Money and Credit Class 10 MCQs Questions with Answers
Question 1.
Fill in the blank by choosing the most appropriate option:
The exchange of goods for goods is a process of ………………
(a) Buying goods through currency
(b) Selling goods through currency
(c) Bartering goods
(d) Making goods
Answer:
(c) Bartering goods
Question 2.
What portion of deposits is essential for the banks to maintain in liquid cash for their day to day transaction?
(a) 10%
(b) 15%
(c) 20%
(d) 25%
Answer:
(b) 15%
Question 3.
Which of the following statements is an essential feature of barter system?
(a) Money can easily be used to buy any commodity or service.
(b) The barter system is based on the double coincidence of wants.
(c) The barter system promises payments at a later date than the day of transaction.
(d) The barter system helps the people to buy and sell goods easily and quickly.
Answer:
(b) The barter system is based on the double coincidence of wants.
Question 4.
Which one of the following agencies issues currency notes on behalf of the government of India?
(a) The Finance Minister of India issues them.
(b) Reserve Bank of India issues the currency.
(c) All the banks of the country can issue notes.
(d) World Bank issues notes
Answer:
(b) Reserve Bank of India issues the currency.
Question 5.
Which one of the following is not a modern form of money?
(a) Paper currency
(b) Demand Deposits
(c) Coins
(d) Precious metals
Answer:
(d) Precious metals
Explanation: Gold, Silver and Copper were used to make coins in ancient times.
Question 6.
Why do banks keep a small proportion of the deposits as cash with themselves?
(a) To extend loan to the poor
(b) To extend loan facility
(c) To pay salary to their staff
(d) To pay the depositors who might come to withdraw the money.
Answer:
Question 7.
Which of the following refers to investment?
(a) The money spent on religious ceremonies.
(b) The money spent on social customs.
(c) The money spent to buy assets such as land.
(d) The money spent on household goods.
Answer:
(c) The money spent to buy assets such as land.
Question 8.
Which one of the following is a formal source of credit?
(a) Traders
(b) Cooperative sectors
(c) Money lenders
(d) Friends and relatives
Answer:
(b) Cooperative sector
Question 9.
Which among the following issues currency notes on behalf of the central government?
(a) State Bank of India
(b) Reserve Bank of India
(c) Commercial Bank of India
(d) Union Bank of India
Answer:
(b) Reserve Bank of India
Explanation: The Reserve Bank of India is the monitoring agency and the Central Bank of India that issues currency on behalf of the Government of India. No other person can issue any legalised currency. Other banks are all involved in public dealing of money but don’t issue any currency.
Question 10.
Which one of the following options is NOT correct about a typical Self-Help Group?
(a) It has 15-20 members
(b) It does not have any male members.
(c) Its members usually belonging to one neighbourhood
(d) Saving per member varies in it.
Answer:
(b) It does not have any male members.
Question 11.
What percentage of their deposits as cash, do the banks in India keep with themselves?
(a) 20 per cent
(b) 15 per cent
(c) 12 per cent
(d) 10 per cent
Answer:
Question 12.
Money is accepted as a medium of exchange because:
(a) It is authorized by the government of India
(b) It is issued by the Reserve Bank of India
(c) It is legalised as a medium of payment in India
(d) All of these
Answer:
(d) All of these
Question 13.
Find the incorrect option:
(a) Demand deposit share the essential features of money
(b) With demand deposit payments can be made without cash
(c) Demand deposits are a safe way of money transformation
(d) Demand deposit facility is like cheque
Answer:
(d) Demand deposit facility is like cheque.
Question 14.
What do people do with the extra cash in hand? Choose the most correct option from the following:
(a) They deposit it with one of the informal lenders
(b) They deposit it with an NGO
(c) They deposit it with the bank manager
(d) They deposit it with the banks by opening a bank account in their name.
Answer:
(d) They deposit it with the banks by opening a bank account in their name.
Question 15.
When do people have the provision to withdraw money? Choose the most appropriate option from the following:
(a) They can withdraw money at the time of severe illness
(b) They cannot withdraw money before it reaches to it maturity level.
(c) They can withdraw money as and when they require
(d) Both (a) and (b)
Answer:
(c) They can withdraw money as and when they require.
Explanation: People deposit money with the bonks by opening a bank account in their name and receive an amount as interest from the bank on this deposit which can be withdrawn by them as and when they require it.
Related Theory
Since the deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits.
Question 16.
Money borrowed from banks and cooperative societies comes under which source of credit?
(a) Informal
(b) Formal
(c) Semi-Formal
(d) None of the above
Answer:
(b) Formal
Explanation: Formal sources of credit include Banks and Cooperative Societies which: provide credit at the low rate of interest to the borrowers and are regulated and supervised by the RBI on behalf of the Central Government in India.
Related Theory
The informal lenders include moneylenders, traders, employers, relatives and peer groups. Such lenders are not monitored or regulated by any agency. Most of the times, lenders fix extremely high rates of interest and push borrowers into debt traps through their informal rules.
Unorganized sources of Credit correspond to Informal sources of credit and cannot be trusted.
Question 17.
In a self-help group most of the decisions regarding savings and loan activities are taken by which one of the following:
(a) Bank
(b) Members
(c) NGOs
(d) All of these
Answer:
(b) Members
Question 18.
Formal sources of credit do not include
(a) Banks
(b) Cooperatives
(c) Employers
(d) Both (a) and (b)
Answer:
(c) Employers
Explanation: Employers, moneylenders, neighbors, friends, relatives etc fall under informal sources of credit who charge high interest on loans that they give to the borrowers.
Question 19.
Arrange the following forms of currency according to their usage from oldest to recent use:
(i) Paper Currency
(ii) Grain and cattle
(iii) Coins
(iv) Net banking and digital payments
(a) (iii)-(iv)-(i)-(ii)
(b) (ii)-(iii)-(i)-(iv)
(c) (i)-(ii)-(iiii)-(iv)
(d) (iv)-(iii)-(ii)-(i)
Answer:
(b) (ii)-(iii)-(i)-(iv)
Explanation: In early times, Grain and Cattle were used as barter to buy items of necessity. This was later replaced by silver, gold and copper coins. Post the invention of paper, paper currency dominated the scene. Today net banking and digital payments have replaced paper currency.
Question 20.
Bank deposits are also called
(a) Collateral
(b) Demand deposits
(c) Cheque
(d) Currency
Answer:
(b) Demand deposits
Explanation: Banks provide the facility of depositing surplus cash of citizens safely. They also provide interest on this deposit. Customers can withdraw or deposit cash at any time according to their demand. Hence this is called a demand deposit.
Question 21.
Terms of credit do not include:
(a) Bank deposits
(b) Interest rate
(c) Collateral
(d) Mode of repayment
Answer:
(a) Bank deposits
Explanation: Interest rate, collateral and documentation requirement, and the mode of repayment together comprise what is called the terms of credit. Together, they are all that a lender or borrower needs to consider before borrowing or lending money.
Question 22.
Rampur is an area where 80% people borrow money from the bank while 10% don’t borrow and the rest 10% take it from their friends, relatives or local moneylenders. Where will Rampur be situated?
(a) In an Urban Region
(b) Semi-Urban area
(c) In a Rural region
(d) Capital of a country
Answer:
(a) In an Urban Region
Explanation: Rampur is located in an area with proper access to banks, however not all the people are convinced borrowers from the bank. In an urban area, most people go to the bank while some people might also resort to friends and relatives for money, due to small or extremely urgent need.
Related Theory
The country’s capital is generally a High-tech city with all educated and skilled people. Hence Rampur can’t be a Capital. It cannot be situated in a rural area because of the large number of banks and easy accessibility. It cannot be a Semi-urban area due to similar reasons.
Question 23.
Find the correct option:
(a) Collateral is what pushes the lender in to a painful debt trap situation.
(b) Collateral is the amount that RBI gets from other banks.
(c) Collateral is an asset that the borrower owns and uses as a guarantee to a lender against the amount borrowed.
(d) Collateral does not include jewellery.
Answer:
(c) Collateral is an asset that the borrower owns and uses as a guarantee to a lender against the amount borrowed.
Explanation: Collateral acts like a guarantee to a lender until loan is repaid, if the borrower fails to repay the loan, the lender can reimburse his loan by selling the collateral or confiscating it.
Related Theory
Property such as land titles, deposits with banks(Jewellery, bonds), livestock are some common examples of collateral used for borrowing. Collateral is a safety valve to lender’s benefit. It does not put the lender in a debt trap because lender lends and not borrows.
Identify
Question 24.
Identify the financial institution on basis of the hints given:
(1) Monitors other Banks
(2) Regulates lending activities
(3) Issues Currencies
Answer:
Reserve Bank of India
Correct and Rewrite/ True-False
State whether the following statements are True or False. If false, correct the statement.
Question 25.
Banks and cooperatives are informal sources of credit.
Answer:
False
Banks and cooperatives are formal sources of credit.
Explanation: Informal sources of credit are locaL moneylenders, sahukars, jewelers, relatives or friends who lend without any proper documentation and charge exorbitant rates of interest. Banks and Cooperatives are backed by the government and hence are formal sources of credit.
Double coincidence of wants is an essential feature of Barter system.
Fill in the blanks with suitable information:
Question 27.
………….. is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.
Answer:
Collateral
Explanation: Property such as land, building, vehicle, livestock, jewellery, bonds deposits with banks are some common examples of collateral used for borrowing.
Match the Columns
Choose the correct pairs option from the following:
Match the correct people involved in a variety of occupations with the appropriate reason they might borrow money for:
| Column A | Column B |
| (a) Auto-rickshaw driver | (i) To buy a house |
| (b) A businessman whose factory has closed down | (ii) To buy a shop of his own |
| (c) Small trader | (iii) To revive his business |
| (d) A person in government service | (iv) To buy his own vehicle |
Answer:
| Column A | Column B |
| (a) Auto-rickshaw driver | (iv) To buy his own vehicle |
| (b) A businessman whose factory has closed down | (iii) To revive his business |
| (c) Small trader | (ii) To buy a shop of his own |
| (d) A person in government service | (i) To buy a house |
Assertion Reasoning questions Class 10 Economics Chapter 3
In each of the following questions, a statement of Assertion (A) is given followed by a corresponding statement of Reason (R). Select the correct answer to codes (a), (b) (c), or (d) as given below:
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A).
(c) (A) is correct but (R) is wrong.
(d) (A) is wrong but (R) is correct.
Question 29.
Assertion (A): Not all the money that is deposited in the bank by the depositors is kept by the banks themselves.
Reason (R): They use it to further extend loans to people so that the difference between interest earned and interest given can be further invested and the chain will continue to go on.
Answer:
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A).
Explanation: Banks make use of the deposits to meet the loan requirements of people. In this way, banks mediate between those who have surplus funds (the depositors) and those who are in need of these funds (the borrowers). They don’t invest the interest earned again, they use it to provide income to their employees.
Question 30.
Assertion (A): If the borrower fails to repay the loan, the lender does not have the right to sell the asset or collateral to obtain payment.
Reason (R): Collateral acts like a guarantee against the borrowed money.
Answer:
(d) (A) is wrong but (R) is correct.
Explanation: If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment.
Question 31.
Assertion (A): The terms of credit vary substantially from one credit arrangement to another.
Reason (R): Interest rates, time periods vary from one arrangement to other.
Answer:
(a) Both (A) and (R) are true and (R) is the correct explanation of (A).
Question 32.
Assertion (A): Members of a cooperative pool their resources for cooperation in certain areas.
Reason (R): They pool their funds together.
Answer:
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A).
Explanation: Cooperatives are formed with the purposes of sharing resources and collecting resources.
Question 33.
Assertion (A): Banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate, etc.
Reason (R): This is done to ensure the rich get enough loans.
Answer:
(c) (A) is correct but (R) is wrong.
Explanation: Banks have to submit periodical reports and this is done to ensure appropriate amounts of loans are given to the poor and vulnerable classes.