CLASS 10TH SOCIAL SCIENCE (ECONOMICS ) UNIT 3 : MONEY AND CREDIT NOTES 2021 -22

UNIT 3 : MONEY AND CREDIT

I. Fill in the blanks with suitable answers.

1. Barter is exchange of goods for _______. (goods)

2. Cheque is a _______ form of money. (Bank money)

3. The Reserve Bank of India was established in the year ____. (1935)

4. The currency of Japan is _______. (Yen) 5. Government of India nationalized 14 commercial Banks in _______. (1969)

6. Narrow money comprises of _______ and _______. (M1 and M2)

7. Inflation occurs when supply of money is _______ than the availability of goods and services in a country. (more)

II. Answer the following questions in one sentence each:

1.What is money?

 „Money is anything which is widely accepted in payment for goods or in discharge of other business obligations”.

2. What is Barter system ?

 Exchange of goods for goods without the use of money.

3. Give examples for Commodity money.

 cattle in Greece, sheep in Rome, teeth in China

4. Give examples for Metallic money.

 Gold, Silver, Bronze

5. Give examples for Paper money.

 Rupee in India; Dollar in the USA; Pound in England; Euro in Europe; Yen in Japan; Yuan in China

6. Give examples for Bank money.

 Cheques, drafts, deposit (credit) receipts

7. What is “banking”?

 “Accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise withdrawable by cheque, draft, order or otherwise”.

8. Which is the central bank of India?

 Reserve bank of India

9.When was RBI established?

 1st April 1935

10. who issue One Rupee?

 One Rupee is issued and circulated by RBI on behalf of the Central Government.

11.What is M1?

 M1 = currency notes and coins + net demand deposits held in commercial banks

12. What is M2?

 M2 = M1 + Savings deposits with Post Office savings banks

13. What is M3?

 M3 = M1 + Net time deposits of commercial banks

14. What is M4?

 M4 = M3 + Total deposits with Post Office savings banks.

15.What is Open Market Operations ?

 Open market operations is the buying and selling of government securities by the central bank from and to the banks.

16.What is Bank Rate?

 The bank rate is the rate at which the RBI lends funds to banks.

17. What is Cash Reserve Ratio (CRR)?

 The ratio of their deposits, which the banks are required to keep with RBI, is the CRR

18. What is Statutory Liquidity Ratio (SLR)?

 The minimum cash which the banks have to keep with themselves as a ratio of their deposits is the SLR

III. Answer the following questions :

1.What is Barter system?

 Exchange of goods for goods without the use of money is called Barter system

2. Explain the meaning and functions of money.

 „Money is anything which is widely accepted in payment for goods or in discharge of other business obligations”. Functions of money:

 Medium of exchange or means of payment

 Measure of Value

 Standard of deferred payments

 Store of value

 Transfer of value:

3. Explain the functions of RBI.

 Monopoly of Note issue

 Banker to Government

 Bankers‟ bank

 National Clearing House

 Controller of credit

 Custodian of Foreign Exchange Reserves

 Promotion of Banking Habits

4. Explain the various concepts of money supply used in India.

 M1 = currency notes and coins + net demand deposits held in commercial banks;

 M2 = M1 + Savings deposits with Post Office savings banks;

 M3 = M1 + Net time deposits of commercial banks; and

 M4 = M3 + Total deposits with Post Office savings banks

5. Discuss the various credit control methods adopted by RBI. Quantitative Credit Control Measures

 Bank Rate Policy

 Open Market Operations

 Varying Reserve Requirements Qualitative Credit Control Measures

 Change in lending margins  Ceiling on credit or credit rationing

 Moral suasion

 Direct Action

6.Explain the Importance of banks

 Banks play an important role in economic development.

 They mobilize the savings of the public and make these available for investors, thereby helping the process of capital formation.

 Banks provide a convenient way of remittance (transfer) of money through the accounts of the customers.

 Banks offer higher rates of interest on fixed deposits.

 They give loans to the borrowers at lower rates of interest.

 They also discount the bills of exchange.

 They lend money to agriculture, industry and service activities for their development.

 They issue demand drafts, credit cards, debit cards. The banks also invest the funds on securities of the government.

7. Menton the different stages of evolution of money.

 Barter system

 Commodity money

 Metallic money

 Paper money

 Plastic money

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