MONEY AND CREDIT
MULTIPLE CHOICE QUESTIONS
1. System of exchanging goods for goods is called:
(a) Monetary system (b) Credit
system
(c) Barter system (d) Exchange
system
2. Money
(a) eliminates double
coincidence of wants
(b) acts as a common measure
of value
(c) acts as a standard of
deferred payments
(d) all the above
3. At present which form of money is increasingly used apart from paper money?
(a) Commodity money (b)
Metallic money
(c) Plastic money (d) All the
above
4. What are the modern forms of money?
(a) Currency (b) Plastic money
(c) Demand deposits (d) All
the above
5. Terms of credit are with respect to :
(a) interest rate (b)
collateral
(c) documentation (d) all the
above
6. Credit or loan refers to an agreement between:
(a) lender and the borrower
(b) consumer and producer
(c) government and tax payers
(d) all the above
7. The formal sector meets only about _______ of the credit needs of rural
people:
(a) 25% (b) 52%
(c) 75% (d) 15%
8. The part of the total deposits which a bank keeps with itself in cash is
(a) zero (b) a small
proportion
(c) a big proportion (d) 100
percent
9. An asset that the borrower uses as a repayment guarantee to a lender is
termed as a:
(a) deposit (b) collateral
(c) advance (d) all the above
10. Currency is issued in India by:
(a) commercial banks
(b) regional rural banks
(c) nationalised banks
(d) Reserve Bank of India
11. Who supervises the credit activities of lenders in the informal sector?
(a) Central bank of India
(b) Commercial Banks
(c) Moneylenders (d) None of
these
12. Rich households in urban areas avail cheap credit from
(a) formal sources (b)
informal sources
(c) government (d) all the
above
13. Productive loans by farmers are taken
(a) to buy seeds, fertilisers,
implements etc.
(b) for celebration of
marriages
(c) for storage of foodgrains
in godowns
(d) none of the above
14. Which of the following is not a source of rural credit?
(a) Regional rural banks (b)
Moneylenders
(c) Traders (d) Government
15. Rate of interest charged by moneylenders as compared to that charged by
banks is:
(a) lower (b) same
(c) slightly higher (d) much
higher
16. Regional Rural Banks were set up in
________.
(a) 1969 (b) 1979
(c) 1989 (d) 1999
17. A Self-Help Group usually has:
(a) 5-10 members (b) 10-15
members
(c) 15-20 members (d) 20-25
members
18. When was the KCC (Kisan Credit Card) scheme introduced?
(a) 1969 (b) 1979
(c) 1987-88 (d) 1998-99
19. Which state accounts for maximum percentage of SHGs (Self-Help Groups) in
bank’s credit?
(a) Andhra Pradesh (b) Tamil
Nadu
(c) Kerala (d) Karnataka
20.
_________ are widely accepted as a medium of exchange.
(a) Rupee notes (b) Gold coins
(c) Silver coins (d) All the
above
21. Majority of the credit needs of the poor households are met from
(a) formal sources (b)
informal sources
(c) self help groups (d) none of the above
22. Who supervises the functioning of formal sources of loans?
(a) RBI (Reserve Bank of
India)
(b) Central government
(c) State government (d) None
of these
23. Which of the following is a major reason which prevents the poor from
getting bank loans?
(a) Absence of collateral
(security)
(b) Non-repayment of loans
(c) Higher interest rates
(d) Documentation
24. Who helps the borrowers to overcome the problem of lack of collateral?
(a) Self help group (SHG)
(b) State government
(c) Employers (d) Moneylenders
25. Self help groups also discuss the following social problems.
(a) Health (b) Nutrition
(c) Domestic violence (d) All
the above
26. Formal sources of credit include
(a) banks (b) moneylenders
(c) employers (d) all the
above
27. Which of the following is not a modern form of money?
(a) Paper notes (b) Demand
deposits
(c) Silver coins (d) None of the above
QUESTIONS FROM CBSE EXAMINATION
PAPERS
1. Which of the following is not an advantage of self-help group?
(a) Grant of timely loans
(b) Reasonable interests
(c) A platform to discuss
various issues
(d) Does not help women to
become self-reliant.
2. What do you mean by collateral?
(a) It is the total sum of
money with a person
(b) It is the things kept in
the locker
(c) It is the guarantee given
by the lender to the borrower.
(d) It is the security to a
lender until the loan is repaid
3. Identify the formal source of credit.
(a) Cooperative societies (b)
Moneylenders
(c) Traders (d) Landlords
4. Which one of the following is not a modern form of money?
(a) Demand Deposits (b) Paper
currency
(c) Coins (d) Precious metals
5. Which one of the following authorises money as a medium of exchange?
(a) Reserve Bank of India
(b) Self Help Groups
(c) The Central Government
(d) The President of India.
6. Which of the following is not true regarding the in convenience of Baster
Exchange?
(a) Lack of double coincidence
of want
(b) Absence of divisibility
(c) Difficulty in storing
wealth
(d) Availability of money as a
medium of exchange.
7. Which one of the following is NOT an informal sector loans for poor rural
household in India?
(a) Commercial Banks (b)
Moneylenders
(c) Traders (d) Landlords
8. Which one of the following is the important characteristic of modern form of
currency?
(a) It is made from precious
metal
(b) It is made from thing of
everyday use
(c) It is authorised by the
commercial banks
(d) It is authorised by the
Government of the country
9. Which one of the following constitutes money in modern day economy?
(a) Gold (b) Silver
(c) Interest (d) Demand
Deposits
10. Which one of the following is NOT responsible for the greater choice of
goods in the market for the consumers?
(a) Increased foreign trade
(b) Increased foreign
investment
(c) Multi-National Companies
(d) World Trade Organisation
11. In a SHG most of the decisions regarding loan activities are taken by
(a) Banks (b) Member
(c) Non-government
organizations
(d) Cooperatives
12. Which one of the following is a major reason that prevents the poor from
getting loans from the banks?
(a) Lack of capital
(b) Not affordable due to high rate of interest
(c) Absence of collateral
security
(d) Absence of mediators
13. Which one of the following agencies issues currency notes on behalf of the
government of India?
(a) Ministry of Finance
(b) Reserve Bank of India
(c) State Bank of India
(d) World Bank
14. Formal Sources of credit include:
(a) money lenders (b)
co-operatives
(c) Employers (d) Finance
companies
15. Anything which is generally accepted by the people in exchange of goods and
services is called:
(a) money (b) barter
(c) credit (d) loans
16. Terms of credit does not include:
(a) interest rate (b)
collateral
(c) cheque (d) mode of
repayment
17. Banks do not give loans :
(a) to small farmers (b) to
marginal farmers
(c) to industries
(d) without proper collateral
and documents
18. The functioning of the formal sources of credit are supervised by:
(a) Government of India
(b) Reserve Bank of India
(c) Ministry of finance
(d) State Bank of India
19. Which one of the following is the appropriate meaning of collateral?
(a) It is the total sum of
money borrowed from banks.
(b) It is the amount of money
borrowed from friends.
(c) It is an asset of the
borrower used as guarantee to lender.
(d) It is the total amount of
money invested in a business.
20. Which one of the following is NOT a formal source of credit?
(a) Commercial Banks (b) State
Bank of India
(c) Employers (d)
Co-operatives
21. Which one of the following is not included in the terms of credit?
(a) Rate of Interest (b) Mode
of payment
(c) Rate of saving (d)
Collateral
22. Which is not the main source of credit from the following for rural
households in India?
(a) Traders (b) Mode of payment
(c) Commercial Banks (d)
Moneylanders
23. Cheap and affordable credit results in which one of the following?
(a) Slow economic growth
(b) Creating a debt trap
(c) Poverty
(d) Good economic growth
24. Deposites in bank accounts withdrawn on demand are called:
(a) Fixed deposit (b)
Recurring deposit
(c) Demand deposit (d) None of
these
25. Banks use the major portion of the deposit to:
(a) Keep reserve so that
people may withdraw
(b) Meet their routine
expenses
(c) Extend loans
(d) Meet renovation of the
bank
26. When both parties agree to sell and buy each other’s commodities it is known
as:
(a) measure of value
(b) double coincidence of
wants
(c) store of value (d) credit
27. Which among these is an essential feature of barter system?
(a) Money can easily exchange
any commodity
(b) It is based on double
co-incidence of wants
(c) It is generally accepted
as a medium of exchange of goods with money
(d) It acts as a measure and
store of value
28. By connecting different countries globalization shall result in:
(a) lesser competition among
producers
(b) greater competition among
producers
(c) no change in competition
among producers
(d) none of the above
29. Which one of the following is the main source of credit for the rich
households?
(a) Informal (b) Formal
(c) Both formal and informal
(d) Neither Formal nor
informal
30. Why bank deposits are known as demand deposits?
(a) Deposits with the banks
(b) People have the provision
to withdraw the money when they require.
(c) Deposits with the banks
cannot be withdrawn.
(d) People have the provision
to withdraw the money only by cash.
31. Which households take more loans from the formal sector?
(a) Poor households and rich
household.
(b) Well off households and
households with few assets.
(c) Poor households and well
off households
(d) Well off households and
rich households.
32. What portion of deposits are kept by the banks for their day to day
transaction?
(a) 10% (b) 15%
(c) 20% (d) 25%
33. How many countries are currently the members of the World Trade Organization
(2006)?
(a) 147 (b) 148
(c) 149 (d) 150
SHORT ANSWER TYPE QUESTIONS
1.
Define Barter System. What are the limitations of this system?
2.
State the objectives of financial institutions.
3.
What are the modern forms of money? Why are they accepted as mediums of
exchange?
4.
Why
are demand deposits considered as money?
5.
Why
do lenders ask for collateral while lending?
6.
What are the differences between informal and formal sources of credit?
7.
Why
were SHGs promoted to provide loans to the poor?
QUESTIONS FROM CBSE EXAMINATION
PAPERS
1.
Mention any three points of distinction between formal sector loans and informal
sector loans
2.
Describe any four institutional reforms introduced by the government of India in
the interest of farmers.
3.
"Money in your pocket cannot buy all the goods and services that you need to
live well". Explain with suitable examples.
LONG ANSWER TYPE QUESTIONS
1.
How
does the Reserve Bank of India keep a check on the functioning of banks?
2.
What is double coincidence of wants? Why it is not required in an economy where
money is in use?
3.
Explain the term ‘credit’. How credit works in a difficult situation?
4.
If
a loan is required to set up a small business, on what basis it is decided to
borrow from the bank or the moneylender? Discuss.
5.
Why
do you think that the share of formal sector credit is higher for the richer
households compared to the poorer households?
QUESTIONS FROM CBSE EXAMINATION
PAPERS
1.
Exaplain any two features each of formal sector loans and informal sector loans.
2.
What are the two main reasons for formal credit not being available to the rural
poor? Why is there a need to expand rural credit?
3.
Why
do the rural borrowers depend on the informed sector of credit? What steps can
be taken to encourage them to take loans from the formal sources? Explain any
two.
4.
‘Cheap and affordable credit is crucial for the country’s development’. Explain
the statement with four points.
5.
Describe the two features each of consumer’s ‘right to safety’ and ‘right to
represent’
6.
Why
should credit at reasonable rates be available to all? Describe any four
reasons.
7.
Why
do we need to expand formal source of credit in India? Explain any four reasons.
Answers the following questions:
(a) Why are banks unwilling to
lend loans to small farmers?
(b) Besides banks, what are
the other sources of credit from which the small farmers can borrow?
(c) Explain how terms of
credit can be unfavorable for the small farmer
(d) From where can small
farmers get cheap loans?
8.
Which are the two major sources of formal sector credit in India? Why do we need
to expand formal sources of credit?
9.
What is meant by term credit? What does it include?
10.
How
does the Reserve Bank of India supervise the functioning of banks? Why is this
necessary?
11.
Describe four features of Self Help Group (SHG).
12.
Describe any four main functions of the Reserve Bank of India.
13.
What is double coincidence of want? How has money solved this problem?
14.
How
do banks mediate between those who have surplus money and those who need money?
15.
Differentiate between formal and informal sources of credit.
16.
Mention four characteristics each of the formal and informal sources of credit
in India.
17.
What is the difference between formal sector loans and informal sector loans?
Give two examples of each.
18.
Study the table given below and answer the questions that follow:
PEOPLE DEPENDING ON FORMAL
SECTOR CREDIT IN URBAN AREAS
Category
Percentage of people
Poor households
15%
Households with few assets
47%
Well-off households
72%
Rich households
90%
(i) Poor household’s share of
formal credit in the urban areas is low as compared to that of rich households.
Why is it so?
(ii) Mention two difficulties
faced by poor households in taking loan from a formal sector.
19.
Why
are poor households still dependent on informal sources of credit? Explain any
four reasons.