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NCERT Solutions for Class 10 Economics Social Science Chapter 3 Money and Credit

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NCERT Solutions for Class 10 Economics Social Science Chapter 3 Money and Credit discusses the history of money and how different kinds of money were utilized in various eras, as well as how current forms of money are related to the banking system. Students would undoubtedly benefit from reading NCERT Solutions Class 10 Economics Social Science Chapter 3: Money and Credit. Except for this Chapter. The NCERT Solutions for Class 10 Economics Chapter 3 may provide the correct answers to practice questions from the textbook.

NCERT Solutions Economics Chapter 3

NCERT Solutions Economics Chapter 3

NCERT Solutions for Class 10 Economics Social Science Chapter 3 Money and Credit

The solutions for Chapter 3 Money and Credit are provided below and students can refer to NCERT Solutions for Class 10 for other subjects as well.

Exercises Pages No 52

1. In situations with high risks, credit might create further problems for the borrower. Explain.

Answer-

When someone is already facing high risks, taking on credit can compound their problems. This is because borrowing money adds an additional financial burden in the form of interest and repayment obligations. If the borrower is unable to meet these obligations, it can lead to more financial difficulties and potential consequences such as increased debt, penalties, and a negative impact on their credit score.

2. How does money solve the problem of double coincidence of wants? Explain with an example of your own.

Answer-

Money resolves the problem of double coincidence of wants by providing a universally accepted medium of exchange. Instead of requiring a direct barter between two parties who have exactly what the other wants, money acts as an intermediary. For example, if someone wants to exchange their bicycle for a laptop, they might struggle to find someone who wants to make that exact trade. However, with money, they can sell their bicycle for money and then use that money to buy the laptop from a different seller, eliminating the need for a perfect match of wants between two parties.

3. How do banks mediate between those who have surplus money and those who need money?

Answer-

Banks serve as middlemen between those who have extra money to spare and those who require money. They accomplish this by accepting deposits from individuals and institutions with surplus funds and then providing loans and credit to individuals and businesses in need of financial assistance.

4. Look at a 10 rupee note. What is written on top? Can you explain this statement?

Answer-

On the top of a 10 rupee note in India, you would usually find the inscription “Reserve Bank of India.” This statement signifies that the note has been issued and is backed by the country’s central bank, the Reserve Bank of India. It serves as a mark of authenticity and assures people that the currency holds its value and is recognized as legal tender. In essence, it indicates that the note is a genuine and official form of money regulated by the central banking authority of India.

5. Why do we need to expand formal sources of credit in India?

Answer-

Expanding formal sources of credit in India is crucial for multiple reasons. Firstly, it promotes financial inclusion by providing access to financial services for marginalized groups. Secondly, it fuels economic growth by facilitating investment and job creation. Thirdly, it reduces reliance on costly informal credit sources. Fourthly, it enables individuals and businesses to establish a credit history, improving their future borrowing prospects. Lastly, it ensures regulated lending practices, protecting borrowers and maintaining financial stability in the system. Overall, expanding formal credit channels benefits individuals, businesses, and the economy as a whole.

6. What is the basic idea behind the SHGs for the poor? Explain in your own words.

Answer-

The fundamental concept behind Self-Help Groups (SHGs) for the poor is to empower individuals from economically disadvantaged backgrounds by fostering a sense of collective strength and self-reliance. SHGs bring together a small group of individuals facing similar challenges, typically from the same community, to pool their resources and support each other. They encourage savings, provide access to credit, and offer skill-building opportunities to help members improve their livelihoods. The idea is to uplift the socio-economic status of the poor through mutual cooperation, shared decision-making, and collective economic activities within the group.

7. What are the reasons why banks might not be willing to lend to certain borrowers?

Answer-

Banks may be unwilling to lend to certain borrowers due to reasons such as poor credit history, lack of sufficient income or collateral, unstable industries or markets, unviable business plans, legal or compliance issues, high debt-to-income ratios, and strained relationships with the bank. These factors increase the perceived risks for the bank, making them hesitant to provide loans.

8. In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?

Answer-

The Reserve Bank of India (RBI) supervises the functioning of banks in several ways to ensure their smooth and safe operations. This supervision is necessary for multiple reasons. The RBI oversees banks through on-site inspections, off-site monitoring, and regular reporting requirements. They assess the financial health and compliance of banks with regulations, including capital adequacy, risk management, and governance practices. The RBI sets prudential norms and guidelines for banks, conducts audits, and enforces corrective measures when necessary. They also have the authority to grant or revoke banking licenses, approve major financial transactions, and regulate interest rates. This supervision is crucial to maintain the stability and integrity of the banking system, protect depositors’ interests, mitigate risks, and prevent misconduct. It helps ensure that banks operate in a safe and sound manner, fostering public confidence in the banking sector and contributing to the overall financial well-being of the country.

9. Analyse the role of credit for development.

Answer-

The role of credit in development is significant. It facilitates investment, entrepreneurship, and economic growth by providing individuals and businesses with the necessary funds to expand their activities, invest in infrastructure, and pursue opportunities. Credit plays a crucial role in fostering development by enabling access to capital and promoting productive ventures.

10. 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.

Answer-

When deciding between borrowing from a bank or a moneylender for his small business, Manav will consider several factors. He will compare the interest rates and repayment terms of both options. Banks usually offer lower interest rates and more structured repayment plans. Manav will also assess the loan amount he needs and the ability to meet documentation requirements. He will consider the credibility and reputation of the bank versus the moneylender. Additionally, any additional services provided by the bank, such as business advice or financial planning, will be taken into account. Based on these considerations, Manav will make an informed decision that best suits his business and financial situation.

11. In India, about 80 percent of farmers are small farmers, who need credit for cultivation.

(a) Why might banks be unwilling to lend to small farmers?

Answer-

Banks may be unwilling to lend to small farmers in India due to various reasons. These include the lack of collateral that small farmers can provide, limited credit history, the seasonal and uncertain nature of agriculture, high administrative costs associated with processing small loans, inadequate financial literacy among farmers, and challenges related to infrastructure and documentation in rural areas. These factors make banks cautious about extending credit to small farmers, leading to the limited availability of loans for this crucial group in the agricultural sector.

(b) What are the other sources from which the small farmers can borrow?

Answer-

In addition to banks, small farmers in India have several other options for borrowing funds to support their cultivation activities. These include Regional Rural Banks (RRBs), agricultural cooperatives, microfinance institutions (MFIs), non-banking financial companies (NBFCs), government schemes and programs, and self-help groups (SHGs). RRBs, cooperatives, MFIs, and NBFCs provide tailored credit services to meet the specific needs of small farmers. Government schemes offer financial support and subsidies, while SHGs enable farmers to access credit within their community. These alternative sources complement traditional banks and ensure that small farmers have multiple avenues to access the funds they need for their agricultural practices.

(c) Explain with an example how the terms of credit can be unfavorable for the small farmer.

Answer-

The terms of credit can be unfavorable for small farmers in India, leading to difficulties in accessing and repaying loans. For example, a small farmer may need to borrow funds to purchase seeds and fertilizers for the upcoming farming season. However, the lender, such as a bank or moneylender, may impose high-interest rates on the loan, making it challenging for the farmer to afford the repayment. Additionally, the repayment terms may be inflexible, requiring the farmer to repay the loan within a short timeframe, which can be burdensome considering the uncertainties of agricultural income. Moreover, the lender may demand collateral that the small farmer cannot provide, further limiting their access to credit. These unfavorable terms of credit create obstacles for small farmers, hindering their ability to invest in their agricultural activities and potentially perpetuating a cycle of financial vulnerability.

(d) Suggest some ways by which small farmers can get cheap credit.

Answer-

Small farmers in India can explore various avenues to access cheap credit for their cultivation needs. They can consider joining agricultural cooperatives or self-help groups that offer loans at reasonable interest rates. Additionally, government-sponsored schemes and programs, such as the Kisan Credit Card (KCC) scheme and NABARD loans, provide subsidized credit to small farmers. Collaborating with microfinance institutions (MFIs) that specialize in serving the needs of rural borrowers can also be beneficial. Furthermore, initiatives promoting financial literacy and awareness among small farmers can help them navigate the formal banking sector and negotiate favorable credit terms.

12. Fill in the blanks:

(i) Majority of the credit needs of the _________________households are met from informal sources.

(ii) ___________________costs of borrowing increase the debt-burden.

(iii) __________________ issues currency notes on behalf of the Central Government.

(iv) Banks charge a higher interest rate on loans than what they offer on __________.

(v) _______________ is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.

Answer-

(i) Majority of the credit needs of poor households are met from informal sources.

(ii) High costs of borrowing increase the debt burden.

(iii) Reserve Bank of India issues currency notes on behalf of the Central Government.

(iv) Banks charge a higher interest rate on loans than what they offer on deposits.

(v) Collateral is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.

13. Choose the most appropriate answer.

(i) In a SHG most of the decisions regarding savings and loan activities are taken by

(a) Bank. 
(b) Members. 
(c) Non-government organization

Answer-

(b) Members.

(ii) Formal sources of credit do not include

(a) Banks. 
(b) Cooperatives. 
(c) Employers.

Answer-

(c) Employers.

Important Topics Covered in Chapter

  1. Money as Medium of Exchange and Modern Forms of Money
  2. Loan Activities of Banks
  3. Two Different Credit Situations
  4. Terms of Credit
  5. Formal Sector Credit in India
  6. Self-Help Groups for the Poor

FAQs on NCERT Solutions for Class 10 Economics Social Science Chapter 3 

Q 1. What topics are included in NCERT Solutions for Class 10 Economics Chapter 3?

Answer-

Money and credit are critical components of the economy. Students will study in this chapter that money is a means of transaction among individuals and how credit is dispersed among people in a country. This chapter discusses several ideas such as the Double Coincidence of Wants, Modern Forms of Money, the Barter System, and Credit Situations. All of these topics are taught in simple terms to assist students achieve in the CBSE Term II examinations.

Q 2. Is it necessary to study money and credit in NCERT Solutions for Class 10 Economics Chapter 3?

Answer-

Money is a valuable commodity that is used to pay for products and services. It is a key part of a country’s economy. It is also critical to understand the primary uses of money, which is employed as a medium of trade, a unit of account, a store of value, and occasionally as a deferred payment standard. Learning about the country’s financial condition and credit terms, on the other hand, aids in the country’s growth.

Q 3. Will the NCERT Solutions for Class 10 Economics Chapter 3 help students succeed in the CBSE Term II exams?

Answer-

It is critical that students first grasp the chapter’s principles and essential concepts before proceeding to answer the practise questions. Students will be able to examine the themes on which they need to focus more after answering various sorts of questions. Students will be able to score well in their CBSE Term II examinations if they use these NCERT Solutions.



Last Updated : 02 Aug, 2023
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