RBSE Solutions for Class 10 Social Science Chapter 17 Currency and Financial System

RBSE Solutions for Class 10 Social Science Chapter 17 Currency and Financial System

Rajasthan Board RBSE Class 10 Social Science Solutions Chapter 17 Currency and Financial System

Currency and Financial System Very Short Answer Questions

Question 1.
What is meant by currency?
Answer:
Currency refers to all that thing which has general acceptability and can be exchanged for goods and services.

Question 2.
State the meaning of exchange.
Answer:
Exchange refers to changing of goods and services against any currency.

Question 3.
What do you mean by cheques?
Answer:
Cheque is a banking instrument in writing that contains an unconditional order addressed to a banker to pay on demand a certain sum of money only to or to the bearer of it.

Question 4.
What is the name of Indian currency?
Answer:
Name of Indian currency is Indian national Rupee.

Question 5.
What is the central bank of India?
Answer:
Central bank of India is Reserve bank of India.

Question 6.
What do you mean by saving?
Answer:
Saving refers to excess of income over consumption.

Question 7.
Indian rupee is represented by which sign?
Answer:
India rupee is represented by ?.

Question 8.
Which paper currency was demonetized in 2016 by Indian government?
Answer:
Paper notes of Rs 500 and Rs 1000 was demonetized in 2016 by Indian government.

Question 9.
For which purpose credit is needed? ‘
Answer:
Credit is needed for productive as well as non productive purposes.

Question 10.
Who controls for institutional credit?
Answer:
Institutional credit in India is controlled by government of India or Reserve bank of India.

Question 11.
Who are financial mediators?
Answer:
Financial mediators refer to those institutions or firms which act as a bridge between depositors and creditors. These institutions pool the savings of depositors and gives credit for the purpose of production and consumption.

Currency and Financial System Short Answer Type Questions

Question 1.
What do you mean by barter system?
Answer:
Barter system is a system in which goods and services are exchanged for some other goods or services. It was used when evolution of money didn’t take place. Still in certain remote areas barter system exists.

Question 2.
What were the drawbacks of Barter system?
Answer:
Barter system had many drawbacks because of which it didn’t succeed. Most common are double coincidence of wants, lack of common unit of value, difficulty of future payments and difficulty of storage of value.

Question 3.
Explain money as a measure of value.
Answer:
Money serves as a measure of value. In other words it serves as a unit of account. Unit of account means that the value of each good or services is measured in the monetary unit. With the help of money we can express each unit of goods or services in terms of money. For example: value of a chocolate is Rs 10.

Question 4.
What do you mean by credit?
Answer:
It refers to the total borrowing capacity bank provide to borrowers. It allows borrowers to buy goods or services on a fixed monthly payment for specified period.

Question 5.
What are demand deposits?
Answer:
Demand deposits are the deposits with the banks which can be demanded by the depositors when they require. Deposits with the bank in saving and current account are called as demand deposit.

Question 6.
What were the limitations of metal currency?
Answer:
Metal currency was not easy to transfer. Its cost of minting was high. Rising demand of currency was not possible to meet out.

Question 7.
What do you mean by financial organization? Explain with example.
Answer:
It refers to an institution (public or private) that collects funds from public or other institutions and invest them in financial assets. Commercial banks are the example of financial organization. They accept the deposits from the public and invest them in some financial assets like shares (mutual funds).

Question 8.
What do you mean by local banker? State its three characteristics.
Answer:
It refers to the private firms or individuals which act as a bank. These are the important sources of non institutional sources of credit in India.
Characteristics of local bankers are as follows:

1. They accept the deposits of people.
2. They help in transferring of funds from one place to another.
3. They are not only the banker but are friend and adviser too.

Question 9.
What do you mean by institutional sources of credit? Explain with the help of example.
Answer:
Institutional sources of credit are the organizations which are controlled by government or central bank of the country. Like all commercial, bank, all the commercial banks are operating under Reserve Bank of India and follow the monetary policy laid by RBI. They not only work for profit but also for social betterment.

Question 10.
Explain money lender as a source of credit.
Answer:
Money lenders operate under non-institutional sources of credit. They use their own capital for the purpose of lending. They do not accept deposits from the people. They normally provide personal loans at high interest rates. People who are unable to reach to the bank they approach to money lenders for credit. Money lenders generally lend money against collateral but sometimes they lend on the goodwill of the creditor.

Currency and Financial System Long Answer Type Question

Question 1.
Explain the stages of development of currency.
Answer:
Development of money crossed three stages which are explained as follows:

1. Barter system: It is the first stage of development of money. When money did not exist economy followed barter system. Under which goods and services were exchanges for some other goods and services. But this system had many drawbacks because of which soon this system was dropped out as the economy expanded. Some of the drawbacks were lack of a common unit, lack of deferred payments, store of value etc.

2. Metal coin: Soon barter system was replaced by metal coins. Initially things made of metal or metal pieces were used as currency. Later on these metal pieces were stamped and its value was written on it. As transfer of metal coin was not convenient and its cost of minting was too high, it was soon dropped out.

3. Paper currency: Due to the limitations of metal currency paper currency was introduced. It was free from all those limitations which metal currency had. Its supply can also increased easily with the rising demand.

Question 2.
Examine the different functions of currency.
Answer:
Functions of currency are as follows:

1. Medium of exchange: Money acts as a medium of exchange for the sale and
purchase of goods and services. In the absence of money, goods were exchanged for goods. This required double coincidence of wants. Introduction of money has separated the acts of sale and purchase.
2. Measure of value: Money serves as a unit of account. It means that the value of each good or service is measured in the monetary unit.
3. Standard of deferred payments: Deferred payments refer to those payments which are made sometimes in the future. Money has made deferred payments much easier than before. When we borrow money from somebody, we have to return both the principal as well as interest amount, sometimes in future. Money is convenient mode of these payments. It is difficult to make such payments in terms of goods and services.
4.  Store of value: Storing of wealth has become considerably easy with the introduction of money. Wealth can be stored just in terms of paper titles like FDR.
5. Transfer of value: Money serves as a convenient mode of transfer of value. It can be conveniently transferred to any part of the world.

Question 3.
Explain in detail the function of commercial bank.
Answer:
Functions of commercial bank are as follows:

1. Accepting deposits: Commercial bank accepts deposits from the public. People can deposit their cash as chequeable deposit or non chequeable deposit.
2. Advancing loans: Banks advance loans to the producers for investment* expenditure and to consumers for consumption expenditure. By offering loans for investment, the banks contribute to the supply of goods and services in the economy. By offering funds for consumption banks contributes to the demand for goods and services in the economy.
3. Other functions: Commercial bank performs various other functions also apart from lending and accepting deposits. It collects cheques and bills for the people. Payment for various installments of insurance policies, locker facility, collection of statistical data, and transfer of money.

Question 4.
Explain the role of currency in economy.
Answer:
Role of currency in the economy is discussed as follows:

1. Currency has made transfer of money easy.
2. It provides basis for the credit creation.
3. It helps to convert savings into investments which leads to increase in production capacity of the economy.
4. It provides maximum satisfaction to the consumer and leads to welfare in the economy.
5. It provides freedom to the consumers to make choice between goods and services.
6. It lead to increase in domestic and international trade.
7. It helped government in launching social welfare schemes.
8. It leads to distribution of wealth among various factors of productions.

Question 5.
Differentiate between Institutional and Non-institutional sources of credit.
Answer:

Question 6.
What are self-help groups? How is it different from conventional sources of credit?
Answer:
It is a group of 15-20 people especially rural women who pool their savings depending upon their capacity ranging from rs. 25-100 or more. Credit is provided to the group members at a low interest rate. Its group operates for one or two years, they are able to take loan from the bank. Bank gives loan to the group with an objective to create self employment opportunities.
Decisions regarding rate of interest, time period and loan amount is taken by the group members themselves. SHG organized people for productive purpose and make them self dependent. It also gives a platform to the members to discuss about various social economical issues like health, sanitation, education, domestic violence, etc.

Question 7.
Write a short note on local banking system.
Answer:
It refers to the private firms or individuals which act as a bank. These are the important sources of non institutional sources of credit in India.
Functions of local bankers are as follows:

1. They accept the deposits of people.
2. They help in transferring of funds from one place to another.
3. They are not only the banker but are friend and adviser too.
4. They provide loan to the people by keeping collateral with them.
5. Along with banking they do their own business.
6. Do the transactions for small traders.
7. Lending on the basis of type of business and personal information.

Currency and Financial System Additional Questions Solved

Question 1.
How is the word ‘money’ originated?
Answer:
English word money is derived from Latin word ‘Moneta’ which is the name of goddess in Rome. First mint was established near goddess moneta temple. Coins produced from the mint were called as money and over the time money was referred to currency.

Question 2.
What do you mean by financial instrument?
Answer:
A document such as a cheque, draft, bills of exchange etc that has monetary value or represents a legally enforceable agreement between two or more parties regarding a right to payment of money.

Question 3.
Mention the types of deposits with commercial banks.
Answer:
There are three types of deposits with commercial bank current account, savings account, and savings in fixed account.

Question 4.
State the merits and demerits of non institutional credit.
Answer:
Merits of non institutional credit are as follows:

1. They give credit without any collateral,
2. They give credit without any documentation, its easy for illiterates,
3. It is a source of instant credit.

Demerits of non institutional credit are as follows:

1. High rate of interest is charged by non institutional sources of credit.
2. Proper documentation is not there so people are exploited.

Question 5.
What is investment?
Answer:
Investment refers to that expenditure which increases the stock of gross capital formation in an economy.

Question 6.
Explain double coincidence of wants.
Answer:
It implies that the two individuals are in possession of such goods which they are willing to exchange for the satisfaction of their wants. It is not so simple to find a person who wants your goods and at the same time he possess the goods which you want.

Question 7.
What is financial literacy project?
Answer:
To raise the financial education. Reserve bank of India has started a project called as financial literacy. Its objective is to give information about working of central bank and commercial bank. It has lots of interesting films, games and comics based on financial structure of the country.

Question 8.
Explain the role of commercial bank in economic growth.
Answer:
Role of commercial bank in economic growth is discussed as follows:

1. For economic growth, high saving rate is needed. Commercial banks secures the savings of the public and give them interest on it. It leads to developing the saving culture in the economy.
2. Savings of public is made mobile and available for various producers in the economy. If banks would not have been then savings would have been only with the savers. It would not be available for the producers.
3. Banks optimally allocates the resources. It allocates resources in the field of social welfare and in the field where there is high profit rate.