CBSE Class 10 Social Science Money and Credit Important Questions Set 05

Important Questions

Question 1. What is a barter system?
Answer:
In the barter system, goods are exchanged without the use of money.

Teacher's Note:
a) Barter means exchanging goods directly, without money.
b) This requires a 'double coincidence of wants' between the two parties.

Question 2. What is a cheque?
Answer:
A cheque is an instruction written on paper to the bank, to pay a specific amount, as mentioned, to the person in whose name the cheque is made out.

Teacher's Note:
a) A cheque is a written instruction to the bank to pay someone a specified amount.
b) It lets payments be made without handling cash directly.

Question 3. How does money act as a medium of exchange?
Answer:
Money acts as an intermediary in the transaction and exchange process; we can buy things with the help of money.

Teacher's Note:
a) Money is the go-between that lets goods and services be exchanged.
b) This is what 'medium of exchange' means in practice.

Question 4. Who issues currency notes in India?
Answer:
The Reserve Bank of India (RBI) issues currency notes in India.

Teacher's Note:
a) RBI is India's sole issuer of currency notes.
b) No other individual or organisation may legally issue currency.

Question 5. How can money be used to easily exchange it for goods or services? Give examples to explain.
Answer:
Money itself acts as a medium of exchange for goods and services; a person holding money can easily exchange it for any commodity or service they want.
Everyone prefers to receive payments in money and exchange that money for the things they want.
For example: a shoemaker wants to sell shoes and buy wheat. The shoemaker first exchanges shoes for money, then exchanges the money for wheat.
If the shoemaker had to directly exchange shoes for wheat without money, they would need to find a wheat-growing farmer who also wants to buy shoes — requiring both parties to agree to sell and buy each other's commodities, which is difficult, time-consuming and inefficient.

Teacher's Note:
a) Money removes the need to find someone who wants exactly what you're selling and has exactly what you want.
b) The shoemaker-wheat example shows how direct barter would be far less practical.

Question 6. How is money transferred from one bank account to another bank account? Explain with an example.
Answer:
If a person needs to make a payment to a friend and writes a cheque for a specific amount, this instructs their bank to pay that amount to the friend.
The friend takes the cheque and deposits it into their own bank account.
This way, the amount is transferred from one bank account to another.

Teacher's Note:
a) A cheque instructs the bank to move money from the payer's account to the payee's account.
b) This is how bank-to-bank transfers happen without physically moving cash.

Question 7. Why is modern currency accepted as a medium of exchange without any use of its own? Find out the reason.
Answer:
Modern currency is authorised by the government of a country.
In India, the Reserve Bank of India issues all currency notes on behalf of the Central Government.
No other individual or organisation is allowed to issue currency.
The law legalises the use of the rupee as a medium of payment that cannot be refused in settling transactions in India.
No individual in India can legally refuse a payment made in rupees.

Teacher's Note:
a) Currency's acceptance comes from government backing and legal tender status, not from any intrinsic use.
b) This is why the rupee, though just paper, is universally accepted for payments in India.

Question 8. Explain, with examples, how people are involved with banks.
Answer:
Banks accept deposits from people who have surplus money, and also pay interest on those deposits.
Banks keep only a small portion (15 per cent in India) of their deposits as cash with themselves — kept as a provision to pay depositors who might come to withdraw money on any day.
They use the major portion of deposits to extend loans to those who need money.
In this way, banks mediate between those who have surplus money and those who need it.

Teacher's Note:
a) Banks hold a small cash reserve (15% in India) for withdrawals and lend out the rest.
b) This mediating role between savers and borrowers is central to how banks function.