CBSE Class 10 Social Science Money and Credit MCQs

Question. Which one of the following options describe ‘Collateral’? 
(A) Double coincidence of wants
(B) Certain products for barter system
(C) Trade in barter system
(D) Asset as guarantee for loan

Answer : D

Question. Which one of the following is not a limitation of the barter system? 
(A) Lack of double coincidence of wants.
(B) Certain products can’t be divided.
(C) Most often double coincidence of wants is not available.
(D) None of the above

Answer : D

Question. Which one of the following was not a traditional form of money? 
(A) Grains
(B) Paper notes
(C) Cattle
(D) Gold coins

Answer : B

Question. Who issues currency notes in India? R
(A) Reserve Bank of India
(B) State Bank of India
(C) Ministry of Finance
(D) Government of India

Answer : A

Question. A cheque like currency notes act as: U
(A) cash
(B) a store of value
(C) a medium of exchange
(D) a demand deposit

Answer : C

Question. A deposit with a bank that can be withdrawnw henever the depositor likes to do so, is termed as: 
(A) a demand deposit
(B) a time deposit
(C) a fixed deposit
(D) a legitimate deposit

Answer : A

Question. Which of the following does not constitute a part of informal credit in India? 
(A) Commercial Bank
(B) Moneylenders
(C) Friends and relatives
(D) Zamindars

Answer : A

Question. The functioning of the formal source of credit is supervised by: 
(A) Government of India
(B) Reserve Bank of India
(C) Ministry of Finance
(D) None of the above

Answer : B

Question. Banks do not give loans to: 
(A) small farmers.
(B) marginal farmers.
(C) industries.
(D) people without proper collateral and documents.

Answer : D

Question. The number of members in a typical SHG varies between: 
(A) 5 and 10
(B) 15 and 20
(C) 15 and 25
(D) 20 and 30

Answer : B

Question. Arrange the following in the correct sequence:
(i) Online payment, Debit card, Credit cards
(ii) Precious metal coins (gold, silver, copper)
(iii) Grain and Cattle
(iv) Modern Currency-Paper notes and coins
Options:
(A) (iv) - (i) - (ii) - (iii)
(B) (iii) - (ii) - (i) - (iv)
(C) (iii) - (ii) - (iv) - (i)
(D) (ii) - (iv) - (iii) - (i)

Answer : C

Question. Analyze the information given below, considering one of the following correct options: Rita has taken a loan of ` 7 lakhs from the bank to purchase a car. The annual interest rate on the loan is 14.5 per cent and the loan is to be repaid in 3 years in monthly instalments. The bank retained the papers of the new car as collateral, which will be returned to Rita only when she repays the entire loan with interest.
(A) Mode of re-payment
(B) Terms of credit
(C) Interest on loan
(D) Deposit criteria 

Answer : B

Question.Analyze the information given below, considering one of the following correct options: Mohan is an agricultural labourer. There are several months in a year when he has no work and needs credit to meet his daily expenses. He depends upon his employer, the landowner for credit who charges an interest rate of 5 per cent per month. Mohan repays the money by working physically for the landowner on his farmland.
Over the years his debt will –
(A) Increase - because of increasing interest and non-payment of monthly amount.
(B) Remain constant - as he is working for the employer but is repaying less.
(C) Reduce - as amount equivalent to his salary is being counted as monthly repayment.
(D) Be totally repaid - as he is repaying the debt in the form of physical labour.

Answer : A

Question. Analyze the information given below, considering one of the following correct options:
Mahesh is a small farmer. He has taken a loan of ` 2 lakhs from the money leader to meet the expenses of cultivation. The annual interest rate on the loan is very high, so he is unable to repay the loan and he is caught in a debt. He has to sell a part of the land to pay off the debt.
(A) Terms of credit
(B) Interest on loan
(C) Debt-trap
(D) Mode of repayment

Answer : C

Question. Analyze the information given below, considering one of the following correct options:
Ramu is a shoe manufacturer and he wants to directly exchange shoes for rice without the use of money. Now he will have to look for a rice growing farmer who not only wants to sell rice but also wants to buy the shoes in exchange.
(A) Double coincidence of wants
(B) Goods exchange with goods
(C) Goods exchange with money
(D) None of the above

Answer : A

Question. Analyze the information given below, considering one of the following correct options:
Megha has taken a loan of ` 6 lakhs from the bank to purchase a house. The annual interest rate on the loan is 14 per cent and the loan is to be repaid in 12 years in monthly installments. Megha had to submit to the bank, documents showing her employment records and salary before the bank agreed to give her the loan.
(A) Interest on loan
(B) Formal source of loan
(C) Informal source of loan
(D) None of the above

Answer : B

Question. Analyze the information given below, considering one of the following correct options:
A shopkeeper Sudha has to make a payment to the wholesaler and writes a cheque for a specific amount to the wholesaler. The wholesaler takes this cheque and deposits it in his own account in the bank. The money is transferred form one bank account to another bank account in a couple of days. The transaction is completed without any payment of cash.
(A) Check payment
(B) Interest on deposits
(C) Demand deposit
(D) Money transfer

Answer : C

Question. Find the incorrect option from the following:
(A) Dem and deposit share the essential features ofmoney. 
(B) With demand deposit payments can be made without cash.
(C) Demand deposits are safe way of money transformation.
(D) Demand deposit facility is like cheque.

Answer : D

Question. Find the incorrect option from the following:
(A) Banks accept deposit and also pay an amount as interest.
(B) People's money is safe with banks.
(C) Banks provide loans only to profit-making businesses.
(D) It is easy for individuals to get credit who have savings and current account in the banks.

Answer : C

Question. Find the incorrect option from the following:
(A) Poor households still depend on informal sources of credit.
(B) RBI supervises the functioning of informal sources of loAnswer :
(C) Banks are not present everywhere in the rural areas.
(D) RBI monitors the banks in actually maintaining cash balance.

Answer : B

FILL IN THE BLANK :

Question. Modern forms of money include .......... 

Answer : Paper notes

Question. Since money acts as an intermediate in the exchange process, it is called .......... .

Answer : Medium of exchange

Question. .......... is used as a substitute for cash.

Answer : Credit card

Question. Deposits in bank accounts withdrawn on demand are called ......... .

Answer : Demand deposits

Question. Major portion of the deposits is used by banks for .......... .

Answer : Extending loans

Question. Banks in India these days, hold about .......... % of their deposits as cash.

Answer : 15%

TRUE/FALSE :

Question. In a SHG, most of the decisions regarding savings and loan activities are taken by government.

Answer : False

Question. The collateral demand that lenders make loans against are vehicle and building of the borrower.

Answer : True

Question. The main source of income for banks is interest on deposits.

Answer : False

Question. Gramin Bank is the success story that met the credit needs of the poor at reasonable rates in Bangladesh

Answer : True

Question. A ‘debt trap’ means overspending till no money is left.

Answer : False

ASSERTION AND REASON :

DIRECTION : Mark the option which is most suitable :‘
(a) If Both assertion and reason are true, and reason is the correct explanation of assertion.
(b) If Both assertion and reason are true, but reason is not the correct explanation of assertion.
(c) If Assertion is true, but reason is false.
(d) If Both assertion and reason are false.

Question. Assertion : In India, no individual can refuse to accept a payment made in rupees.
Reason : Rupee is the legal tender in India.

Answer : A

Question. Assertion : The Reserve Bank of India supervises the functioning of formal sources of loans.
Reason : The RBI sees that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small scale industries, to small borrowers etc.

Answer : B

Question. Assertion : Banks charge a higher interest rate on loans than what they offer on deposits.
Reason : The difference between what is charged from borrowers and what is paid to depositors is their main source of income.

Answer : A 

Question. Assertion : Collateral is an asset that the borrower owns (such as land, building, vehicle, livestock, deposits with banks) and uses this as a guarantee to a lender until the loan is repaid.
Reason : Collateral is given as the lender can sell the collateral to recover the loan amount if the borrower fails to repay the loan.

Answer : A

Question. Assertion : Rohan took credit in the form of advance payment from a buyer and he delivered the goods to the buyer on time and also earned profit. The credit made Rohan better off in this situation.
Reason : Credit can never push a person into a debt trap.

Answer : C

Question. Assertion : The facility of demand deposits makes it possible to settle payments without the use of cash.
Reason : Demand deposits are paper orders which make it possible to transfer money from one person’s account to another person’s account.

Answer : D

Question. Assertion : The terms of deposit are same for all credit arrangements.
Reason : Credit arrangements are very complex process so to remove the complexities same terms of deposits are used.

Answer : D

Question. Assertion : The modern currency is used as a medium of exchange; however, it does not have a use of its own.
Reason : Modem currency is easy to carry

Answer : B

Question. Assertion : Banks keep only a small proportion of their deposits as cash with themselves.
Reason : Banks in India these days hold about 15 per cent of their deposits as cash.

Answer : B

Question. Assertion : Credit would be useful or not depends on the risk involved in a situation.
Reason : The chance of benefitting from credit is highest in agriculture sector.

Answer : C

Case-based MCQs :

I. Read the extract given below and answer the questions that follow:

Bartering is the act of trading one good or service for another without using a medium of exchange such as money. A bartering economy differs from a monetary economy in a variety of ways. When barter was used as an exchange medium, the needs of people were very limited. This trading method doesn’t involve money and it relies solely on exchanging goods and services for other services and goods in return. The use of money spans a very large part of our everyday life. To understand the usefulness of money, we must consider what the world would be like without money. How would people exchange goods and services? Economies without money typically engage in the barter system. Barter is highly inefficient for trying to coordinate the trades in a modern advanced economy. In an economy without money, an exchange between two people would involve a double coincidence of wants, a situation in which both the parties have to agree to sell and buy each other’s commodities. This is known as double coincidence of wants. What a person desires to sell is exactly what the other wishes to buy. In a barter system where goods are directly exchanged without the use of money, double coincidence of wants is an essential feature. Another problem with the barter system is that it does not allow us to easily enter into future contracts for purchasing many goods and services. Money solves the problems that the barter system creates. Money serves as a medium of exchange, which means that money acts as an intermediary between the buyer and the seller. Modern forms of money include currency — paper notes and coins. The other form in which people hold money is as deposits with banks.

Answer the following MCQs by choosing the most appropriate option:

Question. Which of the following can be considered as modern form of Money?
(A) Paper note
(B) Gold Coins
(C) Silver Coins
(D) Copper coins

Answer : A

Question. Which of the following has an essential feature of double coincidence?
(A) Money system
(B) Barter system
(C) Financial system
(D) Banking system

Answer : B

Question. In a barter system:
(A) goods are exchanged for money.
(B) goods are exchanged for foreign currency.
(C) goods are exchanged without the use of money.
(D) goods are exchanged on credit.

Answer : C

Question. Which of the following feature of money acts as an intermediate in the exchange process?
(A) Medium of exchange
(B) Unit of value
(C) Store of value
(D) None of the above

Answer : A

II. Read the source given below and answer the questions that follow:

Banks use the major portion of the deposits to extend loAnswer : There is a huge demand for loans for various economic activities. Banks make use of the deposits to meet the loan requirements of the people. In this way, banks mediate between those who have surplus funds (the depositors) and those who are in need of these funds (the borrowers). Banks charge a higher interest rate on loans than what they offer on deposits. A large number of transactions in our day-to-day activities involve credit in some form or the other. Credit (loan) refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment. In rural areas, the main demand for credit is for crop production. Crop production involves considerable costs on seeds, fertilisers, pesticides, water, electricity, repair of equipment, etc. The various types of loans can be conveniently grouped as formal sector loans and informal sector loAnswer : Among the former are loans from banks and cooperatives. The informal lenders include moneylenders, traders, employers, relatives and friends, etc. The Reserve Bank of India supervises the functioning of formal sources of loAnswer : For instance, we have seen that the banks maintain a minimum cash balance out of the deposits they receive. The RBI monitors the banks in actually maintaining cash balance. There is no organisation which supervises the credit activities of lenders in the informal sector. They can lend at whatever interest rate they choose. There is no one to stop them from using unfair means to get their money back. Compared to the formal lenders, most of the informal lenders charge a much higher interest on loAnswer : Thus, the cost to the borrower of informal loans is much higher. In recent years, people have tried out some newer ways of providing loans to the poor. The idea is to organise rural poor, in particular women, into small Self-Help Groups (SHGs) and pool (collect) their savings.

Answer the following MCQs by choosing the most appropriate option:

Question. Compared to the formal lenders, most of the informal lenders charge a much ________ interest on loans:
(A) lower
(B) constant
(C) higher
(D) no interest

Answer : C

Question. Formal sector loans include loans from:
(I) Banks (II) Moneylenders
(III) Cooperatives (IV) Traders
(A) (i) and (iii)
(B) (ii) and (iv)
(C) (ii) and (iii)
(D) (i) and (iv)

Answer : A

Question. An agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment.
(A) Credit (loan)
(B) Chit fund
(C) Bank
(D) Cheque

Answer : A

Question. Banks use the major portion of the deposits to: 
(A) keep as a reserve so that people may withdraw.
(B) meet their routine expenses.
(C) extend loAnswer :
(D) meet renovation of the bank.

Answer : C

Question. Read the source given below and answer the questions that follow:

The use of money spans a very large part of our everyday life. Look around you and you would easily be able to identify several transactions involving money in any single day. Can you make a list of these? In many of these transactions, goods are being bought and sold with the use of money. In some of these transactions, services are being exchanged with money. For some, there might not be any actual transfer of money taking place now but a promise to pay money later. Have you ever wondered why transactions are made in money? The reason is simple. A person holding money can easily exchange it for any commodity or service that he or she might want. Thus, everyone prefers to receive payments in money and then exchange the money for things that they want. Take the case of a shoe manufacturer. He wants to sell shoes in the market and buy wheat. The shoe manufacturer will first exchange shoes that he has produced for money, and then exchange the money for wheat. Imagine how much more difficult it would be if the shoe manufacturer had to directly exchange shoes for wheat without the use of money. He would have to look for a wheat growing farmer who not only wants to sell wheat but also wants to buy the shoes in exchange. That is, both parties have to agree to sell and buy each other’s commodities. This is known as double coincidence of wants. What a person desires to sell is exactly what the other wishes to buy. In a barter system where goods are directly exchanged without the use of money, double coincidence of wants is an essential feature. In contrast, in an economy where money is in use, money by providing the crucial intermediate step eliminates the need for double coincidence of wants. It is no longer necessary for the shoe manufacturer to look for a farmer who will buy his shoes and at the same time sell him wheat. All he has to do is find a buyer for his shoes. Once he has exchanged his shoes for money, he can purchase wheat or any other commodity in the market. Since money acts as an intermediate in the exchange process, it is called a medium of exchange.

Answer the following MCQs by choosing the most appropriate option:

Question. Why transactions are made in money?
(A) Money is easy to get.
(B) Money is accepted as a medium of exchange.
(C) Everyone has money reserves in their house.
(D) All of the Above.

Answer : B

Question. In ____________ both parties have to agree to sell and buy each other’s commodities.
(A) Double Coincidence of wants
(B) Barter System
(C) Bank Regulation
(D) Personal Agreements

Answer : B

Question. How would had the shoe manufacturer directly exchanged shoes for wheat without the use of money?
(A) Both parties have to agree to sell and buy each other’s commodities.
(B) He compels the farmer to give him wheat on compassionate grounds.
(C) He forces the farmer to take the shoes from him in exchange of wheat.
(D) He approaches the bank authorities.

Answer : A

Question. Why barter system is no longer practiced? 
(A) Considered illegal.
(B) People do not have that much things to exchange.
(C) It is difficult to find two parties that have something they both want to trade.
(D) Government keeps a check on such an activity.

Answer : C

Question :  The exchange of goods for goods is:

a) banker of option b) bills of exchange c) barter d) currency

Answer : C

Question : Currency is issued by:

a) RBI on behalf of central government b) By president of India.

c) By finance minister d) None of them

Answer : A

Question : National Sample Survey Organization is a :

a) Commercial bank organization b) An organization of World Bank

c) An organization associated with Indian Standard. Institute

d) An institution responsible to collect data on formal sector credit.

Answer :  C

Question : Gold mohar, a coin so named was brought in circulation by:

a) Akbar b) Sher Shah Suri c) Ashok d) Shivaji

Answer :  A

Question : Which agency is not included in informal loan sector or agency:

a) Bank b) Village money lender c) Trader d) Relative of borrower

Answer : D

Question : In SHG most of the decisions regarding savings and loan activities are taken by:

a) Bank b) Members c) Non-government organizations d) LIC

Answer :  A

Question : Formal sources of credit does not include:

a) Banks b) Co-operatives c) Employers d) LIC

Answer :  A

Question : Security (pledge, mortgage) against loan:

a) Collateral b) Token Coins c) Promissory Note d) Currency

Answer :  B