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CBSE Class 10 Economics Chapter 3 NCERT Solutions, Money and Credit aims to provide students with insightful solutions. Our subject matter experts have offered simple and accurate answers for the exercises in the economics book of Class 10.
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NCERT CBSE Class 10 Chapter 3 Economics Notes: Money and Credit Notes
Exercises
| 1. In situations with high risks, credit might create further problems for the borrower. Explain. Ans. In situations with high risks, credit might create further problems for the borrower because if the borrower fails to repay the loan, they may face severe consequences such as losing collateral or facing legal action. High-risk situations can also lead to higher interest rates, making it harder for borrowers to repay, thus worsening their financial situation. 2. How does money solve the problem of double coincidence of wants? Explain with an example of your own. Ans. Money solves the problem of double coincidence of wants by acting as a universally accepted medium of exchange. For example, if someone wants to exchange wheat for clothes in a barter system, they need to find someone who not only has clothes but also wants wheat. With money, this complexity is eliminated because the person with wheat can sell it for money, and later use that money to buy clothes from anyone who sells them. 3. How do banks mediate between those who have surplus money and those who need money? Ans. Banks mediate between those who have surplus money and those who need money by accepting deposits from savers (those with surplus money) and lending these funds to borrowers (those who need money) in the form of loans. Banks charge interest on loans, paying some of it to depositors as interest on their savings. 4. Look at a 10 rupee note. What is written on top? Can you explain this statement? Ans. On top of a 10 rupee note, it is written “Reserve Bank of India.” This indicates that the Reserve Bank of India is the issuing authority of the currency note on behalf of the Central Government, ensuring its authenticity and value in the economy. 5. Why do we need to expand formal sources of credit in India? Ans. We need to expand formal sources of credit in India to provide cheaper and more regulated access to credit for all segments of society, especially for the poor and rural populations. Formal credit sources like banks offer lower interest rates and better terms compared to informal sources, reducing the financial burden on borrowers and promoting economic stability. 6. What is the basic idea behind the SHGs for the poor? Explain in your own words. Ans. Self Help Groups (SHGs) for the poor operate on the basic idea of collective savings and lending within a community. Members pool their savings, which are then used to provide loans to group members at reasonable interest rates. This empowers members economically, promotes financial inclusion, and fosters community development through mutual support and decision-making. 7. What are the reasons why the banks might not be willing to lend to certain borrowers? Ans. Banks might not be willing to lend to certain borrowers due to factors such as poor credit history, lack of collateral, high-risk business ventures, or insufficient income to repay the loan. Banks assess these risks carefully to protect their assets and maintain financial stability. 8. In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary? Ans. The Reserve Bank of India supervises banks by setting regulations, monitoring their financial health, and ensuring compliance with banking laws. This supervision is necessary to safeguard depositors’ interests, maintain the stability of the financial system, and promote confidence in banking operations. 9. Analyse the role of credit for development. Ans. Credit plays a crucial role in development by providing funds for investment in businesses, agriculture, infrastructure, and education. It stimulates economic growth, creates employment opportunities, improves living standards, and reduces poverty by enabling individuals and businesses to expand their activities. 10. Manav needs a loan to set up a small business. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss. Ans. Manav will decide whether to borrow from a bank or a moneylender based on factors such as interest rates, repayment terms, collateral requirements, and the reliability of the lender. Banks typically offer lower interest rates and more favorable terms but may have stricter requirements compared to moneylenders. 11. In India, about 80 percent of farmers are small farmers, who need credit for cultivation. (a) Why might banks be unwilling to lend to small farmers? (b) What are the other sources from which the small farmers can borrow? (c) Explain with an example how the terms of credit can be unfavorable for the small farmer.(d) Suggest some ways by which small farmers can get cheap credit. Ans. (a) Banks may be unwilling to lend to small farmers due to their perceived higher risk, lack of collateral, and seasonal income fluctuations. (b) Small farmers can borrow from informal sources such as moneylenders, traders, or relatives. (c) Terms of credit can be unfavorable for small farmers due to high interest rates, short repayment periods, and stringent collateral requirements. (d) Small farmers can access cheap credit through government-sponsored schemes, microfinance institutions, or cooperative banks with subsidized rates and flexible terms. |
| 12. Fill in the blanks: (i) Majority of the credit needs of the _________________households are metfrom informal sources. (ii) ___________________costs of borrowing increase the debt-burden. (iii) __________________ issues currency notes on behalf of the Central Government. (iv) Banks charge a higher interest rate on loans than what they offer on__________. (v) _______________ is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender. Ans. (i) The majority of the credit needs of rural households are met from informal sources. (ii) High borrowing costs increase the debt burden. (iii) The Reserve Bank of India issues currency notes on behalf of the Central Government. (iv) Banks charge a higher interest rate on loans than what they offer on deposits. (v) Collateral is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender. |
| 13. Choose the most appropriate answer. (i) In a SHG most of the decisions regarding savings and loan activities are taken by (a) Bank. (b) Members. (c) Non-government organization. Ans. In a SHG most of the decisions regarding savings and loan activities are taken by Members. (ii) Formal sources of credit do not include (a) Banks. (b) Cooperatives. (c) Employer Ans. Formal sources of credit do not include (c) Employers. |
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