CBSE Class 10 Social Science Money and Credit MCQs Set 07

Social Science Objective Questions and Answers: Chapter 03 Money and Credit

Explore reliable objective questions for Chapter 03 Money and Credit tailored for Class 10 learners. Utilizing these Social Science multiple-choice formats ensures thorough preparation and strengthens problem-solving speed for upcoming school assessments.

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Multiple Choice Questions

Question 1: 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 2: 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 3: 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Question 4: Deposits in bank accounts that can be withdrawn on demand are called: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 A demand deposit is one that can be withdrawn by the account holder at any time, on demand.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 5: 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 6: 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 7: 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 8: 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 9: 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 10: 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 11: 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 12: 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 13: 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 14: 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 15: 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 16: 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 17: 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.

Question 18: Raghav has surplus money, opens a bank account, deposits it, and can withdraw whenever needed. What is this kind of deposit called?
(a) Demand deposit
(b) Term deposit
(c) Fixed deposit
(d) Surplus deposit
Show Answer & Explanation

Answer: (a) Demand deposit

Explanation:
1. Since Raghav can withdraw his money at any time, this is a demand deposit.

Question 19: A person can withdraw money by issuing a cheque. Which statement is true about a cheque?
(a) A loan taken by the bank
(b) A loan taken by the depositor from the bank
(c) A paper instructing the bank to pay a specific amount
(d) A paper valid for withdrawing money generally
Show Answer & Explanation

Answer: (c) A paper instructing the bank to pay a specific amount

Explanation:
1. A cheque is specifically a written instruction to a bank to pay a specified amount from the account holder's account.

Question 20: Identify the correct statement about the agricultural stage of economic history:
(a) Grains were used as money
(b) Grains were used as a commodity
(c) Grains were used as an ingredient
(d) Grains were used as coins
Show Answer & Explanation

Answer: (a) Grains were used as money

Explanation:
1. In the agricultural stage of history, grains themselves served as a form of money, before metal coins and currency notes were developed.

Question 21: Which of the following is the most important function of banks?
(a) Accepting deposits and extending loans
(b) Giving loans to the government
(c) Opening as many bank accounts as possible
(d) Giving loans to businesses
Show Answer & Explanation

Answer: (a) Accepting deposits and extending loans

Explanation:
1. Accepting deposits and lending them out (extending loans) is the core, defining function of banks.

Question 22: Which statement is correct regarding banks and borrowers?
(a) Banks give loans and charge rent on the loan amount
(b) Banks give loans and charge wages on the loan amount
(c) Banks give loans and charge interest on the loan amount
(d) Banks give loans and charge money on the loan amount
Show Answer & Explanation

Answer: (c) Banks give loans and charge interest on the loan amount

Explanation:
1. Banks charge interest, specifically, on the loans they extend to borrowers.

Question 23: All banks act as a mediator between __________ and __________.
(a) rural people, urban people
(b) literates, illiterates
(c) people, government
(d) depositors, borrowers
Show Answer & Explanation

Answer: (d) depositors, borrowers

Explanation:
1. Banks mediate between depositors (who supply funds) and borrowers (who need funds), channelling money from one group to the other.

Question 24: Ram and Shyam are small farmers. Ram borrows Rs 20,000 at 1.5% interest per month from a trader; Shyam borrows the same amount at 8% interest per annum from a bank. Who is better off?
(a) Ram, because he has no paperwork
(b) Shyam, because his interest payment is less
(c) Ram, because he gave no collateral
(d) Both are equal
Show Answer & Explanation

Answer: (b) Shyam, because his interest payment is less

Explanation:
1. 1.5% per month works out to 18% per year, much higher than Shyam's 8% annual rate from the bank, so Shyam pays far less interest overall.

Teacher's Note:
a) Always convert monthly rates to an annual equivalent before comparing them to annual rates — 1.5% x 12 = 18% a year, not 1.5%.

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Practice MCQs for Class 10 Social Science Chapter 03 Money and Credit

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