CBSE Class 7 Social Science Chapter 08 Banks And The Magic Of Finance MCQs Set 01

Answer: (B) The movement of money between people, businesses, and government through financial transactions

Explanation:
The chapter defines financial infrastructure as 'a network of banks, payment systems, stock markets, and other financial institutions that help people, businesses, and the government facilitate financial transactions and manage money.' This is its core function.

Answer: (B) Bank deposits are safer and earn interest over time

Explanation:
The chapter illustrates through Navdeep's example that saving money in a bank is better than keeping cash at home because deposits are secure and earn interest, allowing savings to grow over time through the banking system.

Answer: (C) The deposit rate is lower, and the difference is a source of bank income

Explanation:
• Banks pay lower interest rates on savings deposits to depositors
• Banks charge higher interest rates on loans to borrowers
• The difference between these rates is how banks earn income (the example shows deposits at 2% and loans at 5%, with the bank earning ₹6 on a ₹200 transaction)

Answer: (B) Earning interest on your original deposit plus interest earned in previous years

Explanation:
The chapter explains compounding through an example where after the first year you earn ₹60 on ₹1000, but in the second year you earn interest on ₹1060 (the original amount plus the interest), resulting in ₹63.60. This demonstrates how interest is earned on accumulated amounts, not just the original principal.

Answer: (B) The power of exponential growth over time

Explanation:
By the 32nd square, the rice had grown to over 210 crore grains—illustrating how small amounts can grow into massive quantities through exponential doubling. The story demonstrates the power of compounding and exponential growth, showing how the King 'realised how powerful exponential growth can be.'

Answer: (B) Savings, current, and fixed deposit accounts

Explanation:
The chapter identifies and describes three account types: Savings accounts for individuals who save regularly and earn interest; Current accounts for businesses and traders with no interest but unlimited transactions; and Fixed deposit accounts where money is locked for a set period like 3 or 5 years with higher interest.

Answer: (C) It provided bank accounts to millions, especially low-income earners, without minimum balance requirements

Explanation:
Before 2014, only 15 crore Indians had bank accounts. The Pradhan Mantri Jan Dhan Yojana launched in 2014 aimed to give every Indian, especially low-income earners, access to a bank account without requiring a minimum balance or fees, resulting in over 50 crore accounts being opened, mainly by women.

Answer: (C) To supervise the Indian banking system and act as the banker to banks

Explanation:
The RBI is described as India's central bank that supervises the Indian banking system. It maintains accounts of other banks, facilitates fund exchanges between them, and provides loans to banks and the government. It also prints and distributes currency and sets benchmark interest rates.

Answer: (D) Cheques deposited with a bank

Explanation:
The chapter explicitly states that 'the transfer or payment of money through a cheque requires physically visiting a bank and takes time,' contrasting this with electronic payment methods like UPI, internet banking, and debit cards which allow instant transfers.

Answer: (B) Transfer money using a QR code or phone number and check balances on their phone

Explanation:
UPI enables easier and quicker digital money transfers using a QR code or the phone number of the recipient. It reduces the need for physical passbook updates and allows users to check balances and track transactions anytime on their phone.

Answer: (B) It required filling out cheques with receiver details and physically visiting the bank, which was time-consuming and discouraged banking use

Explanation:
The chapter notes that traditional fund transfer through cheques was 'time-consuming and discouraged a majority of people from using banking services, leading to heavy reliance on cash due to which billions of rupees were used every day without a record.' UPI changed this in 2016 by enabling instant digital transfers.

Answer: (B) A unit of ownership in a company representing a portion of its capital

Explanation:
The chapter defines a share as 'a unit of ownership in a company, representing a portion of its capital stock.' When you buy a share, you become a part-owner of that company, with your ownership level determined by how many shares you hold.

Answer: (B) A company's performance, government policy changes, tax rules, political instability, wars, and economic shocks

Explanation:
The chapter identifies multiple factors affecting share prices: company performance (if doing well, shares become more valuable; if facing problems like bad products or strikes, prices drop), government policy changes, new laws, tax rules, political instability, wars, and economic shocks.

Answer: (B) They trick people into sharing OTPs or bank details through fake calls or messages

Explanation:
The chapter warns that 'Fraudsters trick people through fake calls or messages to download harmful apps or mislead people into sharing bank details or One-Time Passwords (OTPs). This gives them access to the user's mobile or computer, enabling them to steal personal data from the device and draining money from the bank accounts.'

Answer: (B) It enabled cashless transactions while maintaining social distancing, reducing virus transmission

Explanation:
The chapter explains that 'during the COVID-19 pandemic, maintaining social distancing became essential to prevent the spread of infection. During this period, UPI gained popularity for supporting cashless transactions.' This made it valuable for reducing physical contact during disease transmission concerns.

Answer: (B) Current account

Explanation:
The chapter describes the current account as designed specifically for businesses and traders who often make and receive payments. Unlike a savings account which has withdrawal limits, a current account allows unlimited deposits and withdrawals without earning interest, making it ideal for frequent commercial transactions.

Answer: (B) ₹551.25

Explanation:
Year 1: ₹500 + 5% of ₹500 = ₹525. Year 2: ₹525 + 5% of ₹525 = ₹525 + ₹26.25 = ₹551.25. Compounding means you earn interest on the previous year's interest, not just on the original amount.

Answer: (B) To enable fast and secure digital fund transfers without requiring traditional cheque-based processes

Explanation:
The chapter explicitly states that UPI was launched as a fast and secure digital payment system that enabled transfer of funds, addressing the time-consuming nature of traditional cheque-based banking that had discouraged widespread banking adoption.

Answer: (B) Share transactions were manual using paper tickets; now they use digital transactions with advanced computers

Explanation:
• In earlier days: manual trading using paper tickets (Fig. 8.20)
• In modern times: digital transactions using advanced computers and devices
• This technological evolution made the process faster and more efficient.

Answer: (B) Depositor deposits money → Bank lends to borrower → Borrower repays with interest → Bank pays interest to depositor

Explanation:
The chapter illustrates through the example of Navdeep and Rima how banks act as intermediaries: they accept deposits, lend those funds to borrowers at higher interest rates, and return interest to depositors at lower rates—this difference being the bank's income.

Answer: (B) NABARD (National Bank for Agriculture and Rural Development)

Explanation:
The chapter identifies NABARD as an institution that supports rural development by funding banks that give loans for farming, village industries, and rural infrastructure like roads and irrigation.

Answer: (C) Your PIN (Personal Identification Number)

Explanation:
The PIN is a numeric code used for authentication and security in financial transactions. The chapter warns against storing PINs on devices and emphasizes never sharing them. This code is essential for authorizing transactions when using ATMs or POS machines.

Answer: (C) It enabled people, especially low-income earners, to open accounts without minimum balance requirements or fees

Explanation:
Before 2014, only 15 crore Indians had bank accounts. The Jan Dhan Yojana removed barriers to account opening by eliminating minimum balance and fee requirements, resulting in over 50 crore accounts being opened—mainly by women—and expanding banking services across all walks of life.

Answer: (B) A stock market crash occurs

Explanation:
When share prices of numerous companies decline at the same time, it results in a stock market crash. This contrasts with a stock market boom, which occurs when prices rise simultaneously across many companies.

Answer: (B) It allows account holders to check balances, view transaction history, and transfer money using a computer or smartphone from anywhere

Explanation:
The chapter describes internet banking as allowing account holders to access banking services through a bank's website or mobile application, enabling them to check balances and transaction history and transfer money—all without visiting a physical bank branch.