Economics- Money and Credit
Very Short Answer Type Questions
Q.1) What is barter?
Ans) Getting or exchanging one thing for another is called barter.
Q.2) What is money?
Ans) A commodity that is used to buy goods and services and accepted to pay off debts is called currency.
Q.3) What is the main difference between banking and non-banking financial companies?
Ans) Banks create intermediate credit. They take deposits from the public and lend the rest of the money, keeping the reserve ratio at a fixed rate. While non-banking finance companies do not create credit. It only creates liquidity.
Q.4) Manav needs a loan to set up a small business. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss.
Ans) If Manav has any property to mortgage then he can take a loan from the bank. On the other hand, if Manav wants a loan at a low rate of intèrest then he should take a loan from the bank not from the moneylender. If he wants a loan for a short period, then he should take the loan form the moneylender and if he wants loan for a long period then it would be better for him to take from the bank.
Q.5) Analyse the role of credit for development. Or
Write the role of loan for development.
Ans) The role of loan for development is extremely important. The working capital requirement for production is met through loans. The loan helps a person to meet the ongoing expenses of production, complete production on time, and thereby increase his earnings. Loan therefore plays a vital and positive role in this situation.
Q.6) What are the other sources from where small farmers can take loans?
Ans) Informal lenders include moneylenders, merchants, owners, relatives, friends etc.
Q.7) When and how was demonetisation done in India?
Ans) In November 2016, the currency notes of 500 and 1000 rupees were declared invalid in India. People were asked to deposit these notes in banks within a certain period and receive new notes of 500 and 2000 rupees in return. This is called demonetisation.
Q.8) How is payment done by cheque ? or
What do you mean by ‘cheque’?
Ans) For payment through cheque, the payer who has an account with the bank, makes out a cheque for a specific amount. A cheque is a paper instructing the bank to pay a specific amount from the person’s account to the person in whose name the cheque has been issued.
Q.9) Why do lenders ask for collateral (Security) while lending?
Ans) Lenders ask for Collateral (security) while lending, to guarantee the repayment of the loan. If the loan holder fails to pay back the loan amount, the collateral is responsible for repaying that amount. This is a security measure for the lenders.
Q.10) Write formal sector of loan and informal sector of loan sources.
Ans) Different types of loans can be divided into two categories-Formal sector 2) R and informal sector. The formal sector includes loans to banks and co-operative societies. The informal sector includes moneylenders, traders, owners, relatives and friends.