even though, unlike a gold coin, it has no value of its own?

Q183. 'Modern currency is without any use of its own, yet it is the most widely accepted thing in India.' Explain.

Q184. A bank has deposits of Rs 10 crore. At about the proportion Indian banks hold as cash, roughly how much would it keep as cash?

Q185. Rumours spread in a town that a bank is failing, and every depositor rushes to withdraw on the same morning. What problem would the bank face?

Q186. Why does the chapter say cheques give demand deposits 'the essential characteristics of money'?

Q187. A saver asks why his bank pays him only 4% interest while charging borrowers 11%. Which explanation fits the chapter?

Q188. If banks stopped lending and kept all deposits as cash, what would most likely happen?

Q189. Suppose every depositor turned up on the same day demanding their money. What then?

Q190. Explain the role of banks in the economy with reference to depositors and borrowers.

Q191. Megha's loan is Rs 5 lakh at 12% a year. Roughly how much interest would she owe in the first year on the full amount?

Q192. Suppose Salim keeps getting orders every year and repays each loan on time. What would his position likely be after six years?

Q193. Why is a steady-salaried person like Megha able to get a bank loan more easily than a poor small farmer?

Q194. Which statement best describes 'support in case of loss' that could have helped Swapna?

Q195. Why is credit risky for small farmers? How can the risk be reduced?

Q196. Why does the RBI make sure banks lend to small cultivators and small borrowers, not just to profit-making businesses?

Q197. Why might a person with a good business idea not start an enterprise if only moneylenders will lend to her?

Q198. Should an RBI-like supervisor oversee informal lenders, and why would the task be hard?

Q199. In India, about 80% of farmers are small farmers who need credit for cultivation. Why might banks be unwilling to lend to them, what other sources can they use, and how can they get cheap credit?

Q200. Why does the chapter call SHGs the 'building blocks of organisation of the rural poor'?