money and credit

money and credit

Open Ended

Your answer

Multiple Choice

Read the information given below and select the correct option –

Varma is an farmer. 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. Varma repays the money by working physically for the landowner on his farmland. Over the years his debt will

• A- Remain constant - as he is working for the employer but is repaying less

• B. Reduce - as amount equivalent to his salary is being counted as monthly repayment

• C. Be totally repaid - as he is repaying the debt in the form of physical labour

• D-Increase - because of increasing interest and non-payment of monthly amount -

Multiple Choice

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.

• A - Both A and R are true and R is the correct explanation of A.

• B - Both A and R are true but R is NOT the correct explanation of A.

• C - A is true but R is false.

• D. Both assertion and reason are false.

Multiple Choice

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.

• A - Both A and R are true and R is the correct explanation of A.

• b - Both assertion and reason are true, but reason is not the correct explanation of assertion.

• C - A is true but R is false.

• D - A is false but R is true.

Multiple Select

Choose the incorrect statements about Banks.

• i. it save people from the exploitation of formal sector

• ii. It charge a low interest on loans.

• iii. It saves from debt.

• iv. It provides cheap and affordable credit.

• v. RBI supervises the banks through various rules and regulations.

Multiple Choice

Most of the agricultural labourers like Varma depend upon loans from informal sector. Which of the following statements about this sector is correct –

• A Cost of informal loans to the borrower is quite high -

• B. There are govt. bodies to supervise informal sector

• C. Money lenders ask for a reasonable rate of interest

• D. Money lenders use fair means to get their money back

Multiple Choice

Which one of the following options describe ‘Collateral’?

• A. Asset as guarantee for loan

• B. Double coincidence of wants

• C. Certain products for barter

• D. Trade in barter

Multiple Choice

Find the Incorrect option

• A. Demand deposit share the essential features of money

• B. Demand deposit facility is like cheque

• C. With demand deposit payments can be made without cash

• D. Demand deposits are safe way of money transformation

Multiple Choice

Sithara has taken a loan of Rs.16 lakhs from the bank to purchase a car. The annual interest rate on the loan is 19.5 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 Sithara 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

Open Ended

Do you think do banks and cooperative societies need to lend more? Why?

Open Ended

Why is money called a medium of exchange? 1 mark

Open Ended

Why do banks ask for collateral while giving loans? 1 mark

Open Ended

Why are formal sources of credit preferred over the informal source of credit? Give three reasons.(3)

Open Ended

Why is credit a crucial element in the economic development? 3