Maharashtra Board Class 11 Economics Chapter 2 Money Solutions

Complete the Correlation:

 

Question 1. Primary function of money : Medium of exchange : : ___________ : Transfer of value
Answer: Secondary function of money. This category also includes other functions like store of value and standard of deferred payments.
In simple words: While the primary function of money is to act as a medium of exchange, its secondary function includes transferring value from one place or person to another.

🎯 Exam Tip: Remember that primary functions are the most fundamental roles of money, while secondary functions support and expand these basic roles.

 

Question 2. ___________ : Basis of credit : : Secondary functions of money : Standard of deferred payments.
Answer: Contingent function of money. This function plays a crucial role in supporting the modern banking system through credit creation.
In simple words: The contingent function of money acts as the basis for credit, just like secondary functions help in making future payments.

🎯 Exam Tip: Remember the classification of functions of money (Primary, Secondary, and Contingent) to easily solve correlation questions.

 

Question 3. Commodity money : Shells : : ___________ : Credit card
Answer: Plastic money. Modern technology has enabled the use of plastic cards for instant transactions.
In simple words: Just like shells were used as commodity money in ancient times, credit cards are used as plastic money today.

🎯 Exam Tip: Always associate modern electronic payment tools like credit and debit cards with the term 'plastic money'.

 

Question 4. Divisibility : Smaller denomination : : ___________ : Easy to carry from one place to another.
Answer: Portability. This quality ensures that money can be transported easily without much cost or effort.
In simple words: Divisibility means money can be divided into smaller parts, while portability means it is easy to carry around.

🎯 Exam Tip: Learn the key qualities of money like portability, divisibility, and durability as they are frequently asked in objective questions.

 

Question 5. Barter system : Goods : : Modern economy : ___________
Answer: Money. It serves as the universal medium of exchange in today's economic transactions.
In simple words: In the old barter system, goods were exchanged for other goods, but in a modern economy, we use money for all exchanges.

🎯 Exam Tip: Contrast the barter system directly with the money-based modern economy to highlight the evolution of exchange systems.

 

Give Economic Terms:

 

Question 1. The act of exchanging goods for goods – ___________
Answer: Barter System. This system was widely used before the invention of money.
In simple words: Exchanging one item directly for another item without using any money is called the barter system.

🎯 Exam Tip: Use the exact term 'Barter System' when describing direct goods-for-goods transactions to secure full marks.

 

Question 2. Provision for making payments in future – ___________
Answer: Deferred payment. This allows consumers and businesses to acquire goods now and pay for them later.
In simple words: Deferred payment means making a deal today but paying the money at a later date.

🎯 Exam Tip: Remember that 'deferred' simply means postponed or delayed to a future date.

 

Question 3. System that makes use of currency for facilitating payments – ___________
Answer: Monetary system. This structured framework regulates the creation and circulation of money in a country.
In simple words: A monetary system is any system where paper notes and coins are officially used to buy and sell things.

🎯 Exam Tip: Be precise with terms; a system relying on currency is always referred to as a monetary system.

 

Question 4. Credit instrument through which bank deposits are transferable – ___________
Answer: Cheque/Demand Draft. These instruments allow safe and convenient transactions without carrying physical cash.
In simple words: A cheque or demand draft is a paper document that lets you safely move money from your bank account to someone else's.

🎯 Exam Tip: Remember that cheques and demand drafts are key examples of credit instruments used in modern banking.

 

Question 5. Monetary value stored and transferred electronically by means of computer hard drive or servers – ___________
Answer: E-money. It represents a modern digital alternative to traditional paper currency.
In simple words: E-money is digital money stored on computers or online servers instead of being printed on paper.

🎯 Exam Tip: Clearly distinguish between physical plastic money and electronic money stored on digital servers.

 

Question 6. Money not accounted for in the bank and not disclosed to the government – ___________
Answer: Black money. This unaccounted wealth often leads to a loss of tax revenue for the nation.
In simple words: Black money is cash that people hide from the government so they do not have to pay taxes on it.

🎯 Exam Tip: Define black money as undisclosed income to secure full marks in short-answer questions.

Choose the Correct Option:

 

Question 1. Arrange in order of evolution of money.
(a) Metallic money
(b) Animal money
(c) Metallic coins
(d) Commodity money
Options:
(a) a, b, c, d
(b) b, d, a, c
(c) d, c, a, b
(d) c, a, b, d
Answer: (b) b, d, a, c
In simple words: Money evolved step-by-step starting with animals, then useful goods, then raw metals, and finally stamped coins.

🎯 Exam Tip: Memorize the chronological order of the evolution of money as it is a frequently asked sequence question.

 

Question 2. Arrange in order of Evolution of money.
(a) Plastic money
(b) Electronic money
(c) Paper money
(d) Credit money
Options:
(a) b, d, a, c
(b) a, b, c, d
(c) d, c, b, a
(d) c, d, a, b
Answer: (d) c, d, a, b
In simple words: Money evolved step-by-step starting with paper money, then credit money like cheques, followed by plastic cards, and finally digital electronic money.

🎯 Exam Tip: Remember the chronological order of money's evolution from physical forms to digital forms to easily solve such arrangement questions.

 

Identify and Explain the Concepts from the Given Illustrations:

 

Question 1. Vasantsheth provides coal from his shop to farmers in exchange for foodgrains.
Answer: Barter System. The barter system refers to the exchange of goods against goods. In the above case, it is a barter exchange as Vasantsheth exchanges coal against food grains. This ancient practice of trading did not involve any form of paper or metal currency.
In simple words: The barter system is when people trade items directly with each other without using any money, like swapping coal for food.

🎯 Exam Tip: Clearly state the identified concept first, and then explain it using the details given in the illustration to secure full marks.

 

Question 2. Babanrao deposits his money in a nationalized bank.
Answer: Bank Money. Bank money or credit money refers to cash deposits saved by people. It can be withdrawn or transferred or demanded by means of cheque, draft, etc. In the above case, it is bank money, because Mr. Babanrao deposits his cash into the bank as deposits. This type of money plays a crucial role in modern financial transactions.
In simple words: Bank money is the money kept in bank accounts that can be easily used for payments through cheques or digital transfers instead of physical cash.

🎯 Exam Tip: Mention both terms 'Bank Money' and 'Credit Money' to show a comprehensive understanding of the concept.

 

Question 3. Charu used her debit card to purchase a shirt for her younger brother.
Answer: Plastic Money. Plastic money refers to hard plastic cards used in place of physical cash for everyday transactions. In this case, Charu uses her debit card, which is a form of plastic money, to make a purchase.
In simple words: Plastic money refers to modern payment cards, like debit or credit cards, which we use to buy things instead of carrying paper notes.

🎯 Exam Tip: Always identify the specific tool (like a debit card) as an example of the broader concept (plastic money) in your explanation.

 

Question 4. Malathi purchased a house through an agent. The agent accepted the commission amount in cash but did not issue a receipt to her.
Answer: Black money. Money that is received in cash but not accounted for and on which tax is not paid to Government is called Black Money. In the above case, the agent did not issue a receipt to Malathi, hence it will be a case of Black money. This evasion of tax deprives the nation of crucial revenue needed for public welfare.
In simple words: Black money is money earned but hidden from the government to avoid paying taxes. Since the agent didn't give a receipt, this transaction was unrecorded.

🎯 Exam Tip: Always define the term 'Black money' first before explaining how it applies to the given scenario.

 

Question 5. To prevent misuse/fraudulent use of the national currency, a note ban is imposed on its use at certain times.
Answer: Demonetization. Demonetization is a tool to control black money in a country. A note ban is a case of demonetization. This process strips the specified currency units of their status as legal tender.
In simple words: Demonetization is when the government declares certain banknotes invalid. It helps stop illegal cash and fake currency from being used.

🎯 Exam Tip: Remember that demonetization specifically refers to stripping a currency unit of its status as legal tender.

 

5. State with Reasons Whether You Agree or Disagree with the Following Statements:

 

Question 1. There are no difficulties in the barter system.
Answer: No, I do not agree with the statement. A barter system is a process of exchange under which people exchange goods and services produced by them with goods and services produced by others. With the progress of civilization, human wants to be multiplied and the barter system of exchange became obsolete. This was because of various inherent limitations. They are as follows:
• Lack of double coincidence of wants: Barter exchange cannot take place unless there is a double coincidence of wants. Under Barter System wants may not always coincide. This mismatch makes direct trade highly inefficient and difficult to execute.
In simple words: The barter system had many problems, like finding someone who wants what you have and has what you want. This made trading very difficult as society grew.

🎯 Exam Tip: When asked to agree or disagree, always start your answer with a clear 'Yes, I agree' or 'No, I do not agree' to secure initial marks.

 

Question 2. There are many good qualities found in modern currency.
Answer: Yes, I agree with the statement. There are many good qualities found in a modern currency like:
• General Acceptability: It must be generally accepted as a medium of exchange.
• Stability: The purchasing power of money should be stable because money serves as a store of value.
• Cognizability: It must be easily recognizable or identifiable. For E.g. Notes of different denominations must be of different sizes, colours, etc. so that they can be easily identified.
• Durability: Money should be durable also i.e. its value should not fluctuate too much.
• Divisibility: Money should be divisible into units of smaller denominations.
• Portability: It should be easy to handle and carry from one place to another.
• Homogeneity: Money of the same denomination should be identical in shape, size, colour, etc. Modern currency is designed to meet all these essential requirements efficiently.
In simple words: Modern money has useful qualities like being easy to carry, easy to recognize, and accepted by everyone, which makes buying and selling things very simple.

🎯 Exam Tip: Memorize at least four key qualities of money (like portability, durability, divisibility, and cognizability) with brief examples to secure full marks in short-answer questions.

 

Question 3. Many tasks are accomplished with money.
Answer: Yes, this statement is true. Money plays a crucial role in our daily lives as it is used to perform various functions such as buying goods and services, paying bills, storing wealth for the future, and making deferred payments. In modern economies, it acts as the fundamental driving force behind all financial transactions.
In simple words: Money makes our lives easier because we can use it to buy what we need, pay for services, and save up for the future without any hassle.

🎯 Exam Tip: Clearly state the primary and secondary functions of money (medium of exchange, measure of value, store of value) to write a well-structured answer.

 

Question. Money performs a number of functions in today's economy.
Answer: Yes, I do agree with the statement.
Money performs a number of functions in today’s economy. They are as follows:

• Medium of Exchange: It serves as a medium of exchange, i.e. any commodity can be purchased or sold for money.
• The measure of Value: Money helps to compare the price of commodities in the modern economy, which was not possible during the Barter period. Value of commodity can be expressed in different currencies like Rupee in India, Dollar in the U.S.A., etc.
• Standard of deferred payment: Deferred payment means making payment at a future date. This was not possible in a barter economy, because taking loans was easy, but its repayment was difficult as the loan was in form of grains, cattle, etc.
• Store of value: Money made possible the habit of saving for the future. Saving was not possible during the barter economy as commodities started deteriorating after a certain period of time. But with the invention of money, now it can be saved for a longer period.
• Transfer of value: Transfer of money from one person to another and from one place to another place, became possible due to the invention of money.
• Contingent Functions: Besides the above functions of money, there are other functions of money, like:
  • it helps to measure National Income.
  • it forms the basis of credit.
  • it imparts liquidity to wealth.
  • it helps to estimate macroeconomic variables.

Additionally, money acts as a crucial tool for economic stability and growth in modern financial systems.
In simple words: Money does many important jobs today, like helping us buy things, measure prices, save for the future, and make payments later.

🎯 Exam Tip: Clearly list the primary, secondary, and contingent functions of money with brief explanations to secure full marks.

 

Question 4. Money can be sent anywhere through electronic means.
Answer: Yes, I do agree with the statement.

• With the invention of new technologies, like mobile phones, tablets, smart cards, computers, etc, money can be sent anywhere nationally or globally.
• E-money is a monetary value that is stored and transferred as and when desired through various means.
• It is the safest mode of transfer as it is backed and monitored by the Central Bank. This modern system has revolutionized how we conduct daily transactions.
• It is also called a digital wallet.

In simple words: Thanks to modern technology like phones and computers, we can safely and instantly send digital money to anyone around the world.

🎯 Exam Tip: Mention key terms like 'E-money', 'digital wallet', and 'Central Bank' to show a complete understanding of electronic money transfers.

6. Answer the Following Questions on the Basis of the Following Information:

Ganesh travelled to the mall by bus. He gave the conductor Rs. 10 coins for the ticket. He purchased many commodities from the mall. At the billing counter, he gave his credit card for payment but the billing clerk informed him that only debit cards were accepted. Since Ganesh had forgotten his debit card at home, he offered to make payment by cash.

 

Question 1. Identify the types of money used in the information.
Answer: Types of money used in the above information are:

• Plastic money – Credit card and Debit card
• Paper money
• Token coin.

These various forms of money facilitate smooth transactions in our daily lives.
In simple words: The story mentions three types of money: plastic money (credit and debit cards), paper money (cash), and token coins (the Rs. 10 coin).

🎯 Exam Tip: Clearly list all the types of money identified from the passage using bullet points to make your answer structured and easy to read.

 

Question 2. Explain any two of them.
Answer:
(a) Paper money: It is a substitute for metallic money. It consists of paper currency which is issued by the Central Bank of the country. Currency notes of higher denominations are issued by the Central Bank i.e. Reserve Bank of India. This system helps in managing large-value transactions easily.
(b) Bank money: It is also called Credit money. It refers to deposits that are in the form of cash saved by the people. Such money can be withdrawn or transferred with the help of instruments like cheques, drafts, etc.
In simple words: Paper money is the cash printed by the central bank of a country. Bank money refers to the savings people keep in banks, which can be used through cheques or cards.

🎯 Exam Tip: When explaining types of money, define them clearly and mention who issues them or how they are used to secure full marks.

 

Find Out: [Textbook Page No. 11]

 

Question. Recent changes introduced by the banks for the safe use of plastic money.
Answer: Banks have introduced several safety measures for plastic money, such as EMV chip-based cards, mandatory PIN verification for transactions, One-Time Passwords (OTPs) for online purchases, and instant SMS alerts. These technological upgrades have significantly reduced unauthorized card usage.
In simple words: Banks now use secure chips, OTPs sent to your phone, and PIN numbers to make sure no one else can use your credit or debit cards.

🎯 Exam Tip: Mention modern security features like EMV chips, OTPs, and tokenization as key terms when discussing safe banking practices.

Safe Use of Plastic Money

Various changes and instructions are given by the banks for the safe use of plastic money:

• Do not save the 16 digit card number using multiple payment gateways.
• On the backside of the card, there is 3 digit number which is an added security feature that protects our card from making fraudulent transactions.
• For safe usage, a One Time Password (OTP) is provided by the bank on a client’s personal registered number (mobile number) to use for each transaction.
• Banks are instructed by RBI to move to chip and pin-based cards and avoid the use of magnetic stripe cards. The chip and pin-based cards create a unique token, every time the card is used. This provides a higher level of security than the magnetic strip.

 

Question. Explain the terms legal tender money and non-legal tender money.
Answer:
(i) Legal Tender Money: It is the money that is backed by law and refusal to accept this is punishable by law. It is issued by the Central Bank of the country. This ensures trust and stability in the daily transactions of a nation. E.g.: Currency note of any denominations like Rs. 5, Rs. 10, Rs. 50, Rs. 100, Rs. 200, Rs. 500, and Rs. 2000.
(ii) Non-Legal Tender Money: It is the money that is generally used by people in final payment but there is no legal compulsion to accept (i.e. no one can force to accept it). It is issued by commercial banks. These are optional instruments used for convenience in business transactions. E.g. cheques, drafts, bill of exchange, etc.
In simple words: Legal tender is official money like cash that everyone must accept by law, while non-legal tender includes things like cheques which people can choose to accept or refuse.

🎯 Exam Tip: Clearly distinguish between the two by mentioning that legal tender is backed by law and issued by the central bank, whereas non-legal tender is optional and issued by commercial banks.

 

Question. List the various modes of digital transactions.
Answer: Various modes of digital transactions are Debit cards, Credit cards, Mobile wallets, Internet banking, Digital Payment App (Google pay, Paytm, etc), UPI (United Payments Interface), Mobile Banking, Bank prepaid card, etc. These modern methods have significantly reduced the reliance on physical cash.
In simple words: Digital transactions are ways to pay for things electronically without using physical paper money, such as using cards, mobile apps, or online banking.

🎯 Exam Tip: Remember to list at least four to five distinct examples like UPI, credit/debit cards, and mobile wallets to secure full marks.