Samacheer Kalvi Class 9 Social Science Solutions Chapter 3 Money and Credit

Samacheer Kalvi 9th Social Science Money and Credit Text Book Back Questions and Answers

I. Choose the correct answer

 

Question 1. Certain metals like ______ (gold/iron) were used as a medium of exchange in ancient times.
(a) gold
(b) iron
Answer: (a) gold
In simple words: In olden times, valuable metals like gold were used by people to buy and sell things. Gold was a trusted form of money.

🎯 Exam Tip: Remember that historical forms of currency often involved precious metals due to their intrinsic value and durability.

 

Question 2. The Head Quarters of the RBI is at ______ (Chennai /Mumbai).
(a) Chennai
(b) Mumbai
Answer: (b) Mumbai
In simple words: The main office of the Reserve Bank of India (RBI), which controls money in India, is located in Mumbai. This is where important decisions about the country's finances are made.

🎯 Exam Tip: Knowing the headquarters of key financial institutions like the RBI is important for general knowledge questions about Indian economy.

 

Question 3. International trade is carried on in terms of ______ (US Dollars / Pounds).
(a) US Dollars
(b) Pounds
Answer: (a) US Dollars
In simple words: When countries trade with each other, they usually use US Dollars to pay. It is a common and trusted currency for business between nations. This makes transactions smoother and easier worldwide.

🎯 Exam Tip: Understand that the US Dollar is a global reserve currency, making it the preferred medium for international transactions due to its stability and widespread acceptance.

 

Question 4. The currency of Japan is ______ (Yen/Yuan).
(a) Yen
(b) Yuan
Answer: (a) Yen
In simple words: The money used in Japan is called the Yen. Each country has its own special name for its money.

🎯 Exam Tip: Always pay attention to specific details like country names and their respective currencies in economic geography questions.

II. Fill in the blanks

 

Question 1. ______ System can be considered as the first form of trade.
Answer: Barter
In simple words: Barter was the very first way people traded things. It means exchanging goods or services directly without using money.

🎯 Exam Tip: Define barter system accurately, emphasizing the direct exchange of goods or services without money.

 

Question 2. Money supply is divided into ______.
Answer: four
In simple words: The total amount of money available in an economy is categorized into four main groups. This helps economists understand how much money is flowing.

🎯 Exam Tip: For economics, remember the different measures of money supply (M1, M2, M3, M4) as they are fundamental concepts.

 

Question 3. The first printing press of the RBI was started at ______.
Answer: Nasik
In simple words: The first place where the Reserve Bank of India started printing money was in Nasik. This was an important step for the country's currency system.

🎯 Exam Tip: Recall the historical milestones of the Reserve Bank of India, including the location of its first printing press.

 

Question 4. ______ act as a regulator of the circulation of money.
Answer: Reserve Bank of India
In simple words: The Reserve Bank of India (RBI) is like the main controller that manages how money moves around in the country. It ensures the economy stays stable.

🎯 Exam Tip: Recognize the RBI's primary role as the central bank responsible for monetary regulation and stability in India.

 

Question 5. The thesis about money by B.R. Ambedkar is ______.
Answer: The Problem of the Rupee – Its Origin and its Solution
In simple words: B.R. Ambedkar wrote an important study about the Indian currency called 'The Problem of the Rupee – Its Origin and its Solution'. This work explored the history and issues related to the Indian rupee.

🎯 Exam Tip: Be familiar with significant historical economic works, especially those related to national currency and by prominent figures like B.R. Ambedkar.

III. Match the following:

 

Question 1. US Dollar – (i) Automatic Teller Machine
2. Currency in circulation – (ii) Substitute of money
3. ATM – (iii) Universally accepted currency
4. Salt – (iv) Saudi Arabia
5. Riyal – (v) 85%
Answer:
1. - (iii) Universally accepted currency
2. - (v) 85%
3. - (i) Automatic Teller Machine
4. - (ii) Substitute of money
5. - (iv) Saudi Arabia
In simple words: This match-up connects different terms with their correct definitions or related facts. For example, the US Dollar is recognized and accepted all over the world, and ATM stands for Automated Teller Machine, which helps you get cash. Salt was used as a temporary form of money in the past.

🎯 Exam Tip: Carefully read each item and its corresponding options to ensure accurate pairing. Sometimes, one correct match can help deduce others.

IV. Give Short Answer

 

Question 1. Why was money invented?
Answer:
1. Money was invented because the barter system had many problems. In a barter system, people directly exchanged goods, which was often difficult because it required a "double coincidence of wants" (both people wanting what the other had).
2. If money did not exist, trade would be limited to a barter system, which is inefficient. People would not be able to trade easily for specific items they needed.
3. Money serves as a common medium of exchange, making it easy to buy and sell goods and services. It simplified trade and allowed economies to grow beyond simple exchanges.
In simple words: Money was created to solve the problems of the old barter system. It made trading much easier because everyone accepted it as a common way to pay for things. Without money, it was very hard for people to exchange goods.

🎯 Exam Tip: When explaining the invention of money, always refer to the drawbacks of the barter system, such as the need for a 'double coincidence of wants', as a core reason.

 

Question 2. What is ancient money?
Answer:
1. Ancient money refers to the earliest forms of currency used by humans. These were often items that had natural value or were commonly used.
2. The first forms of money included certain metals like gold, silver, and copper. People valued these metals, making them suitable for trade.
3. These metals became known as ancient currency because they were widely accepted for buying and selling goods in early societies.
In simple words: Ancient money means the first types of currency used long ago. Things like gold, silver, and copper metals were often used as money because they were valuable.

🎯 Exam Tip: Focus on the materials and their inherent value when defining ancient money. Provide examples of specific metals used.

 

Question 3. What were the items used as barter during olden days?
Answer: During ancient times, many different items were used for bartering, which is trading goods directly without money. Common items included leather beads, shells, tobacco, salt, corn, and even people (slaves). These items served as a means of exchange because they were useful or valuable in some way to the people of that time.
In simple words: In the past, people traded things like leather beads, shells, tobacco, salt, corn, and even slaves. These items were exchanged directly for other goods, without using money.

🎯 Exam Tip: List a variety of items used in the barter system to show a comprehensive understanding of early trade practices.

 

Question 4. What is spice route? Why was it called so?
Answer:
1. The Spice Route was an ancient trade network used by merchants, importers, and exporters to carry valuable goods across continents.
2. Merchants traveled along these routes, both by land and sea, starting from places like Malabar in India and reaching as far west as Morocco. These routes connected different parts of the world.
3. Important items like pepper, other spices, pearls, gems, rubies, and muslin clothes were exported from regions like the eastern sea of Tamil Nadu.
4. Pepper and various other spices formed a very large part of the goods traded. They were highly sought after and drove much of the trade.
5. Because spices were such a dominant commodity traded, this network of trade paths became known as the Spice Route.
In simple words: The Spice Route was an old path for traders to move valuable goods like spices from one country to another. It was called the Spice Route because spices, especially pepper, were a very big part of what was traded. These routes connected places like India to faraway lands.

🎯 Exam Tip: When defining the Spice Route, mention the key commodities traded (spices) and its significance as an ancient trade network connecting different regions.

 

Question 5. What is natural money?
Answer: Natural money refers to goods that gained importance as a standard value for exchange over time, often due to their intrinsic worth and universal acceptance. Metals like silver and gold gradually became significant across the world because they were rare and valuable. Therefore, these precious metals were used as a reliable standard for trading goods, and this system was known as natural money. This transition moved societies beyond simple barter.
In simple words: Natural money refers to valuable things like silver and gold that people started using to trade. These metals became important everywhere because they were precious and easy to use as a standard for buying and selling.

🎯 Exam Tip: Highlight that natural money evolved from items with inherent value and became widely accepted, with precious metals like gold and silver being prime examples.

 

Question 6. Why were coins of low value printed in large quantities?
Answer:
1. Coins of low value were printed in large quantities because there were not enough reserves of gold and silver, which were traditionally used for higher-value currency.
2. The mines that produced these precious metals also had limited supplies, meaning they couldn't provide enough material for all currency needs.
3. As a solution, an alternative was found: coins were made using less valuable metals. This allowed for more coins to be produced economically.
4. These lower-value coins were used for everyday transactions, helping people buy and sell small goods and services easily.
5. This made money more accessible to everyone, especially poor people, enabling them to participate in the economy.
In simple words: Low-value coins were made in big numbers because there wasn't enough gold and silver. These coins, made from cheaper metals, helped poor people buy and sell everyday things easily.

🎯 Exam Tip: Emphasize the scarcity of precious metals and the need for inclusive economic participation as key reasons for the mass production of low-value coins.

 

Question 7. What is meant by foreign exchange?
Answer:
1. Foreign exchange refers to the process of converting one country's currency into another country's currency. This conversion rate, or currency value, can also be determined by the country's government or market forces.
2. It is essentially a system where people trade and convert the money of one nation into the money of another. This is crucial for international trade and travel. For example, converting Indian Rupees to US Dollars.
In simple words: Foreign exchange means changing the money of one country into the money of another country. It's important for buying things from other countries or traveling abroad.

🎯 Exam Tip: Clearly define foreign exchange as the conversion of one currency to another and mention its importance for international transactions.

V. Answer in detail

 

Question 1. Explain how money is transacted in the digital world.
Answer:
1. In the traditional system, people had to visit a bank, fill out a challan, or use a cheque to take money out of their account.
2. However, this old way of handling money is slowly disappearing as technology advances.
3. Now, people can easily get the money they need from an Automated Teller Machine (ATM) using an ATM debit card. This offers convenience and speed.
4. ATMs are located everywhere, allowing people to withdraw cash at any time, day or night.
5. Besides ATMs, individuals can also deposit money into their accounts without physically going to the bank branch, using various digital methods.
6. Credit cards are also available, which let people buy things on credit and pay later. This system provides flexibility in spending.
7. Nowadays, online transactions are very common. Instead of cheques or Demand Drafts (DDs), people use net banking to transfer money directly.
8. Through these digital methods, money can be sent to anyone, anywhere in the world, making global transactions simple.
9. Technology has advanced so much that mobile banking is now widely used, allowing people to manage their money from their phones. This has changed how we use money drastically.
In simple words: In the digital world, money is moved using technology. Instead of visiting banks, people use ATMs to get cash, credit cards to buy things, and online banking or mobile apps to send money. This makes transactions easy and fast, even across the world.

🎯 Exam Tip: When explaining digital transactions, cover key methods like ATMs, credit cards, net banking, and mobile banking, highlighting their convenience and global reach.

 

Question 2. Explain in detail about the role of RBI in the country.
Answer:
A government is responsible for managing the money supply and overseeing the country's monetary policy. It is crucial to prevent the hoarding of money in an economy to ensure that funds are available for productive use. Only when money is properly managed can it be effectively saved in banks and circulated within the economy. The Reserve Bank of India (RBI) plays a central role in this process.

A large part of the money saved in banks is used to develop industries, support economic growth, and fund various development projects aimed at improving the lives of the poor. The RBI ensures that banks channel these savings efficiently.

After most major banks in India were nationalized in 1969, the Reserve Bank of India (RBI) became the main body that controls how currency circulates in the country. It acts as the central banking authority. The Reserve Bank of India began its operations on April 1, 1935. It moved its permanent headquarters to Mumbai in 1937. In 1949, the RBI itself was nationalized, giving the government more control. The RBI releases 85% of the printed currency into circulation. As of August 2018, statistics showed that currency worth Rs.19 lakh crore was actively circulating in the economy. This demonstrates the RBI's vast responsibility in managing the nation's financial health.
In simple words: The RBI is India's central bank. It manages how much money is available, controls interest rates, and makes sure banks work properly. The RBI helps the government with money matters, ensures economic growth, and keeps the financial system stable. It also prints and controls the flow of currency.

🎯 Exam Tip: Focus on the RBI's primary functions: regulating money supply, overseeing monetary policy, managing currency circulation, and its historical nationalization. Mentioning key dates like 1935 and 1949 is also helpful.

 

Question 3. Write in detail about the various functions of money.
Answer:
1. When money was introduced, it solved many practical problems that were present in the old barter system, making trade much easier and more efficient.
2. Money serves several key functions: it acts as a medium of exchange (something people use to buy and sell), a unit of measurement (to put a value on things), a store of value (it holds its worth over time), and a standard for future payments (used for debts paid later).
3. It plays a crucial role in all economic transactions, from buying groceries to making large investments.
4. **Medium of Exchange** - Money must be widely accepted by everyone in a country as payment for goods and services. This universal acceptance is what makes it functional.
5. **Unit of Account** - Money acts as a common, standard way to calculate the total value of a country's consumer goods, products, and services. For instance, if a book costs Rs.50, it means its value is equal to 50 units of money. Money helps measure and record all financial dealings in an economy, allowing for clear comparisons.
6. **Store of Value** - Money can be saved and kept for future use because it generally maintains its purchasing power. This means you can save money today and use it to buy things later. It can also be used to finance payments that are due in the future. For example, if you sell goods on credit, you expect to receive money later.
In simple words: Money has many jobs. It helps us buy and sell things easily (medium of exchange), measures how much things are worth (unit of account), keeps its value so we can save it (store of value), and helps us pay for things later (standard of deferred payments). Money makes the economy run smoothly.

🎯 Exam Tip: Clearly list and explain the four main functions of money: medium of exchange, unit of account, store of value, and standard of deferred payments, providing a simple example for each.

VI. Write the correct statement

 

Question (a)
1. The barter system flourished wherever civilizations thrived.
2. This was the initial form of trade.
(i) 1 is correct; 2 is wrong
(ii) Both 1 and 2 are correct
(iii) Both 1 and 2 are wrong
(iv) 1 is wrong; 2 is correct
Answer: (iv) 1 is wrong; 2 is correct
In simple words: The barter system was a basic way of trading, but it did not make civilizations 'flourish' everywhere because it had many problems. However, it was definitely the very first method of trade used by humans.

🎯 Exam Tip: Understand the limitations of the barter system, especially its inefficiency, which prevents it from being a system that helps civilizations 'flourish' in a complex economy, while still recognizing its historical significance as the earliest form of trade.

 

Question (b)
1. Most of the international trade transactions are carried out in US dollars.
2. No other country except the US carries out trade in the world.
(i) Both the statements are correct.
(ii) Both the statements are wrong.
(iii) 1 is correct; 2 is wrong
(iv) 1 is wrong; 2 is correct
Answer: (iii) 1 is correct; 2 is wrong
In simple words: It is true that most international trade uses US Dollars because it is a stable and widely accepted currency. However, it is not true that only the US trades. Many countries all over the world trade with each other.

🎯 Exam Tip: Differentiate between the US Dollar's role as a primary international trade currency and the global nature of trade, which involves many countries.

VII. Project and Activity

 

Question 1. Visit a local museum and collect information about the coins displayed there.
Answer: This is an activity designed for students to perform themselves. Students should visit a nearby museum that displays old coins, observe the different types, materials, and historical periods they represent, and gather information about them. This hands-on experience helps them understand the evolution of currency.
In simple words: This is a project for students to do. They need to go to a museum, look at old coins, and learn facts about them.

🎯 Exam Tip: For activity-based questions, encourage students to explore local resources and engage in direct observation and research.

 

Question 2. Imagine you are going abroad for a Post Graduation course in architecture. Write a letter to the Branch Manager regarding an education loan.
Answer:
Date: 12th June 20XX

From
[Your Name]
[Your Address]
[Your Phone Number]
[Your Email]

To
The Branch Manager,
State Bank of India, [Bank Branch Address],
[City] – 600 XXX

Sir,

Sub: Request to sanction Educational Loan

I am writing to you with a request for an educational loan. I have successfully completed my B.Arch. degree from Anna University. I have applied for and received admission for a Post-Graduation course in Architecture, specifically an M. Arch program, at Kingston University in Australia. While I have secured admission, the total cost of the studies is quite high. Therefore, I kindly request you to sanction an educational loan of Rs.8 lakhs.

I am an existing account holder at your bank, with SB Account No. [xxxx xxxx xxxxx]. I would be very grateful if you would consider my application favorably and approve the educational loan. I look forward to your positive response.

Thanking you.
Yours faithfully,
[Your Signature]
[Your Typed Name]
In simple words: This is a letter asking a bank for a loan to study abroad. It tells the bank about the student's degree, the course they want to study, the university, and how much money they need. It also mentions they are already a customer of the bank.

🎯 Exam Tip: Ensure your letter is formal, clearly states the purpose (education loan), provides necessary details like admission, course, university, and loan amount, and maintains a polite tone.

VIII. Life Skills

 

Question 1. Observe a 20 rupee note. What is written on it?
Answer: The following important lines and details are written on a 20 rupee note, in both Hindi and English: 'Reserve Bank of India', 'Guaranteed by the Central Government', 'I promise to pay the bearer the sum of twenty rupees', and the signature of the 'Governor'. These details confirm the note's authenticity and value.
In simple words: On a 20 rupee note, it says "Reserve Bank of India". It also has a promise from the government to pay 20 rupees to the person holding the note, signed by the Governor.

🎯 Exam Tip: Pay attention to the specific text and features on currency notes, as they are crucial for understanding their legal tender status and origin.

 

Question 2. Prepare a family budget for a month.
Answer: This is an activity for students to complete on their own, based on a hypothetical or actual monthly family income. Students should create a detailed budget that includes various income sources and expenditure categories such as housing, food, transport, education, savings, and discretionary spending. This exercise helps develop practical financial management skills.
In simple words: This is a student activity. You need to make a plan for how a family earns money and how they spend it for one month.

🎯 Exam Tip: For budget-related questions, encourage students to categorize income and expenses clearly and consider both fixed and variable costs for a realistic plan.

Intext HOTS

 

Question 1. How important is foreign exchange to one's country?
Answer: The foreign exchange market is an essential part of the broader money market within financial centers. It brings together buyers and sellers of claims on foreign currency, along with intermediaries, to form a functional foreign exchange market. This market is global and not restricted to any single country or geographical region, making it critical for international economic relations.

There are many different types of dealers in the foreign exchange market. Banks that deal in foreign exchange have branches and correspondent relationships in various countries, maintaining substantial balances there. Through these global branches and partners, the services of such banks, often called "Exchange Banks," are available worldwide. Foreign exchange enables a country to trade with others, manage its balance of payments, and stabilize its currency value, all of which are vital for economic prosperity.
In simple words: Foreign exchange is very important for a country because it lets that country trade with other countries. It helps businesses buy and sell goods globally and allows people to travel. It is a big market where different countries' money is exchanged.

🎯 Exam Tip: Emphasize that foreign exchange facilitates international trade, investment, and travel, and that banks play a crucial role as intermediaries in this global market.

Samacheer Kalvi 9th Social Science Money and Credit Additional Important Questions and Answers

I. Choose the correct answer

 

Question 1. Barter system involved the exchange of ______ (Goods/Money)
(a) Goods
(b) Money
Answer: (a) Goods
In simple words: The barter system was a way of trading where people directly exchanged goods or services for other goods or services, without using money.

🎯 Exam Tip: Remember that barter is a direct exchange of physical goods or services, distinguishing it from monetary transactions.

 

Question 2. NFC was introduced in Britain in the year ______ (2016/2008)
(a) 2016
(b) 2008
Answer: (a) 2016
In simple words: Near Field Communication (NFC) technology, which allows for contactless payments, was first introduced in Britain in 2016. This was a step forward for digital transactions.

🎯 Exam Tip: For technology-related questions, note down the specific year and location of introduction for new advancements like NFC.

 

Question 3. The Chinese made coins out of ______ (Bronze/Copper)
(a) Bronze
(b) Copper
Answer: (a) Bronze
In simple words: In ancient China, people used bronze to make coins. This metal was readily available and durable enough for currency.

🎯 Exam Tip: Be precise about the materials used in historical currency, especially for specific civilizations like the Chinese.

 

Question 4. In 1999 mobile banks were used in ______ (USA/Europe)
(a) USA
(b) Europe
Answer: (b) Europe
In simple words: Mobile banking, which allows people to do banking on their phones, started being used in Europe in 1999. This showed early adoption of digital banking.

🎯 Exam Tip: Note the early adoption regions for financial technologies to understand the global spread of innovation.

 

Question 5. In educational loans the ______
(a) Student
(b) Teacher
Answer: (a) Student
In simple words: When it comes to educational loans, the student who is getting the education is usually the main person responsible for the loan. They are the primary borrower.

🎯 Exam Tip: Understand that for educational loans, the student is typically identified as the main borrower, although co-applicants may be involved.

 

Question 6. One rupee and two rupee notes were first printed in India in the year ______ (1917/1927)
(a) 1917
(b) 1927
Answer: (a) 1917
In simple words: The first one rupee and two rupee currency notes in India were printed in 1917. This marked an important point in India's currency history.

🎯 Exam Tip: Remember significant dates in the history of Indian currency, such as the introduction of specific denomination notes.

 

Question 7. Security Printing and Minting Corporation of India Ltd. was started in ______ (Mumbai/Dewas)
(a) Mumbai
(b) Dewas
Answer: (b) Dewas
In simple words: The Security Printing and Minting Corporation of India Ltd., which is responsible for printing currency and minting coins, started one of its operations in Dewas. This is a key location for India's currency production.

🎯 Exam Tip: Familiarize yourself with the locations of India's currency printing presses and mints, as they are essential for the country's financial infrastructure.

II. Fill in the blanks

 

Question 1. Exchange of goods means ______
Answer: Barter
In simple words: Exchanging goods directly for other goods, without using money, is called barter. It's the simplest form of trade.

🎯 Exam Tip: Understand that "exchange of goods" directly points to the definition of barter system.

 

Question 2. Countries bordering the Indian ocean used ______
Answer: Shells
In simple words: Countries near the Indian Ocean often used shells as a form of money in the past. These shells were valuable in their trade networks.

🎯 Exam Tip: Note the unique forms of currency used in specific geographical regions or historical periods, such as shells in Indian Ocean trade.

 

Question 3. Paper money spread to Europe through the travels of ______
Answer: Marco Polo
In simple words: The idea of using paper money, which was common in Asia, became known in Europe after the travels of Marco Polo. He brought back stories of this new type of currency.

🎯 Exam Tip: Recall the historical figures who played a role in the transmission of economic ideas or innovations between continents.

 

Question 4. A gold plated coin called the ______ was introduced in Europe
Answer: Florin
In simple words: In Europe, a gold-plated coin known as the Florin was introduced. This coin was significant in medieval European trade.

🎯 Exam Tip: Learn about specific historical currencies and their names, especially those that were prominent in significant trade regions.

 

Question 5. The Credit card was invented by ______
Answer: John Biggins
In simple words: John Biggins is credited with inventing the credit card. This invention changed how people bought things, allowing them to pay later.

🎯 Exam Tip: Remember the key individuals associated with significant inventions in financial history, like the credit card.

 

Question 6. In 2016 NFC got introduced in ______
Answer: India
In simple words: Near Field Communication (NFC) technology, used for contactless payments, was introduced in India in 2016. This made digital payments more convenient for many.

🎯 Exam Tip: Keep track of the timeline for the adoption of new financial technologies in India, such as NFC.

 

Question 7. All the major and important banks were nationalised in India in ______
Answer: 1969
In simple words: In 1969, the Indian government took control of all the big and important banks. This process is called nationalization, and it aimed to help the government guide the country's economy better.

🎯 Exam Tip: The nationalization of major banks in India in 1969 is a crucial event in its economic history; remember this date.

 

Question 8. There is no security required for the loan amount upto ______
Answer: Rs.4 lakhs
In simple words: For educational loans up to Rs.4 lakhs, students do not need to provide any property or other assets as security. This helps more students access funds for education.

🎯 Exam Tip: Note the specific limit for collateral-free educational loans, as this detail is important for financial literacy.

 

Question 9. The relationship between money and price is connected with the ______ policy
Answer: Monetary
In simple words: How much money is available and how much things cost are linked through a country's monetary policy. This policy is set by central banks to control the economy.

🎯 Exam Tip: Understand that monetary policy, controlled by the central bank, is the primary tool for managing the relationship between money supply and inflation (prices).

 

Question 10. Trades and small entrepreneurs need ______ for their needs
Answer: Credit
In simple words: Small business owners and traders often need credit, or borrowed money, to buy supplies, grow their businesses, and manage their daily needs. This helps them operate.

🎯 Exam Tip: Recognize the importance of credit for small businesses and entrepreneurs to facilitate their growth and operational needs.

 

Question 11. When the metal supply got limited ______ currency was introduced
Answer: Paper
In simple words: When there wasn't enough metal to make coins, paper currency was introduced. Paper money was a practical solution to continue trade when precious metals were scarce.

🎯 Exam Tip: Understand that the scarcity of precious metals was a key driver for the introduction and widespread adoption of paper currency.

 

Question 12. The medium of exchange in a country is ______
Answer: currency
In simple words: The main way people buy and sell things in a country is through its currency. This could be coins or paper money.

🎯 Exam Tip: The term "medium of exchange" refers directly to money or currency, as it is the universally accepted item for transactions.

III. Match the following

 

Question 1. European union – (i) Pound
2. England – (ii) Ringgit
3. China – (iii) Dollar
4. Malaysia – (iv) Euro
5. Australia – (v) Yuan
Answer:
1. - (iv) Euro
2. - (i) Pound
3. - (v) Yuan
4. - (ii) Ringgit
5. - (iii) Dollar
In simple words: This exercise matches countries or regions with their correct currencies. For example, the European Union uses the Euro, England uses the Pound, and China uses the Yuan. This helps us learn about different types of money around the world.

🎯 Exam Tip: Practice associating countries or economic blocs with their respective currencies to improve your global economic knowledge.

IV. Give short answers

 

Question 1. What is ATM?
Answer:
1. ATM stands for Automated Teller Machine. It is an electronic device that allows bank customers to perform basic transactions without needing to interact with a human teller.
2. With the help of an ATM debit card, people can easily withdraw the money they need at any time from ATMs located almost everywhere. It provides convenient access to cash. ATMs have made banking services available 24/7.
In simple words: ATM means Automated Teller Machine. It's a machine where you can use your bank card to take out money whenever you need it, without going inside a bank.

🎯 Exam Tip: Define ATM by its full form and main function, emphasizing its role in providing convenient access to banking services.

 

Question 2. How is the major portion of the savings in banks used?
Answer: A large part of the money that people save in banks is used for important economic activities. These savings are channeled into developing industries, fostering overall economic growth, and funding various development schemes. These initiatives are designed to improve the welfare and living standards of the poor and the population as a whole. Banks play a crucial role in converting individual savings into productive investments for the country.
In simple words: Most of the money saved in banks is used to help industries grow, improve the economy, and fund projects that help poor people. Banks take small savings and use them for big development plans.

🎯 Exam Tip: Explain that banks act as intermediaries, using savings to fuel economic development, industrial growth, and social welfare programs.

 

Question 3. What phenomenon increased the importance of the market and money?
Answer:
1. The shift towards growing crops and producing goods on a commercial basis, rather than just for basic survival (subsistence level), significantly increased the importance of the market.
2. This shift meant that people produced more than they needed and wanted to sell the surplus, which in turn required a more efficient system of exchange. This phenomenon made markets more central to economic life and greatly increased the importance of money as the primary medium of exchange. Money simplified transactions and allowed for larger-scale trade.
In simple words: When people started growing more food and making more things to sell, instead of just for their own use, it made markets and money much more important. Money helped them trade and sell extra goods easily.

🎯 Exam Tip: Connect the rise in commercial production and surplus goods to the increased necessity and importance of markets and money as a medium of exchange.

 

Question 4. What type of currency notes was available till 1947?
Answer:
1. Until India gained independence in 1947, the currency notes that were in circulation featured the image of King George VI. These notes were issued by the British colonial administration.
2. After India became independent, the Government of India began issuing its own currency notes with new designs, reflecting the sovereignty of the new nation. This marked a significant change in India's monetary system.
In simple words: Before 1947, Indian money notes had a picture of King George VI, as India was ruled by the British. After 1947, India started printing its own money.

🎯 Exam Tip: Remember that pre-independence Indian currency featured British monarchs, and post-independence currency reflected national sovereignty.

 

Question 5. Why do we say that money, a store of value?
Answer:
1. Money is considered a "store of value" because it holds its purchasing power over time. This means that if you save money today, you can use it to buy goods and services in the future without it losing all its worth. It allows people to defer consumption.
2. It can also be used to make future payments, such as paying back a loan or buying something on credit. This characteristic makes money a reliable asset for saving and investment. However, inflation can erode the real value of money over time.
In simple words: We say money is a "store of value" because you can save it today and it will still be worth something to buy things later. It keeps its value over time, so you can use it for payments in the future too.

🎯 Exam Tip: Explain "store of value" as money's ability to retain purchasing power over time, allowing for saving and future transactions, while also briefly acknowledging inflation's impact.

 

Question 6. What is meant by SHG?
Answer: SHG stands for Self Help Groups. These are groups of people, typically from similar socio-economic backgrounds, who live in a particular area or are involved in the same type of work. They come together to regularly save small amounts of money and provide loans to each other at reasonable interest rates. SHGs help members improve their financial situation and gain independence through collective effort.
In simple words: SHG means Self Help Group. It's a group of people, often from the same area, who save money together and lend it to each other. They help each other financially.

🎯 Exam Tip: Define SHG by its full form and core function: a group saving money together to provide mutual financial support and access to credit.

V. Answer in detail

 

Question 1. What are educational loans?
Answer:
1. Educational loans are financial assistance designed to help students achieve their academic goals and fulfill their educational aspirations.
2. The student pursuing the course is considered the main borrower, responsible for repaying the loan.
3. Parents, spouses, or siblings can often act as co-applicants for the loan, providing additional security and support.
4. These loans are available for students who wish to pursue higher education, whether it is within India or in a foreign country.
5. Educational loans can be taken for various types of courses, including full-time programs, part-time studies, vocational courses, and higher degrees like Graduation or Post-Graduation.
6. For loan amounts up to Rs.4 lakhs, generally no security or collateral is required, making it easier for many students to access funds.
7. The loan repayment typically begins after the student completes their course and secures employment, allowing them time to start earning.
8. In India, students can also apply for these loans through the "Vidya Lakshmi Portal Education Loan Scheme," a government initiative to streamline the application process. Educational loans are a vital tool for making higher education accessible to a wider population.
In simple words: Educational loans are special money given by banks to students to pay for their studies. The student is the main person who has to pay it back, usually after they get a job. These loans help students study in India or abroad for different types of courses.

🎯 Exam Tip: When defining educational loans, include who can apply, what types of courses they cover, security requirements, and repayment terms, as well as any relevant government initiatives.

 

Question 2. Explain the relationship between Money and Price.
Answer: The way money works and how prices are set is closely linked to a country's monetary policy. When there is more money in circulation, it can lead to higher prices, which is called inflation. The Reserve Bank of India (RBI) plays a key role in controlling prices and keeping the economy stable. Money acts as a way to exchange goods and services. For India, this is the Indian Rupee (INR). Different countries have their own currencies, known as foreign exchange. The buying power of currencies around the world is often compared using the US dollar as a standard. This value changes from one country to another. Most big international trades also happen using the US dollar.
In simple words: How much money is available directly affects prices and inflation. The central bank (RBI) controls this to keep the economy stable. Money is for buying things, and its value helps compare economies globally.

🎯 Exam Tip: When discussing money and price, remember to link it to monetary policy, inflation, and the role of the central bank (RBI in India) for a comprehensive answer.

 

Question 3. How is currency printed in India?
Answer: The printing of currency in India has a historical background. In 1925, the British government set up a currency press in Nasik, Maharashtra. New currencies started being printed three years later. Later, in 1974, another press began operations in Dewas, Madhya Pradesh. By the 1990s, two more printing presses were added in Mysuru, Karnataka, and Salboni, West Bengal, to print banknotes. The Reserve Bank of India (RBI) is responsible for deciding the value of the currency to be printed and making sure it reaches its destination safely. While the RBI has the power to print notes up to Rs.10,000, the highest value note currently printed and in circulation is Rs.2,000.
In simple words: Money in India is printed at special places like Nasik and Dewas. The RBI decides how much money to print and makes sure it gets to banks safely.

🎯 Exam Tip: Remember the four main locations of currency presses and highlight the RBI's authority in currency management for a complete answer.

 

Question 4. Write a note on credit.
Answer: Credit is money or a loan given with a promise of future payment. It is very important for many people and businesses.
1. Farmers often take credit during monsoon season to buy seeds, other farming supplies, and cover their expenses.
2. Small traders and entrepreneurs also need credit to meet their business needs.
3. Even large industries use credit to fund new big projects.
4. Credit is available from different sources:

• Formal financial institutions like nationalised banks, private banks, and co-operative banks.
• Informal financial institutions, which are often local lenders or money lenders.
• Micro-credit, which is small loans given through Self Help Groups (SHG).

5. Nationalised and co-operative banks usually offer credit with lower interest rates and provide a guarantee for the items kept as security. It's crucial to understand the terms and conditions before taking any credit to avoid debt traps.
In simple words: Credit is like a loan you get now and pay back later. Farmers, small business owners, and big companies all use it. You can get credit from banks or other groups, and it helps people do things they couldn't afford otherwise.

🎯 Exam Tip: When explaining credit, mention its diverse uses across different economic groups and distinguish between formal and informal sources of credit.

 

Question 5. What is an informal financial institution?
Answer: Informal financial institutions are places or people that lend money without following strict bank rules. They are easy for customers to approach and have very flexible ways of working. However, they also come with problems like the safety of items pledged as security, very high interest rates, and often harsh ways of getting the money back. To help these groups, nationalised banks sometimes offer micro-credit. This credit is given through Self Help Groups (SHG) and is especially helpful for street vendors, fishermen, and women who are poor. In Tamil Nadu, there are many bank branches, with 10,612 branches across the state, which makes formal banking more accessible.
In simple words: Informal financial institutions are lenders that are easy to get money from, but they might charge high interest and have risks. Banks try to help by offering small loans (micro-credit) through groups like SHGs.

🎯 Exam Tip: Highlight both the accessibility and the potential risks (high interest, safety of collateral) associated with informal financial institutions in your answer.

 

Question 6. Why is foreign exchange important?
Answer: Foreign exchange is very important because it allows countries to trade with each other. Without the ability to trade in different currencies, companies would find it very hard to do business internationally, which would hurt global economic growth. Investors use the foreign exchange (forex) market to buy and sell foreign assets and securities, which helps them spread their investments across different countries. Having a good amount of foreign exchange reserves increases confidence in a government's economic and currency policies. These reserves are also very helpful during financial crises, as they can save a country from major distress. Essentially, the foreign exchange market is the system that enables money to move and be used for purchases between different countries.
In simple words: Foreign exchange is key for global trade and helps countries deal with financial problems. It allows businesses to buy and sell goods and services across borders and helps keep the economy stable.

🎯 Exam Tip: Focus on the core functions of foreign exchange: enabling international trade, providing economic stability through reserves, and facilitating global investment.

 

VI. Write the correct statement

 

Question 1. 1. Mobile banking is not used.
2. Pepper and Spices took a major share of exports.
(i) Both 1 and 2 are correct
(ii) Both 1 and 2 are wrong
(iii) 1 is correct, 2 is wrong
(iv) 1 is wrong, 2 is correct
Answer: (iv) 1 is wrong, 2 is correct
In simple words: Mobile banking is actually used a lot, so statement 1 is false. Historically, pepper and spices were indeed very important exports for trade, making statement 2 true.

🎯 Exam Tip: Always evaluate each statement separately for its truthfulness based on general knowledge or context provided in the chapter before selecting the combined option.

 

Question 2. 1. Reserve Bank of India was permanently moved to Mumbai from 1935
2. Gold, silver and copper were called ancient money.
(i) Both 1 and 2 are correct
(ii) 1 is correct, 2 is wrong
(iii) 1 is wrong, 2 is correct
(iv) Both 1 and 2 are wrong
Answer: (iii) 1 is wrong, 2 is correct
In simple words: The Reserve Bank of India (RBI) moved to Mumbai in 1937, not 1935, so the first statement is wrong. Gold, silver, and copper were indeed some of the earliest forms of money used, making the second statement correct.

🎯 Exam Tip: Pay close attention to dates and specific facts. Even a small detail like a year can change whether a statement is correct or incorrect.