Class 10 Economics Chapter-1
CLASS 10 SEBA SOCIAL STUDIES NOTES
1. MONEY AND BANKING
1. What is barter?
Ans: Barter is the direct exchange of commodities against commodities.
2. What is money?
Ans: Anything that is generally acceptable as a medium of exchange is money.
3. Mention one important function of money.
Ans: One important function of money is that money performs the function of a medium of exchange.
4. Give an example of non-legal tender money.
Ans: An example of non legal tender money is cheque money.
5. What is representative paper money?
Ans: Representative paper money is money which is convertible into gold and silver of equivalent value.
6. What is a bank?
Ans: Bank is a financial institution that deals in loans.
7. In which year was the Reserve Bank of India set up?
Ans: The Reserve Bank of India was set up in 1935.
8. What is current deposit?
Ans: Current deposit is savings or deposits that can be withdrawn by the saver or deposited at any time.
Short answer type questions.
1. How does the lack of double coincidence of wants create problems in the barter system?
Ans: The barter system does not work when there is lack of double coincidence of wants. For example- A has rice, B has sugar and C has fish. If A needs fish, then the problem arise between the exchange of A and B as B does not produce fish. If A exchange with C then A can fulfill its need but C does not want rice. So there is lack of double coincidence of wants.
Hence, the double coincidence of wants problems in the barter system.
2. What is meant by store of value?
Ans: Store of value means value is stored up in the sense that commodities are stored up so that the stored up commodity may be exchanged against other commodities as and when such a transaction is required to take place.
3. Which characteristic of money is the most important one and why?
Ans: The most important characteristic of money is that money must have general acceptability. General acceptability means acceptability by one and all. Money must be acceptable as a medium of exchange for different commodities.
4. What is liquidity of money?
Ans: Liquidity of money means direct and immediate convertibility of money into goods and services that the holder of money wants. Compared to other assets, the degree of liquidity is the maximum in case of money.
5. Money is the common unit of measurement of the value of goods and services.' Explain.
Ans: All economic goods have prices. The value in exchange expressed in terms of money is price. Money is the common unit of measurement. The value of all economic goods and services are expressed in prices only. As a whole, money acts as a standard of measurement of values of goods and services.
6. What is the difference between limited and unlimited legal tender?
Ans: When the general acceptability of money as a medium of exchange is supported by the law of the land, it is legal tender money. Whereas in non-legal tender money the general acceptability of money as a medium of exchange has no legal support.
7. What are the functions of the Regional Rural Banks?
Ans: The functions of the Regional Rural Banks are-
(i) To provide loans at low rate of interest to the villages and liberate them from the clutches of the private money lenders who charge extremely high rate of interest.
(ii) To mobilise rural savings and invest these in various productive activities.
8. How are the Non Banking Financial Institutions different from the banks?
Ans: The difference between the Non Banking Financial Institutions and the banks are-
(i) The depositors can withdraw money from the banks through cheque but NBFI depositors cannot do that.
(ii) NBFI s do not have any Deposit Insurance Scheme that banks have.
Long answer type questions.
Ans: The four demerits of the barter system are
(i) The barter system does not work when there is lack of double coincidence of wants. This demerit can be explained by an example. Example - A has sugar, B has rice and C has fish. If A needs fish he cannot exchange its product with B. Since C has fish, A will exchange with C. But C does not want sugar. So, there is lack of double coincidence of wants.
(ii) The barter system lacks a common unit of account. For example - an apple is exchange against three guavas. Similarly for other commodities there will be other exchange rates. So it becomes impossible for the consumer to keep in mind all the innumerable rates of exchanges. Hence, it becomes a major problem.
(iii) The barter system ceases to operate when commodities are indivisible. For example- an elephant cannot be against a piece of bread. Because the value of an elephant is much more than a piece of bread and the elephant is not divisible.
(iv) The barter system lacks a store of value of goods and services. It is because some commodities are perishable. Some perish earlier such as egg, fish, milk etc. Beyond a point of time some commodities can no longer be stored up. Hence, it becomes difficult in the barter system to save or store commodities.
2. Explain any four characteristics of money.
Ans: Any four characteristics of money are-
(i) Money must have general acceptability. It must be acceptable as a medium of exchange. It means money must be accepted as a commodity of exchange against other commodity.
(ii) Money must have cognizability. There should be absolutely no difficulty in identifying money. If money is not easily recognisable, then transactions will naturally be problematic.
(iii) Money must have durability. If money is perishable, then money cannot be stored. In that case, there will be no store of value. So, money should be a commodity that can be stored and can be saved.
(iv) Money must have divisibility. High value money may be converted into low value money. There is money to settle transaction of all values, high or low. Lack of divisibility of money makes money a non acceptable commodity for exchange. Money can settle a transaction of 50 paisa or a transaction of Rs. 50 crores.
3. Explain four major functions of money.
Ans: The four major functions of money are-
(i) Money performs the function of a medium of exchange. It means that in a money economy commodities can be directly or indirectly exchange to money. The consumer can get any commodity from any producer through money.
(ii) Money act as a standard of of goods and services. All economic goods have prices. The value in exchange expressed in terms of money is price. Money is the unit of measurement.
(iii) Money acts as a standard of deferred payments. Deferred payments means taking commodities on credit. Accounts of all such payments are expressed in terms of money. The account of transaction is maintained in the form of money.
(iv) Money functions as the store of value. Money is durable and can be stored up for long. However, money will continue to act as a store of value as long as its own value does not fall rapidly. Saving is possible in money economy.
4. Is cheque money? Give reasons for your answer.
Ans: A cheque is not money but non-legal tender money.
An individual may refuse to accept payment in cheque. In this case, there is no violation of the law of land. A cheque is encased at the counter of the bank. Although cheque is not money yet the fact remains that it is being used increasingly as a mean of payment in maximum of the countries. It is because cheque can be used for higher transactions.
5. Mention four problems associated with money.
Ans: Four problems associated with money are-
(i) Whenever money lacks stability of value, quite a number of problems will arise in the economy.
(ii) Money may be used as one of the instruments to facilitate the concentration of economic power and wealth.
(iii) Weakness for money may well be the cause of the erosion of the social value system.
(iv) When money takes the form of black money, the economy suffers in many different ways.
6. Explain any four functions of the Central Bank.
Ans: The four functions of Central Bank are-
(i) The central bank issues currency. This is the Monopoly right of the central bank as no other bank in the country enjoy this right.
(ii) The Central bank controls the volume of credit. The quantity of credit money depends on the lending capacity of the commercial banks. The Central bank adopts credit control measures to regulate the lending capacity of the commercial banks.
(iii) The Central bank is the bankers bank. The Central bank examines the account of all the member banks. Whenever the banks are in a financial crisis, it is the Central bank that comes to their the help.
(iv) The Central bank functions as the clearing house of the member banks. There is inter-bank lending and borrowing. The central bank maintains the accounts of all member banks. All transactions between the lending and borrowing banks are cleared at the Central banking level.
7. Explain any two major functions of the commercial banks.
Ans: The two major functions of the commercial banks are-
(i) The commercial bank mobilises savings. Savings are of three types. Current saving or deposit may be withdrawn by the saver or deposit or at anytime. Fixed or time deposits cannot be withdrawn unless the depositor gives prior intimation to the bank before he or she withdraws the savings. In savings deposit a part can be withdrawn as and when necessary but the other part can only be withdrawn with the bank's permission.
(ii) The commercial bank offers loans. It offers loans to farmers, artisans, industrialist, rickshawpullers and others. The proper utilisation of bank loans improve the economic status of the people.
8. Briefly explain any two functions of each of the following:
(i)IDBI
Ans: Any two functions of IDBI are-
(a) The IDBI offers financial assistance to the industries. The IDBI gives financial assistance to the State Financial Corporation, Industrial Development Corporation, the commercial banks and such other institutions and, in their turn, these institutions offer loans to various industries.
(b) The IDBI offers industrial loans at occasional rate of interest to industries in the backward regions of the country.
(ii) RRBs
Ans: Any two functions of RRBs are-
(a) To provide loans at low rate of interest to the villagers and liberate them from the clutches of the private money lenders who charge extremely high rate of interest.
(b) To mobilise rural savings and invest these in various productive activities.
(iii)NABARD
Ans: Any two functions of NABARD are-
(a) NABARD streamlines the process of offering loans, monitors and evaluates the progress of various rural schemes and organises training programmes for the beneficiaries.
(b) NABARD coordinates the various schemes for rural development initiated by the central government, the state governments, the Reserve Bank of India and so on.
(iv) SIDBI
Ans: Any two functions of SIDBI are-
(a) To promote modernization and application of improved technology in small industries.
(b) To create markets for the products of the small industries.
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