CBSE Class 10 Social Economics Chapter 3 Money and Credit

 CBSE Class 10 Social Economics Chapter 3 Money and Credit Notes

Key Topics Covered

1. Money as a Medium of Exchange

   • Money replaced the barter system, solving the problem of "double coincidence of wants."

   • Modern forms of money include currency (paper notes and coins) and deposits in banks.

   • The Reserve Bank of India (RBI) authorizes the issuance of currency in India.

2. Modern Forms of Money

   • Currency: Paper notes and coins authorized by the government.

   • Bank Deposits: People deposit money in banks, which can be withdrawn using cheques.

3. Loan Activities of Banks

   • Banks act as intermediaries between depositors and borrowers.

   • They use a portion of deposits to provide loans, earning interest on these loans.

4. Credit and Its Importance

   • Credit refers to an agreement where a borrower takes money and repays it with interest.

   • It plays a crucial role in economic activities, enabling people to invest in businesses, agriculture, and other ventures.

5. Types of Credit Situations

   • Positive Credit: When credit helps improve the borrower's situation (e.g., investing in productive activities).

   • Negative Credit: When credit leads to a debt trap due to high risks or failure to repay.

6. Terms of Credit

   • Credit involves terms like interest rate, collateral, documentation, and mode of repayment.

   • Collateral is an asset pledged by the borrower to secure the loan.

7. Formal and Informal Sources of Credit

   • Formal Sources: Banks and cooperatives, regulated by the government.

   • Informal Sources: Moneylenders, traders, and relatives, often charging high interest rates.

8. Self-Help Groups (SHGs) for the Poor

   • SHGs are small groups of people who pool their savings and provide loans to members.

   • They promote financial inclusion and reduce dependence on informal credit sources.

CBSE NCERT Class 10 Social Science Economics Chapter 3 Money and Credit Important Question Answers

How does money solve the problem of the double coincidence of wants? Answer: Money acts as a medium of exchange, eliminating the need for double coincidence of wants. For example, in a barter system, a farmer wanting books would need to find a publisher willing to trade books for cereals. With money, the farmer can sell cereals for cash and use the cash to buy books.

What are demand deposits, and why are they considered as money? Answer: Demand deposits are bank deposits that can be withdrawn on demand. They are considered money because they can be used for payments and transactions, just like currency.

How do banks mediate between those who have surplus money and those who need money? Answer: Banks accept deposits from people with surplus money and pay them interest. They use these deposits to provide loans to those in need, earning interest on the loans. This process helps circulate money in the economy.

What is collateral, and why is it important in credit arrangements? Answer: Collateral is an asset pledged by the borrower to secure a loan. It ensures that the lender can recover the loan amount if the borrower fails to repay.

What are the differences between formal and informal sources of credit? Answer:

Formal Sources: Include banks and cooperatives, regulated by the government, offering lower interest rates and legal protection.

Informal Sources: Include moneylenders and relatives, often charging high interest rates and lacking regulation.

What are Self-Help Groups (SHGs), and how do they benefit the poor? Answer: SHGs are small groups of people who pool their savings and provide loans to members. They promote financial inclusion, reduce dependence on informal credit sources, and empower members through collective decision-making.

In situations with high risks, how can credit create problems for borrowers? Answer: High-risk situations, such as crop failure, can lead to a debt trap. Borrowers may struggle to repay loans, forcing them to sell assets or land, worsening their financial condition.

CBSE NCERT Class 10 Social Science Economics Chapter 3 Money and Credit MCQs

MCQs – Class 10 Economics: Money and Credit

1. Who issues currency notes in India?
   a) Ministry of Finance
   b) Reserve Bank of India (RBI) ✅
   c) State Bank of India
   d) Central Bank of India
   Answer: b) Reserve Bank of India (RBI)

2. What is the modern form of money?
   a) Barter system
   b) Gold and silver
   c) Paper notes and bank deposits ✅
   d) Livestock
   Answer: c) Paper notes and bank deposits

3. What is collateral in terms of credit?
   a) A loan taken from a bank
   b) An asset pledged as security for a loan ✅
   c) The interest rate on a loan
   d) The total amount of money borrowed
   Answer: b) An asset pledged as security for a loan

4. Which of the following is a formal source of credit?
   a) Moneylenders
   b) Cooperative societies ✅
   c) Friends and relatives
   d) Traders
   Answer: b) Cooperative societies

5. What is the primary function of banks?
   a) To print currency notes
   b) To accept deposits and provide loans ✅
   c) To regulate trade policies
   d) To collect taxes
   Answer: b) To accept deposits and provide loans

6. What is the main source of income for banks?
   a) Government funding
   b) Interest charged on loans ✅
   c) Service charges on deposits
   d) Investments in foreign markets
   Answer: b) Interest charged on loans

7. Which of the following is an informal source of credit?
   a) Commercial banks
   b) Cooperative banks
   c) Moneylenders ✅
   d) Self-Help Groups (SHGs)
   Answer: c) Moneylenders

8. What is the role of Self-Help Groups (SHGs)?
   a) To provide large-scale loans to industries
   b) To pool savings and provide loans to members ✅
   c) To regulate the banking system
   d) To issue currency notes
   Answer: b) To pool savings and provide loans to members

9. What is the essential feature of the barter system?
   a) Use of money as a medium of exchange
   b) Double coincidence of wants ✅
   c) Use of credit for transactions
   d) Exchange of goods for currency
   Answer: b) Double coincidence of wants

10. Which country is known for the Grameen Bank model of microcredit?
    a) India
    b) Sri Lanka
    c) Bangladesh ✅
    d) Nepal
    Answer: c) Bangladesh

CBSE Class 10 Social Science Economics: Understanding Economic Development – II

• Chapter 1 Understanding Economic Development
• Chapter 2 Sectors of Indian Economy
• Chapter 3 Money and Credit
• Chapter 4 Globalisation and the Indian Economy
• Chapter 5 Consumer Rights

Class 10 Social Science Economics NCERT Pdf:- Click Here 

CBSE Class 10 Social Science Economics (Subject Code 087) Notes, Solution & Important Questions:- Click Here