Class 10 Social Part 3 (B) Economics Chapter 1 Money and Banking System
Are you looking for SEBA Class 10 Social Part 3 (B) Economics Chapter 1 Money and Banking System? You have come to the right place. This article provides complete notes, textbook solutions, important questions and answers, and exam-oriented study materials for Class 10 students.
This chapter explains the concept of money, its functions, importance, and evolution from the barter system to modern forms of currency. Students will learn about the banking system, different types of banks, their functions, and the role of banks in economic development. The chapter also discusses deposits, loans, credit creation, digital banking, and the importance of financial institutions in facilitating trade and economic activities.
All notes and solutions are written in simple and easy-to-understand English, helping students learn the concepts quickly and prepare effectively for examinations. These study materials are highly useful for revision, class tests, annual examinations, and the HSLC board examination.
Part-III (B) Economics
Money and Banking System
Selected Questions &Answers
Very Short Answer Type Questions (Mark-1)
1. What is the name of the central bank of India?
Ans: Reserve Bank of India.
2. Where is the head office of NABARD?
Ans: In Mumbai.
3. What is the full form of NABARD?
Ans: National Bank for Agriculture and Rural Development.
4. What is bank deposit?
Ans: The credit money created by commercial banks through accepting cash deposits and providing loans is called ‘bank deposit’.
5. Which is the oldest central bank in the world? HSLC ’18
Ans: Sveriges Riksbank (Central Bank of Sweden).
6. Which bank was established in India in 1770? HSLC ’17
Ans: Bank of Hindustan.
7. What is the name of the Government’s bank of India? HSLC ’15
Ans: Reserve Bank of India.
8. What is the barter system? HSLC ’22
Ans: The barter system refers to the direct exchange of one commodity for another commodity.
9. What was the first stage in the evolution of money?
Ans: Barter system.
10. What is real money?
Ans: The money that is in circulation among the public and is accepted by all people is called ‘real money’.
11. What is metallic money?
Ans: The money made by giving a particular shape and stamp to a metal and circulated as money is called ‘metallic money’.
12. What is national money?
Ans: Metallic or paper money is called national money.
13. What is token money?
Ans: The money whose face value is greater than its intrinsic or metallic value is called ‘token money’.
14. What is the name of the oldest bank?
Ans: Riksbank of Sweden.
15. What is money?
Ans: According to economist Geoffrey Crowther, “Anything that is generally acceptable as a medium of exchange and at the same time serves as a measure of value and a store of value is called money.”
16. Mention one main function of money.
Ans: Money functions as a common measure of value of goods.
17. Give one example of fiduciary money.
Ans: Bank draft or cheque.
18. What is representative paper money?
Ans: Earlier, paper money could be converted into an equivalent amount of gold or silver. Such paper money is called ‘representative paper money’.
19. What is a bank? HSLC ’22
Ans: A bank is a type of financial institution that deals in lending.
20. In which year was the Reserve Bank of India established?
Ans: In the year 1935.
21. Cheque is an example of fiduciary money. (Write correct or incorrect) HSLC ’23
Ans: Correct
Short Answer Type Questions (Marks-2)
1. Mention two disadvantages associated with money. HSLC ’18
Ans: Two disadvantages associated with money are: (a) Due to people’sexcessive attachment to money, social values may deteriorate. Through money, people may engage in corruption, irregularities, and injustice. (b) Corruption caused by money leads to the creation of black money, which in turn creates social inequality.
2. Is a cheque money? Justify your answer. HSLC ’20
Ans: A cheque is not money. It is merely an order for the payment of money. This is because a cheque does not have general acceptability. If a person refuses to accept a cheque, no legal action can be taken against them. Therefore, a cheque is not money. It is called a bank order or near money.
3. What is the liquidity of money?
Ans: The property by which money can be immediately and directly converted into goods and services of equal value is called the ‘liquidity of money’.
4. Explain how money is a common measure of value of goods.
Ans: Through money, the value of all goods and services is determined. The amount of money required to purchase a commodity is called its ‘price’. Therefore, money acts as a common measure of value of goods.
5. What is the difference between limited legal tender and unlimited legal tender money?
Ans: The money with which only transactions up to a limited value can be settled is called ‘limited legal tender money’. On the other hand, money that can be used for transactions of unlimited value is called unlimited legal tender money. For example: cheque money.
6. What functions are performed by Regional Rural Banks? HSLC ’17
Ans: The two main functions performed by Regional Rural Banks are:
(a) To collect rural savings and invest them in various productive activities.
(b) To provide loans at low interest rates to rural farmers, thereby relieving them from borrowing at high interest from traders and moneylenders.
7. In what way are non-banking institutions different?
Ans: In non-banking financial institutions, transactions cannot be carried out through cheques. This feature distinguishes them from banking institutions.
8. Which feature of money is the most important and why?
Ans: The most important feature of money is its general acceptability. Without this feature, money cannot function as a medium of exchange.
Essay-type Question-Answers
1. Explain any four main characteristics of money.
Ans: The four main characteristics of money are:
(a) General acceptability: Money must be acceptable to all; otherwise, it cannot function as a medium of exchange.
(b) Recognizability: Money should be easily recognizable and distinguishable from other goods. If it is not easily identifiable, complications may arise in buying and selling.
(c) Durability: Money should not be perishable. Goods like fish, eggs, milk, vegetables, etc. cannot serve as money because they cannot be stored for a long time.
(d) Homogeneity: Money should be uniform or identical in nature; that is, units of the same denomination should be alike in shape and form.
2. Explain four disadvantages of the barter system. HSLC ’22
Ans: The disadvantages of the barter system are:
(1) Difficulty in determining value: There is no common unit of value to measure different goods. Hence, expressing all goods in a single standard becomes impossible.
(2) Lack of divisibility: Indivisible goods create problems in exchange. For example, it is difficult to determine how much rice should be exchanged for a cow, as a cow cannot be divided according to the quantity of rice.
(3) Lack of double coincidence of wants: For barter to work, the wants of two persons must coincide. For example, if one person wants rice in exchange for cloth and another wants cloth in exchange for rice, it works. But if theowner of cloth wants mustard oil instead of rice, then there is no mutual coincidence of wants.
(4) Lack of store of value: Goods exchanged in barter cannot be stored for a long time. There is no facility for saving wealth. In contrast, money can be stored, does not perish like goods, and can be deposited in banks and withdrawn when needed to purchase goods.
3. Explain four main functions of money.
Ans: The main functions of money are discussed below:
(1) Medium of exchange: Money is used as a medium for exchanging goods and services. Buyers and sellers complete transactions in the market through money.
(2) Measure of value: Money acts as a measure of value. The value of all goods and services is expressed in terms of money.
(3) Store of value: People save a part of their income, and money facilitates this saving because it is durable and easy to store.
(4) Standard of deferred payments: Money serves as a standard for future payments such as loans and credit transactions.
4. Explain four main disadvantages created by money. HSLC ’15, ’18
Ans: The four disadvantages created by money are:
(a) Excessive attraction towards money may lead to the deterioration of social values. People may engage in corruption, irregularities, and injustice due to greed for money.
(b) Money leads to the creation of black money, which is associated with economic crimes.
(c) Instability in the value of money creates serious problems. If the value of money continuously falls, its purchasing power decreases; if it rises excessively, purchasing power increases.
(d) Money may become a tool for the concentration of wealth and income. A money-oriented economy may lead to the accumulation of economic power and create social inequality.
5. Explain four main functions of the central bank.
Or
Discuss the functions of the Reserve Bank of India. HSLC ’19
Ans: The main functions of the central bank are discussed below:
(1) Issue of paper currency: The central bank has the sole authority to issue paper currency. It follows the minimum reserve system. In India, the Reserve Bank of India issues currency under this system.
(2) Banker’s bank: The central bank acts as a bank for other banks. Commercial banks are required to keep a portion of their deposits with the central bank. It supervises their accounts, provides loans, and settles inter-bank claims and transfers.
(3) Banker to the government: The central bank acts as the banker of the government. It provides financial assistance, gives advice on financial matters, acts as an agent of the government, manages public debt, and maintains accounts of government receipts and expenditures.
(4) Control of credit: The central bank controls the credit system of the country. It uses various control measures to regulate and reduce inflation.
6. Explain the main functions performed by commercial banks.
Ans: The main functions of commercial banks are discussed below:
(1) Collection of savings: Commercial banks accept deposits from the public. They collect money from individuals, institutions, and business organizations and pay interest to depositors.
(2) Provision of loans: Commercial banks lend the money collected from the public at higher interest rates to individuals and business organizations. They generally provide short-term loans but sometimes also long-term loans.
(3) Creation of credit or deposits: Commercial banks create credit or deposits. Deposits are of two types: primary (cash deposits) and secondary(derived deposits). The deposits made by savers are called cash deposits. From these, banks create secondary or derived deposits, which is known as credit creation.
(4) Other functions: Other functions include payment of telephone and electricity bills of depositors, safe custody of valuables and documents, and transfer of money from one place to another.
7. Briefly explain the functions of the following institutions:
(a) IDBI
Or
What is IDBI? When was it established? Mention two main functions. HSLC ’20
Ans: IDBI (Industrial Development Bank of India) was established in 1964. Its main functions are:
(a) To promote the growth of institutions associated with industrial development and to provide financial assistance directly and indirectly in the form of loans to industries.
(b) To provide loans at concessional interest rates to industries in economically backward regions.
(c) To provide assistance to industrial enterprises.
(d) To promote industrial entrepreneurship in underdeveloped districts through training.
(b) National Bank for Agriculture and Rural Development (NABARD)
8. What is NABARD? What are its main functions? HSLC ’20
Or
Mention two functions performed by NABARD. HSLC ’16
Ans: NABARD was established in 1982. Its functions are:
(a) NABARD is the apex institution for all financial institutions related to investment and production in rural areas.
(b) It takes measures to strengthen credit delivery systems, project evaluation, and training.
(c) It maintains coordination with all financial institutions, the Government of India, state governments, and the Reserve Bank of India.
(c) Small Industries Development Bank of India
9. Mention two functions performed by SIDBI.
Ans: The Small Industries Development Bank of India Act was passed in1989, and it came into effect in 1990. Its head office is located in Lucknow. Its main functions are:
(a) To generate employment opportunities in semi-urban areas and prevent migration of people from these areas to cities.
(b) To provide financial assistance to State Financial Corporations, industrial corporations, commercial banks, cooperative banks, and regional rural banks.
(c) To promote modern technology and modernization in small-scale industries.
(d) To arrange marketing facilities for products of the small-scale sector.
Multiple Choice Questions (MCQ)
Q. Where is the head office of SIDBI (Small Industries Development Bank of India) located?
(a) Mumbai
(b) Lucknow
(c) Chennai
(d) Delhi
Ans: (b)
Q. In which year was NABARD established?
(a) 1982
(b) 1983
(c) 1984
(d) 1985
Ans: (a)
Q. Is a cheque money?
(a) Yes
(b) No
(c) Basis of money
(d) None of the above
Ans: (b)
Q. Which of the following banks is the oldest central bank in the world?
(a) Bank of Hindustan
(b) Bank of Sweden (Riksbank)
(c) Reserve Bank of India
(d) Bank of Venice
Ans: (b)
Q. Which of the following is a disadvantage of the barter system?
(a) Lack of agreement
(b) Lack of cooperation
(c) Lack of double coincidence of wants
(d) Lack of understanding
Ans: (c)
Q. What is the name of the central bank of India?
(a) Bank of India
(b) Bank of Hindustan
(c) Central Bank of India
(d) Reserve Bank of India
Ans: (d)
Q. In which year were 14 commercial banks nationalized in India?
(a) 1960
(b) 1977
(c) 1961
(d) 1969
Ans: (d)
Q. Which bank has the sole authority to issue paper currency?
(a) Bank of India
(b) Bank of National
(c) Central Bank
(d) None of the above
Ans: (c)
Q. What is a bank?
(a) An institution for money transactions
(b) A financial institution
(c) A financial institution dealing in lending
(d) None of the above
Ans: (c)
Q. What is another name for monetary contraction?
(a) Inflation
(b) Monetary policy
(c) Deflation
(d) None of the above
Ans: (c)
Q. The real money in circulation in India is—
(a) Token money
(b) Gold coins
(c) Silver coins
(d) Paper currency of various denominations in circulation
Ans: (d)
Q. How many Regional Rural Banks are currently functioning in India?
(a) 56
(b) 57
(c) 58
(d) 59
Ans: (b)
Note: The answer may be outdated. The number of Regional Rural Banks has been reduced (currently around 43 after amalgamation).
Q. A cheque is a bank order or near money.
(a) True
(b) False
(c) Both true and false
(d) None
Ans: (a)
Q. Broadly, how many types of money are there?
(a) 2 types
(b) 3 types
(c) 4 types
(d) 5 types
Ans: (a)
Q. When was the first bank established in India?
(a) 1670
(b) 1770
(c) 1775
(d) 1780
Ans: (b)
Q. What was the name of the bank established in India in 1770?
(a) Bank of Baroda
(b) Bank of India
(c) Bank of Hindustan
(d) Bank of Bharat
Ans: (c)
Q. Which of the following financial institutions was made operational from 1990 in India for modernization, expansion, and marketing of products of the small-scale sector? HSLC ’23
(a) NABARD
(b) Small Industries Development Bank of India
(c) Regional Rural Bank
(d) Small Industries Development Bank of India
Ans: (b)
Q. Where is the head office of NABARD located? HSLC ’24
(a) Kolkata
(b) Mumbai
(c) Chennai
(d) New Delhi
Ans: (b)
