CBSE Class 10 Social Science Chapter 3 Money and Credit MCQs
FAQs on CBSE Economics Money and Credit Class 10 MCQ
1. What are the modern forms of money accepted as a medium of exchange in India, as per the CBSE Class 10 syllabus?
According to the CBSE Class 10 Economics syllabus for the 2025-26 session, the two primary modern forms of money are:
- Currency: This includes paper notes and coins issued by the country's central bank. In India, the Reserve Bank of India (RBI) issues currency notes on behalf of the central government.
- Demand Deposits: This is the money people keep in bank accounts. It can be withdrawn on demand, which is why it's called a demand deposit. Payments can be made using cheques or digital methods, making it a convenient form of money.
2. What are the four essential 'Terms of Credit' that are frequently asked in Class 10 board exams?
The 'Terms of Credit' are the conditions agreed upon between a lender and a borrower. For your exams, it is important to know these four terms:
- Interest Rate: The percentage of the principal amount that the borrower must pay to the lender as a cost of borrowing.
- Collateral: An asset (like land, vehicle, or property) that the borrower owns and pledges as a security to the lender until the loan is repaid.
- Documentation Required: Official papers needed for the loan process, such as proof of identity, address, and income.
- Mode of Repayment: The method and duration over which the loan, along with interest, will be paid back, usually in monthly instalments.
3. Why is the role of the Reserve Bank of India (RBI) a critical topic in Chapter 3, Money and Credit?
The role of the RBI is critical because it is the apex institution of India's financial system. From an exam perspective, you must know that the RBI:
- Issues currency notes on behalf of the central government.
- Supervises the functioning of formal sources of loans, like commercial banks.
- Ensures that banks maintain a minimum cash balance (Cash Reserve Ratio or CRR) out of the deposits they receive.
- Monitors that banks give loans not just to profit-making businesses but also to small cultivators and small-scale industries.
4. How does the problem of 'double coincidence of wants' in the barter system help explain the primary function of money?
The 'double coincidence of wants' is a major drawback of the barter system, where a transaction can only occur if two individuals each have a good or service that the other desires. Money solves this problem by acting as an intermediate in the exchange process. It separates the act of buying from the act of selling. Because money is universally accepted, it eliminates the need to find someone who wants what you have and has what you want, thereby serving its primary function as a medium of exchange.
5. Why is a loan not always beneficial? Explain the concept of a 'debt-trap' that could be asked as a HOTS question.
A loan is not always beneficial because it can push a borrower into a situation from which recovery is very difficult, known as a debt-trap. This happens when a borrower takes a loan but is unable to repay it due to unforeseen circumstances, such as crop failure for a farmer. To repay the initial loan, the borrower is forced to take another loan, often at a higher interest rate. This cycle of borrowing to repay previous debts leads to a continuously increasing debt burden, making the borrower's financial situation worse instead of better.
6. From an exam point of view, why does the CBSE syllabus stress the need to expand formal sources of credit in India over informal ones?
The syllabus emphasises expanding formal credit sources for several key reasons that are important for exams:
- Lower Interest Rates: Formal lenders like banks and cooperatives offer loans at much lower interest rates compared to informal lenders (e.g., moneylenders).
- Fair Terms: Formal credit operates under the supervision of the RBI, ensuring fair and transparent terms of credit, which prevents exploitation of the borrower.
- Economic Development: Cheap and affordable credit from formal sources is crucial for the country's development as it encourages investment in agriculture, small businesses, and industries. Informal loans with high interest rates do little to increase the income of the borrowers.
7. How do Self-Help Groups (SHGs) solve the problem of lack of collateral for the poor?
Self-Help Groups (SHGs) help overcome the problem of collateral in a unique way. They are small groups of people, typically from the same neighbourhood, who pool their savings regularly. This pooled money can be given as a loan to any member for their needs. Because the group is collectively responsible for the repayment of the loan, banks are often willing to lend to the SHG as a whole without demanding collateral from individual members. The group's record of regular savings acts as a form of financial discipline and guarantee for the bank.
