Money and credit: 10th CBSE Economics

Question: What is currency? Explain any three features of modern Indian currency.

Answer: A currency is a unit of exchange, facilitates the transfer of goods and / or services.

1. It is authorized by the government of the country.
2. Its demand and supply can be controlled by the Central Bank of the country.
3. In India, the law legalizes the use of rupee as a medium of payment that cannot be refused in settling transactions in India. No individual can legally refuse a payment made in rupees.

Question: State any three characteristics of money.

Answer:

1. Money has eliminated the problem of double coincidence of wants.
2. Money acts as a medium of exchange.
3. It is easily acceptable.

Question: Mention any three limitations of the barter system.

1. Two people with different types types of needs and goods must be there to satisfy each other’s needs.
2. There are many products which cannot be divided.
3. Valuation of goods is very difficult.
4. Barter system is time consuming.

Question: Mention any four uses or advantages of money.

Answer:

1. Money is used as a medium of exchange.
2. Money offer economic freedom to the people.
3. Money is used for purchasing goods and services.
4. It is easy to store money.

Question: Distinguish between the modern and traditional forms of money.

Answer: Modern Forms of Money:

1. Modern forms of money include currency-paper notes and coins.
2. The modern currency is without any use of its own.

Traditional Forms of Money:

1. Traditional forms of money include gold, silver and copper.
2. The traditional forms of money had its own uses.

Question: What is included in the modern forms of money? Explain.

Answer:

1. Currency: Modern form of money include paper notes and coins held by the public.
2. Demand Deposits of Commercial Banks: Demand deposits are the deposits, which can be en-cashed by issuing cheques at any time by the account holders. A demand deposit is treated as equal to currency held as it is readily accepted as a means of payments.

Question: “Credit may useful or may put the creditor into a debt trap.” Explain.
Or
“Credit is useful as well as harmful, it depends on the risk involved.” Support the statement with examples.

Answer:

1. Credit is a working capital which is required for production. The credit helps the farmers to meet the ongoing expenses of production, complete production on time, and thereby increase his earnings. Credit therefore plays a vital and positive role in this situation.
2. The failure of crop may push the borrower into a situation from which recovery is very painful. In many cases farmers need to sell part of land to repay the loan.
3. Whether the credit would be useful or not depends on the risks in the situation and whether there is some support in case of loss.

Question: ‘The rupee is widely accepted as a medium of exchange.’ Explain.

1. It is authorized by the government of the country.
2. Its demand and supply can be controlled by the Central Bank of the country.
3. In India, the law legalizes the use of rupee as a medium of payment that cannot be refused in setting transactions in India. No individual can legally refuse a payment made in rupees.
4. In India, the value of each good or service is measured in rupee.