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Question 1 In situations with high risks, credit might create further problems for the borrower. Answer economocs At times repayment of the loan becomes difficult and credit instead of improving the earnings, pushes the borrower into a situation from which recovery is very difficult and painful. This situation is called debt-trap. Then the borrower is forced to give up his collateral or asset used as the guarantee to the lender.

Question 2 How does money solve the problem of double coincidence of wants? Explain with an example of your. Answer 2 In a barter system, commodities are exchanged with commodities without the use of money. This is called double coincidence of wants.

Money solves the problem of double coincidence of wants by acting as a medium of exchange. The transactions are made in money because a person holding money can easily exchange it class 10th economics chapter 3 ncert solutions 5?? any commodity or service that he or she wants.

For example, suppose an ice-cream vendor ncegt a bicycle but the bicycle manufacturer wants clothes, and not ice-creams. Chpater such a situation the vendor can use money to obtain a bicycle. In the same way, the bicycle manufacturer too will use money to buy clothes. Question 3. How do banks mediate between those who have surplus money and those who need money?

Answer 3 Banks keep only a small proportion of their deposits as cash with themselves, as a provision to pay the depositors who might come to withdraw from the bank on any given day.

They use their major portion of the deposits to extend loans. They charge higher rate of interest on the loans than what they offer on deposits. The difference between what is charged from borrowers and what is paid to depositors is their main source of income. Question 4.

Look at a cuapter rupee note. What is written on top? Can you explain this statement? Answer 4. It is a promissory note and can only be issued by the Reserve Bank of India which supervises all money-related functions in the formal sector in India. The statement on the ten rupee note relates to this idea that the RBI is the central 10ty in the working of money-related activities. Question 5 Why do we need to expand formal sources of credit in India?

Answer 5 Compared to the formal lenders most of the informal lenders charge a much higher interest on loans. It chapterr that the cost to the borrower of the informal loans is much higher. Higher cost of borrowing means a larger part class 10th economics chapter 3 ncert solutions 5?? earning of the borrowers is used to repay the loan and they have less income left for themselves.

The high rate of interest of borrowing can mean that the amount to be repaid is greater than the income of the borrower and this could lead to increasing debt and debt-trap. People who might wish to start an enterprise by borrowing may not do so because of the high cost of borrowing. For these reasons banks and cooperatives need to lend. This would lead to higher incomes and many people could then borrow cheaply for a variety of needs. They could grow crops, do business, set up small-scale industries.

They could set up new industries or trade in goods. Hence, it is necessary to expand formal sources of credit in our country. Question 6. What is the basic idea behind class 10th economics chapter 3 ncert solutions 5?? SHGs for the poor?

Explain in your own words. Answer 6 Self-Help Groups SHGs consist of certain members who pool their savings and constitute a fund which is further used in making finance and advances to other members. Cclass SHGs help borrowers overcome the problem of lack of collateral. They can get timely loans at a reasonable interest rate.

They help women to become self-reliant. Question 7. What are the reasons why the banks might not be willing to lend to certain borrowers? Answer 7 The banks are sometimes not willing to lend to certain borrowers because of the following reasons:. Some persons are not able to produce certificate of their earning. There are some people who have a history of non repayment of loans.

There are other people who are nccert able to produce documents of their employment. Some persons have nothing to give to bank as collateral. There are a few others who fail class 10th economics chapter 3 ncert solutions 5?? produce two persons who can stand as surety in case he is unable to repay the loan.

Question 8. In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary? Answer 8 The Reserve Bank of India supervises the functioning of formal sources of loans. The RBI monitors the banks in actually maintaining cash balance. Similarly, the RBI sees that the banks give loans not just to profit making businesses and traders but also to small cultivators, small-scale industries, to small borrowers.

Periodically banks have to submit information to the RBI on how much they are lending, to chaptwr, at what interest rate. Question 9. Analyse the role of credit for development. Answer 9. Credit refers to an agreement in which lender supplies the borrowers with money, goods and services in return for the promise of future payments.

Whether credit will be useful or not, depends upon the risks in the situation and on whether there solutiobs some support in case of loss. Question 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? Answer Manav will decide on whether to borrow from the bank or the class 10th economics chapter 3 ncert solutions 5?? on the basis of various factors:.

Firstly, he must have a collateral or asset which can guarantee his loan. If he lacks such an asset, he cannot soluutions a loan from the bank. In this scenario, he will have to go to a moneylender, even though the latter charges a higher interest rate. Secondly, if Manav is not aware of the banes of borrowing from the informal sector, he might not even consider taking a bank loan. Thirdly, if there are no banks in or near his area of residence or work place, then he will borrow from a moneylender.

In India, about 80 per cent of farmers are small farmers, who need credit for cultivation. Answer 11 a Banks might be unwilling to lend to small farmers because small farmers usually lack ncertt documents and collateral or asset. Fill in the blanks:. Answer 12 i poor. Choose the most appropriate answer. Question 1. The following table shows people in a variety of occupations in urban areas.

What are the purposes for which the following people might need loans? Fill in the column. Next, classify the people into two groups based on whom you think might get a bank loan and those who might not. What is the criterion that you have used for classification? The criterion I have used class 10th economics chapter 3 ncert solutions 5?? the aforementioned classification is firstly, whether the borrower has the potential to repay the loan or not.

Those with job security will certainly get a loan from a bank because they have the capability to give repayment instalments. These two are the basic prerequisites for getting a loan from a bank. University and has many years of experience in teaching. She has started this educational website with the mindset of spreading Free Education to. Your email address will not be published. Leave a Class 10th economics chapter 3 ncert solutions 5?? Cancel reply Solutinos email address will not be published.

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It also ensures that banks give out loans not just to profiteering businesses but also to small cultivators, small scale industries, and small borrowers. Periodically, banks are supposed to submit information to the RBI on the amounts lent, to whom, and at what rates of interest. This monitoring is necessary to ensure that equality is preserved in the financial sector, and that small industry are also given an outlet to grow.

This is also done to make sure that banks do not loan out more money than they are supposed to, as this can lead to situations like the Great Depression of the s in the USA, which greatly affected the world economy as well.

Question 9: Analyse the role of credit for development. Answer: The role of credit for development is very significant as mentioned below:. Question 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? Answer: Manav will decide whether to borrow from the bank or the moneylender on the basis of the following terms of credit:. Depending on these factors and of course, easier terms of repayment, Manav has to decide whether he has to borrow from the bank or the moneylender.

Question In India, about 80 percent of farmers are small farmers, who need cultivation. Answer: a The banks might be unwilling to lend to small farmers because the farmers usually take crop loan at the beginning of the season and repay the loan after harvest. Repayment of loan is dependent on the income from farming. And in case of crop failure, repayment becomes impossible. In such cases, the recovery of loan from the small farmers becomes very difficult.

The small farmers have to sell part of the land to repay the loan that is why banks do not want to give loans to small farmers. Thus in order to repay, the small farmers sell a part of the land.

This leads to worsening of their condition. Sometimes, small farmers give collateral or security against loans. The collateral generally consists of land, building, vehicles, livestock.

In case of nonpayment of loan, the lender may sell the collateral to recover loan. Under above conditions, the terms of credit become unfavourable for the small farmers.

Members of a cooperative society, pool their resources for cooperation in certain areas. The cooperative accepts deposits from its members. With these deposits as collateral, the cooperative obtains loan from the bank. These funds are used to provide loans to members.

Question Choose the most appropriate answer. Answer: i b ii c. Multiple Choice Questions. Which one of the following statements is most appropriate regarding a transaction made in money? Which one of the following is the new way of providing loans to the rural poor? Which among the following authorities issues currency notes? Banks provide a higher rate of interest on which one of the following accounts?

Which one of the following is the main source of credit for rich urban households in India? Which one of the following is an essential feature of the barter system? Which one of the following terms is not included against loans? What is main source of income for banks?

In which one of the following systems exchange of goods is done without use of money? Which of the following has an essential feature of double coincidence? What percent of their deposits do bank hold as cash? Which of the following is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender?

How many members a typical Self-Help Group Should have? About what percentage of their deposits is kept as cash by the banks in India? Why do banks keep a small proportion of the deposits as cash with themselves? The currency notes on behalf of the Central Government are issued by whom? Which one of the following is not a feature of money? Professor Muhammad Yunus is the founder of which one of the following banks?

Which one of the following is a modern form of currency? The Informal source of credit does not include which one of the following? Additional Questions Anything which is generally accepted by the people in exchange of goods and services a Money b Barter c Credit d Loans.

Money acts as an intermediate in the exchange process. Which function of money is highlighted here? Modern forms of money include i Gold ii Paper Notes iii Coins iv Silver a i and iii b ii and iv c iii and iv d ii and iii. Mpney is accepted as a medium of exchange because the currency is authorised by a Private sector b Public sector c Government d People. Deposits in the bank accounts can be withdrawn on demand, therefore these deposits are called a Returnable deposits b Acceptable Deposits c Demand deposits d None of the above.

Banks use the major portion of the deposits to a Keep as a reserve so that people may withdraw b Meet their routine expenses c Extend loans d Meet renovation of the bank. An agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment.

Salim, the shoe manufacturer, to meet expenses obtains loans from two sources. Swapna is unable to repay the moneylender and she is caught in debt. She has to sell a part of the land to pay off the debt. Whether credit would be useful or not, depends on i Whether there is some support in case of loss ii Action of competitors iii Market response iv Risks in the situation a i and iii b ii and iv c ii and iii d i and iv. Terms of credit does not include a Interest rate b Collateral c Cheque d Mode of repayment.

Krishak cooperative functioning in a village near Sonpur has �����. Formal sector loans include loans from i Banks ii Moneylenders iii Cooperatives iv Traders a i and iii b ii and iv c ii and iii d i and iv. Organisation which supervises the credit activities of lenders in the informal sector. Compared to the formal lenders, most of the informal lenders charge a much �����.. Formal sector meets only about ����� of the total credit needs of the rural people in a one third b one fourth c half d whole.

It is important that the formal credit is distributed more equally so that a Poor can benefit from cheaper loans. After a year or two, if the SHG is regular in savings, it becomes eligible for availing loan from a Cooperative societies b Moneylenders c Bank d Traders. Answer: High-risk situations occur in rural areas because there the main demand for credit is for crop production which involves considerable costs on seeds, fertilisers, pesticides, water, electricity, repair of equipment.

There is a minimum stretch of three of four months between the time when farmers buy these inputs and when they sell the crop. Farmers generally take crop loans at the beginning of the season and repay the loan after harvest. Repayment of the loan is crucially dependent on the income from farming. If a crop fails due to shortage of rain or for any other reason, a small farmer has to sell a part of the land to repay the loan.

Failure of crops create further problems for the borrowers. Credit does not improve his earnings but leaves him worse off than before.

Credit in high risks situations pushes the borrower into a debt trap, a situation from which recovery is very painful. Answer: People hold money as deposits with banks which pay an interest rate on them. People do not withdraw their cash daily. The banks, therefore, hold only 15 percent of their deposits as cash with themselves in order to pay the depositors who might come to withdraw money from the bank on any given day.

Since, on any particular day, only some of its many depositors come to withdraw cash, the bank is able to manage with this cash. Avail Offer. Ok Cancel. Ok Choose Chapter. Ok Choose Topic.

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