CBSE Class 10 Social Science Money and Credit MCQs Set 04

Download CBSE MCQs for Class 10 Social Science: Chapter 03 Money and Credit

Review structured MCQ sets for Class 10 Social Science Chapter 03 Money and Credit. Built according to official CBSE guidelines, these downloadable questions support daily revision and core concept reinforcement.

Chapter-wise Objective Questions: Chapter 03 Money and Credit

View or download the dedicated Chapter 03 Money and Credit MCQ resource below. Practicing these 50 objective questions regularly builds familiarity with standard exam patterns and helps secure higher marks in final Social Science evaluations.

Question 1: Currency notes in India are issued by which of the following?
(a) State Bank of India
(b) Reserve Bank of India
(c) Central Bank of India
(d) None of these
Show Answer & Explanation

Answer: (b) Reserve Bank of India

Explanation:
1. Currency notes in India are issued by the Reserve Bank of India (RBI), the country's central bank.

Teacher's Note:
a) RBI issues India's currency notes.
b) SBI and 'Central Bank of India' are commercial banks, not the issuing authority.

Question 2: A ______ is a paper that instructs the bank to pay a specific amount from the payer's account to the person in whose name it is written.
(a) Fixed deposit
(b) Demand deposit
(c) Cheque
(d) None of these
Show Answer & Explanation

Answer: (c) Cheque

Explanation:
1. This instrument is a cheque, which instructs the bank to pay a specified amount to the named payee from the account holder's funds.

Teacher's Note:
a) A cheque instructs the bank to pay a named person from the account holder's funds.
b) It allows payment without handling cash directly.

Question 3: Find the incorrect option about demand deposits.
(a) Demand deposits share the essential features of money
(b) With demand deposits, payments can be made without cash
(c) Demand deposits are a safe way of money transformation
(d) Demand deposit facility is like a cheque
Show Answer & Explanation

Answer: (d) Demand deposit facility is like a cheque

Explanation:
1. Demand deposits themselves are a form of money held in a bank account; a cheque is merely the instrument used to access or transfer that deposit, so describing the deposit facility itself as 'being like a cheque' is the imprecise, incorrect statement among the options.

Teacher's Note:
a) A demand deposit is money held in an account, not the cheque instrument itself.
b) The other three statements correctly describe demand deposits as safe, cash-free, money-like holdings.

Question 4: Arrange in correct sequence: (i) Banks accept deposits and pay interest on them. (ii) People deposit money by opening a bank account. (iii) Workers with monthly salaries have extra cash at the start of the month. (iv) People can withdraw money whenever they need it.
(a) (i), (ii), (iii), (iv)
(b) (ii), (iii), (iv), (i)
(c) (iii), (ii), (i), (iv)
(d) (iv), (ii), (i), (iii)
Show Answer & Explanation

Answer: (c) (iii), (ii), (i), (iv)

Explanation:
1. Workers first have extra cash at the start of the month (iii); they deposit it in a bank account (ii); banks accept this deposit and pay interest (i); and depositors can withdraw it whenever needed (iv).

Teacher's Note:
a) Correct order: extra cash → deposit → bank pays interest → withdrawal as needed.
b) This traces a typical salaried worker's monthly banking cycle.

Question 5: Study the table (modern money: paper notes and coins; issued by RBI; rupee widely accepted; used as a medium of exchange) and find the appropriate reason for money's acceptance as a medium of exchange.
(a) It is widely accepted
(b) It is a modern form of money
(c) It includes notes and coins
(d) It is issued by RBI
Show Answer & Explanation

Answer: (a) It is widely accepted

Explanation:
1. Money functions as a medium of exchange because it is widely accepted by everyone as payment — its form (notes/coins) or issuer (RBI) is secondary to this universal acceptability.

Teacher's Note:
a) Universal acceptability is what makes money a medium of exchange.
b) Being issued by RBI or taking the form of notes and coins is secondary to this acceptability.

Question 6: Which of the following options describes 'Collateral'?
(a) Double coincidence of wants
(b) Certain products for barter
(c) Trade in barter
(d) Asset as guarantee for a loan
Show Answer & Explanation

Answer: (d) Asset as guarantee for a loan

Explanation:
1. Collateral is an asset that a borrower owns and offers to the lender as a guarantee of loan repayment.

Teacher's Note:
a) Collateral is an asset pledged as security for a loan.
b) If the loan isn't repaid, the lender has the right to sell the collateral to recover the money.

Question 7: Which of the following refers to an agreement in which a lender supplies the borrower with money, goods or services in return for a promise of future payment?
(a) Credit
(b) Debit
(c) Both (a) and (b)
(d) Interest
Show Answer & Explanation

Answer: (a) Credit

Explanation:
1. This arrangement — money, goods or services now in exchange for a promise to pay later — is called credit.

Teacher's Note:
a) Credit is money/goods/services given now for a promise of future repayment.
b) Interest is the cost charged for extending that credit, not the arrangement itself.

Question 8: In the NCERT case comparing Salim and Swapna's need for credit: Salim needed credit for working capital and supplied his orders, earning profits and repaying his loan. Swapna needed credit for cultivation expenses, with the risk of crop failure. What was Swapna's outcome?
(a) Crop failed
(b) Found herself in a debt trap
(c) Both (a) and (b)
(d) Repaid the loans
Show Answer & Explanation

Answer: (c) Both (a) and (b)

Explanation:
1. Swapna's crop failed, and because she could not repay her loan, she fell into a debt trap — both outcomes happened to her, unlike Salim who repaid his loan successfully.

Teacher's Note:
a) Swapna's crop failure led directly to a debt trap.
b) This contrasts with Salim's low-risk, successfully repaid working-capital loan.

Question 9: Rita took a loan of Rs 7 lakh from a bank to buy a car, at 14.5% annual interest, repayable in monthly instalments over 3 years; the bank held the car's papers as collateral until full repayment. What does this information describe?
(a) Mode of repayment
(b) Terms of credit
(c) Interest on loan
(d) Deposit criteria
Show Answer & Explanation

Answer: (b) Terms of credit

Explanation:
1. The combination of interest rate, repayment period and collateral together make up the 'terms of credit' for this loan — not any single element alone.

Teacher's Note:
a) Interest rate + repayment period + collateral together define the 'terms of credit'.
b) No single detail alone (like just the interest rate) captures the full terms.

Question 10: Fill in the blank: The exchange of goods for goods is a process of ___.
(a) Buying goods through currency
(b) Selling goods through currency
(c) Bartering goods
(d) Making goods
Show Answer & Explanation

Answer: (c) Bartering goods

Explanation:
1. Exchanging goods directly for other goods, without using money, is called bartering.

Teacher's Note:
a) Goods-for-goods exchange without money is called bartering.
b) This predates the use of currency as a medium of exchange.

Question 11: Seema's teacher asked her a question, and she underlined her definition of the 'formal sector'. What could the teacher's question have been?
(a) Name the sector which includes banks and cooperatives
(b) Name the sector which includes moneylenders
(c) Name the sector which includes traders
(d) Name the sector which includes relatives and friends
Show Answer & Explanation

Answer: (a) Name the sector which includes banks and cooperatives

Explanation:
1. The formal sector of credit specifically comprises banks and cooperatives, regulated by the RBI.

Teacher's Note:
a) Banks and cooperatives make up the formal credit sector.
b) Moneylenders, traders and relatives/friends instead belong to the informal sector.

Question 12: Ms. 'T', an agricultural labourer, needs credit but has no collateral to offer. Which of the following would NOT be willing to offer her money in this situation?
(a) The village moneylender
(b) The bank situated in her village
(c) The landowner where she is working
(d) The cooperative in her locality
Show Answer & Explanation

Answer: (b) The bank situated in her village

Explanation:
1. Banks strictly require collateral before lending, unlike informal lenders such as moneylenders, employers or local cooperatives, who may lend without it (often at a cost).

Teacher's Note:
a) Banks strictly require collateral, unlike informal lenders.
b) Moneylenders, landowners and cooperatives may lend without formal collateral, though often on less favourable terms.

Question 13: In a Self-Help Group, decisions regarding savings and loan activities are mostly taken by which of the following?
(a) Bank
(b) Members
(c) NGOs
(d) All of these
Show Answer & Explanation

Answer: (b) Members

Explanation:
1. SHG members themselves decide on savings and lending activities within their group, promoting self-reliance.

Teacher's Note:
a) SHG members decide their own group's savings and lending activities.
b) This self-governance is central to how SHGs function.

Question 14: Choose the correct option about collateral.
(a) Collateral is what pushes the lender into a painful debt trap situation
(b) Collateral is the amount that RBI gets from other banks
(c) Collateral is an asset that the borrower owns and uses as a guarantee to a lender against the amount borrowed
(d) Collateral does not include jewellery
Show Answer & Explanation

Answer: (c) Collateral is an asset that the borrower owns and uses as a guarantee to a lender against the amount borrowed

Explanation:
1. Collateral is correctly defined as an asset the borrower owns, pledged as security against a loan.

Teacher's Note:
a) Collateral is an asset pledged by the borrower as loan security.
b) Jewellery, land and other valuables can all serve as collateral.

Question 15: Looking at images of punch-marked coins, Gupta coins, Tughlaq coins and Akbar's gold mohar, what were currencies in the era of kings made from?
(a) Gold, Silver and Copper
(b) Ivory and Bones
(c) Grains and Water
(d) Rice and Water
Show Answer & Explanation

Answer: (a) Gold, Silver and Copper

Explanation:
1. Historic Indian coinage was made from precious and semi-precious metals: gold, silver and copper.

Teacher's Note:
a) Ancient and medieval Indian coins were made of gold, silver and copper.
b) This preceded the introduction of paper currency.

Question 16: Arrange forms of currency by usage, from oldest to most recent: (I) Paper Currency, (II) Grain and cattle, (III) Coins, (IV) Net banking and digital payments.
(a) (III)-(IV)-(I)-(II)
(b) (II)-(III)-(I)-(IV)
(c) (I)-(II)-(III)-(IV)
(d) (IV)-(III)-(II)-(I)
Show Answer & Explanation

Answer: (b) (II)-(III)-(I)-(IV)

Explanation:
1. Grain and cattle were the earliest form of exchange (II), followed by metal coins (III), then paper currency (I), and most recently digital/net banking payments (IV).

Teacher's Note:
a) Correct order: grain/cattle → coins → paper currency → digital payments.
b) This traces the historical evolution of money across millennia.

Question 17: Fill in the blank: Bank deposits are also called ___.
(a) Collateral
(b) Demand deposits
(c) Cheque
(d) Currency
Show Answer & Explanation

Answer: (b) Demand deposits

Explanation:
1. Bank deposits that can be withdrawn on demand are called demand deposits.

Teacher's Note:
a) Bank account deposits are also known as demand deposits.
b) They can be withdrawn by the account holder on demand.

Question 18: Choose the correct pair.
(a) SHG – Group of Banks
(b) Banks – Informal source of credit
(c) Collateral – Bitcoin
(d) Terms of credit – Time duration
Show Answer & Explanation

Answer: (d) Terms of credit – Time duration

Explanation:
1. Terms of credit genuinely include the repayment time duration (along with interest rate and collateral), making this the correctly matched pair.

Teacher's Note:
a) Terms of credit include repayment time duration, interest rate and collateral.
b) The other pairs misstate facts about SHGs, banks and collateral.

Question 19: Why does a farmer need initial working capital in the sowing season? (I) To buy seeds to sow. (II) To buy raw materials. (III) To buy fertilisers. (IV) To build a cold storage.
(a) (III) and (IV) only
(b) (I), (II) and (III)
(c) (I), (II), (III) and (IV)
(d) (I) and (III)
Show Answer & Explanation

Answer: (b) (I), (II) and (III)

Explanation:
1. Seeds, raw materials and fertilisers (I, II, III) are all immediate sowing-season needs; building cold storage (IV) is a longer-term infrastructure investment, not a sowing-season working capital need.

Teacher's Note:
a) Seeds, raw materials and fertilisers are immediate sowing-season needs.
b) Cold storage construction is a separate, longer-term investment, not sowing-season working capital.

Question 20: Match: (A) NSSO, (B) NABARD, (C) RBI, (D) NITI Aayog with their fields of interest: (I) Data on Self-Help Groups, (II) Economic planning, (III) Formal and Informal Sector credit data and surveys, (IV) Monitors banks and credit activities.
(a) (A)-(I), (B)-(III), (C)-(IV), (D)-(II)
(b) (A)-(III), (B)-(I), (C)-(IV), (D)-(II)
(c) (A)-(II), (B)-(III), (C)-(IV), (D)-(I)
(d) (A)-(IV), (B)-(III), (C)-(II), (D)-(I)
Show Answer & Explanation

Answer: (b) (A)-(III), (B)-(I), (C)-(IV), (D)-(II)

Explanation:
1. NSSO collects formal/informal sector credit data and surveys (III); NABARD holds data on Self-Help Groups (I); RBI monitors banks and credit activities (IV); and NITI Aayog focuses on economic planning (II).

Teacher's Note:
a) NSSO = credit data/surveys; NABARD = SHG data.
b) RBI = monitors banks/credit; NITI Aayog = economic planning.

Question 21: Assertion (A): If the borrower fails to repay the loan, the lender does not have the right to sell the asset/collateral to obtain payment. Reason (R): Collateral acts like a guarantee against the borrowed money.
(a) Both (A) and (R) are true and (R) is the correct explanation of (A)
(b) Both (A) and (R) are true but (R) is not the correct explanation of (A)
(c) (A) is correct but (R) is wrong
(d) (A) is wrong but (R) is correct
Show Answer & Explanation

Answer: (d) (A) is wrong but (R) is correct

Explanation:
1. Assertion A is actually false, since lenders DO have the right to sell collateral if a loan isn't repaid; Reason R, that collateral acts as a guarantee, is correctly true.

Teacher's Note:
a) Lenders DO have the right to sell collateral on default, making A false.
b) R correctly describes collateral's role as a guarantee, even though it doesn't explain the (false) assertion A.

Question 22: Modern forms of money include:
(a) Silver coins
(b) Copper coins
(c) Paper notes
(d) Gold coins
Show Answer & Explanation

Answer: (c) Paper notes

Explanation:
1. Paper currency notes are the standard example of a modern form of money, unlike historical metal coins.

Teacher's Note:
a) Modern money (notes/coins) is deliberately NOT made of precious metal, unlike the older forms it replaced.

Question 23: In rural areas, what is the main purpose for which farmers typically take credit?
(a) Health
(b) Education
(c) Crop production
(d) Fodder
Show Answer & Explanation

Answer: (c) Crop production

Explanation:
1. This answer was corrected — see the note below.
2. Crop production is the chief source of demand for rural credit, since farmers need to cover costs like seeds, fertilisers and pesticides well before they can sell their harvest.

Teacher's Note:
a) Fodder is a minor, occasional expense — crop production costs are the recurring, dominant driver of rural credit demand.

Question 24: A major portion of bank deposits is used by banks for:
(a) Setting up new branches
(b) Paying taxes
(c) Extending loans
(d) None of the above
Show Answer & Explanation

Answer: (c) Extending loans

Explanation:
1. Banks lend out most of their deposits as loans, keeping only a small cash reserve on hand.

Question 25: Deposits in bank accounts that can be withdrawn on demand are called:
(a) Demand deposits
(b) Fixed deposits
(c) Recurring deposits
(d) Withdrawal deposits
Show Answer & Explanation

Answer: (a) Demand deposits

Explanation:
1. A demand deposit is one that can be withdrawn by the account holder at any time, on demand.

Question 26: Presently, banks in India hold about what percentage of their deposits as cash?
(a) 35%
(b) 30%
(c) 20%
(d) 15%
Show Answer & Explanation

Answer: (d) 15%

Explanation:
1. Indian banks keep roughly 15% of their deposits as a cash reserve, to meet day-to-day withdrawal demand.

Teacher's Note:
a) The remaining ~85% is available to be lent out as loans.

Question 27: Mohan produces ice cream and wants to sell it; he also needs sugar, but can't find anyone willing to exchange sugar directly for ice cream. What problem is this?
(a) Lack of trade expertise
(b) Double coincidence of wants
(c) Irrational consumer behaviour
(d) Future expectations
Show Answer & Explanation

Answer: (b) Double coincidence of wants

Explanation:
1. Mohan's problem is the classic double coincidence of wants — he needs to find someone who both has what he wants AND wants what he's offering.

Teacher's Note:
a) Money solves exactly this problem, by letting Mohan sell ice cream for money, then buy sugar with that money from anyone.

Question 28: Which of the following issues currency notes on behalf of the Central Government?
(a) State Bank of India
(b) Reserve Bank of India
(c) Commercial Bank of India
(d) Union Bank of India
Show Answer & Explanation

Answer: (b) Reserve Bank of India

Explanation:
1. The Reserve Bank of India issues currency notes on behalf of the Central Government.

Question 29: Which statement best describes a demand deposit?
(a) Cash held by people, usable whenever they need it
(b) Cash deposited in a bank, withdrawable on demand
(c) An order to a bank to pay a sum from the drawer's account
(d) Currency approved by international bodies for trade
Show Answer & Explanation

Answer: (b) Cash deposited in a bank, withdrawable on demand

Explanation:
1. A demand deposit is specifically cash deposited with a bank that the depositor can withdraw at any time.

Question 30: A paper instructing a bank to pay a specific amount from a person's account to another named person is called a:
(a) Demand deposit
(b) Time deposit
(c) Bond
(d) Cheque
Show Answer & Explanation

Answer: (d) Cheque

Explanation:
1. This describes a cheque, a written payment instruction to a bank.

Question 31: Which statement is true regarding banks?
(a) Banks mediate between those wanting to exchange one commodity for another
(b) Banks use most deposits to invest in mutual funds
(c) Banks charge lower interest on loans than they pay on deposits
(d) Banks use deposits to fulfil people's loan requirements
Show Answer & Explanation

Answer: (d) Banks use deposits to fulfil people's loan requirements

Explanation:
1. Banks' core function is using depositors' money to meet borrowers' loan needs, earning the difference between loan and deposit interest rates.

Question 32: Which statement best describes a debt trap?
(a) When a person takes a loan and, unable to repay it, has to sell land, worsening their situation
(b) When a person takes a loan for production, earns a good profit, repays it and borrows again next cycle
(c) When a person takes a loan from the unorganised sector
(d) When a person takes a bank loan, since banks charge very high interest
Show Answer & Explanation

Answer: (a) When a person takes a loan and, unable to repay it, has to sell land, worsening their situation

Explanation:
1. A debt trap specifically describes a situation where failure to repay a loan forces the borrower into an even worse position, such as being forced to sell land.

Teacher's Note:
a) Option (b) actually describes a healthy, beneficial use of credit — the opposite of a debt trap.

Question 33: Identify the correct statement about money:
(a) Money is based on double coincidence of wants
(b) Money is based on single coincidence of wants
(c) Money is based on double or single coincidence of wants
(d) None of the above
Show Answer & Explanation

Answer: (b) Money is based on single coincidence of wants

Explanation:
1. Money removes the need for a DOUBLE coincidence of wants (both parties wanting exactly what the other offers); it only requires a single coincidence — someone willing to accept money for their good or service.

Teacher's Note:
a) This is a subtle but important distinction: money still needs 'coincidence' in some form, just a much easier, single-sided one.

Question 34: What is the name given to a system in which goods were exchanged without using money?
(a) Goods system
(b) Exchange system
(c) Barter system
(d) No-money system
Show Answer & Explanation

Answer: (c) Barter system

Explanation:
1. This describes the barter system, the direct exchange of goods and services without money.

Question 35: A potter making pots wants to exchange pots for wheat, and finds a farmer with wheat willing to exchange it for pots. What is this situation called?
(a) Incidence of wants
(b) Double coincidence of wants
(c) Barter system of wants
(d) None of the above
Show Answer & Explanation

Answer: (b) Double coincidence of wants

Explanation:
1. This is a textbook example of a double coincidence of wants — both parties happen to want exactly what the other has.

Question 36: Which among the following is included in modern forms of money?
(a) Currency notes and coins
(b) Cowrie shells and stones
(c) Gold and silver coins
(d) Grains and cattle
Show Answer & Explanation

Answer: (a) Currency notes and coins

Explanation:
1. Modern money consists of currency notes and coins, unlike the historical forms of money listed in the other options.

Question 37: What is the most important function of money?
(a) Used in banking transactions
(b) Payment of loans
(c) Medium of exchange
(d) Stock market exchange
Show Answer & Explanation

Answer: (c) Medium of exchange

Explanation:
1. Money's single most important function is acting as a medium of exchange, removing the need for a double coincidence of wants.

Question 38: Which statement is correct regarding banks?
(a) RBI lays down the norms for other banks
(b) SBI lays down the norms for other banks
(c) Syndicate Bank lays down the norms for other banks
(d) PNB lays down the norms for other banks
Show Answer & Explanation

Answer: (a) RBI lays down the norms for other banks

Explanation:
1. The Reserve Bank of India (RBI) regulates and sets norms for all other banks in India.

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Where can I access latest CBSE Class 10 Social Science Money and Credit MCQs Set 04?

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Are Assertion-Reasoning and Case-Study MCQs included in the Social Science Class 10 material?

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