Statement Based Questions – MONEY AND CREDIT

CBSE Class 9 Economics-English Medium / By /

Common Options for All Questions

A. Statements 1 and 2 are correct.
B. Statements 1 and 3 are correct.
C. Statements 2 and 3 are correct.
D. Statements 1, 2 and 3 are correct.

TOPIC 1: MONEY AS A MEDIUM OF EXCHANGE

Q1.

Consider the following statements:

  1. Money helps overcome the problem of double coincidence of wants.
  2. A person can sell a product for money and use that money later to buy another product.
  3. Money requires both parties in a transaction to possess goods desired by each other.

Which of the above statements are correct?

Q2.

Consider the following statements:

  1. Barter involves direct exchange of goods or services.
  2. Barter can become difficult when the wants of two people do not coincide.
  3. Money makes direct matching of wants necessary in every transaction.

Which of the above statements are correct?

Q3.

Consider the following statements:

  1. Money acts as an intermediary in exchange.
  2. Money allows buying and selling to take place at different times.
  3. Money eliminates the need to assign prices to goods.

Which of the above statements are correct?

Q4.

Consider the following statements:

  1. A farmer can sell wheat for money and later purchase a bicycle.
  2. The farmer does not need to find a bicycle seller who wants wheat.
  3. This transaction demonstrates how money solves the double coincidence problem.

Which of the above statements are correct?

Q5.

Consider the following statements:

  1. Money facilitates specialisation.
  2. A person can specialise in producing one good and use money earned from its sale to buy other goods.
  3. Specialisation requires every producer to produce all the goods needed by the household.

Which of the above statements are correct?

Q6.

Consider the following statements:

  1. Barter may require a coincidence of wants.
  2. Money provides a commonly accepted medium through which exchanges can occur.
  3. Money makes all goods physically interchangeable.

Which of the above statements are correct?

Q7.

Consider the following statements:

  1. Money increases the ease of transactions.
  2. Money enables people to separate selling from purchasing.
  3. Money can serve as a medium of exchange even when the seller and buyer do not directly want each other’s products.

Which of the above statements are correct?

TOPIC 2: MODERN FORMS OF MONEY

Q8.

Consider the following statements:

  1. Modern money includes currency.
  2. Modern money can also include demand deposits with banks.
  3. Currency gets its value mainly from the intrinsic value of the paper used to make it.

Which of the above statements are correct?

Q9.

Consider the following statements:

  1. Currency is generally accepted as a means of payment.
  2. People accept money partly because they expect others to accept it.
  3. Modern currency can be used only if it has an intrinsic commodity value equal to its face value.

Which of the above statements are correct?

Q10.

Consider the following statements:

  1. The government authorises the issue of currency in India.
  2. Trust and general acceptance are important for the functioning of modern money.
  3. Modern currency would remain equally useful even if nobody accepted it as a means of payment.

Which of the above statements are correct?

Q11.

Consider the following statements:

  1. Money provides liquidity to its holder.
  2. Currency can be used directly for many transactions.
  3. Modern money has made the need for confidence in the monetary system completely unnecessary.

Which of the above statements are correct?

Q12.

Consider the following statements:

  1. Modern money facilitates exchange.
  2. Currency is accepted because it has very high intrinsic value as a physical object.
  3. General acceptability is an important feature of money.

Which of the above statements are correct?

Q13.

Consider the following statements:

  1. A ₹500 note can be exchanged for goods worth approximately ₹500 despite its paper value being much lower.
  2. Its purchasing power depends on its acceptance as money.
  3. The physical paper itself determines the purchasing power of the note.

Which of the above statements are correct?

Q14.

Consider the following statements:

  1. Money provides a common unit for expressing prices.
  2. It makes comparison of the prices of different goods easier.
  3. Without a common medium of exchange, economic transactions can become more complicated.

Which of the above statements are correct?

TOPIC 3: CURRENCY AND BANK DEPOSITS

Q15.

Consider the following statements:

  1. People may keep money in bank deposits rather than holding all of it as cash.
  2. Bank deposits can be used for making payments.
  3. All deposited money must remain physically locked inside the bank against the name of each depositor.

Which of the above statements are correct?

Q16.

Consider the following statements:

  1. Deposits are liabilities of banks towards depositors.
  2. Banks use a portion of deposits for lending.
  3. Depositors permanently lose their claim over the money once it is deposited.

Which of the above statements are correct?

Q17.

Consider the following statements:

  1. Bank deposits contribute to the supply of money in an economy.
  2. People can access deposits through banking facilities.
  3. Bank deposits have no role in modern transactions because only currency is money.

Which of the above statements are correct?

Q18.

Consider the following statements:

  1. Keeping money in a bank can provide greater safety than keeping large amounts of cash at home.
  2. Bank deposits can facilitate non-cash payments.
  3. Depositing money in a bank means that the depositor cannot use it until the bank closes the account.

Which of the above statements are correct?

Q19.

Consider the following statements:

  1. Banks maintain some cash to meet withdrawal requirements.
  2. Banks can lend a part of the deposits they receive.
  3. Banks can safely lend all deposits without retaining any liquidity.

Which of the above statements are correct?

Q20.

Consider the following statements:

  1. A bank deposit represents a claim of the depositor against the bank.
  2. Banks record deposits as liabilities.
  3. The depositor has no right to withdraw money merely because it has been deposited.

Which of the above statements are correct?

Q21.

Consider the following statements:

  1. The banking system connects savers and borrowers.
  2. Deposits provide banks with funds that can partly be used for lending.
  3. Bank lending can support economic activities such as production and investment.

Which of the above statements are correct?

TOPIC 4: DEMAND DEPOSITS AND CHEQUES

Q22.

Consider the following statements:

  1. Demand deposits can be withdrawn when required, subject to account conditions.
  2. Demand deposits can be used for making payments.
  3. Demand deposits have no relationship with modern money.

Which of the above statements are correct?

Q23.

Consider the following statements:

  1. A cheque can be used to make a payment without handing over currency notes.
  2. A cheque is an instruction to a bank to make payment from the issuer’s account.
  3. A cheque guarantees payment even when the issuer has no sufficient balance.

Which of the above statements are correct?

Q24.

Consider the following statements:

  1. Cheques reduce the need to carry large amounts of cash.
  2. A cheque facilitates transfer of purchasing power between accounts.
  3. A cheque itself creates money independently of the bank account.

Which of the above statements are correct?

Q25.

Consider the following statements:

  1. Demand deposits are considered an important component of modern money.
  2. Their usefulness arises partly from their ability to be used for payments.
  3. Demand deposits must always be withdrawn in physical cash before they can be used.

Which of the above statements are correct?

Q26.

Consider the following statements:

  1. A person can pay a seller through a banking transaction rather than handing over cash.
  2. Such a payment can reduce the physical movement of currency.
  3. Banking instruments make the banking system irrelevant to the payment process.

Which of the above statements are correct?

Q27.

Consider the following statements:

  1. A cheque is connected to the bank account of the person issuing it.
  2. The successful payment of a cheque generally depends on the availability of sufficient funds or applicable credit arrangements.
  3. A cheque has purchasing power completely independent of the issuer’s account.

Which of the above statements are correct?

Q28.

Consider the following statements:

  1. Demand deposits provide liquidity to depositors.
  2. Cheques can be used to transfer funds without directly transferring currency.
  3. Both features make bank deposits useful as money.

Which of the above statements are correct?

TOPIC 5: LOAN ACTIVITIES OF BANKS

Q29.

Consider the following statements:

  1. Banks keep only a small proportion of deposits as cash.
  2. Banks need liquidity to meet withdrawal demands.
  3. Banks can lend every rupee deposited without considering withdrawal requirements.

Which of the above statements are correct?

Q30.

Consider the following statements:

  1. Banks charge interest on loans.
  2. Banks generally pay interest on certain deposits.
  3. The difference between interest received from borrowers and interest paid to depositors can contribute to bank income.

Which of the above statements are correct?

Q31.

Consider the following statements:

  1. Banks act as intermediaries between depositors and borrowers.
  2. Banks use a portion of deposits to provide loans.
  3. Banks only store people’s money and do not perform lending activities.

Which of the above statements are correct?

Q32.

Consider the following statements:

  1. Bank lending can increase the availability of credit.
  2. Borrowers may use bank loans for production, business or investment.
  3. Bank lending has no relationship with economic activity.

Which of the above statements are correct?

Q33.

Consider the following statements:

  1. Banks must balance lending with their need to meet deposit withdrawals.
  2. Banks keep some cash reserves for this purpose.
  3. Banks can ignore depositors’ withdrawal requirements once money has been lent.

Which of the above statements are correct?

Q34.

Consider the following statements:

  1. Banks earn income from lending activities.
  2. The interest charged to borrowers is generally important to bank profitability.
  3. Banks lend money only to people who have no intention of repaying it.

Which of the above statements are correct?

Q35.

Consider the following statements:

  1. Banks mobilise savings by accepting deposits.
  2. They use part of these funds to provide loans.
  3. This process can make credit available to people who need funds for economic activities.

Which of the above statements are correct?

TOPIC 6: CREDIT AND ITS IMPORTANCE

Q36.

Consider the following statements:

  1. Credit can help a producer purchase inputs before receiving sales revenue.
  2. Productive borrowing can increase income if the activity succeeds.
  3. Every loan automatically increases the borrower’s income.

Which of the above statements are correct?

Q37.

Consider the following statements:

  1. Credit can be useful for meeting working-capital requirements.
  2. Credit can help bridge the time gap between expenditure and income.
  3. Borrowing is beneficial regardless of the interest rate and repayment conditions.

Which of the above statements are correct?

Q38.

Consider the following statements:

  1. Credit can support investment in productive activities.
  2. A borrower may use credit to purchase machinery or raw materials.
  3. Productive use of credit can potentially generate income with which the loan can be repaid.

Which of the above statements are correct?

Q39.

Consider the following statements:

  1. Credit can have both positive and negative consequences.
  2. A loan can become burdensome if income generated is insufficient to repay it.
  3. Borrowing is always harmful because every loan creates a debt.

Which of the above statements are correct?

Q40.

Consider the following statements:

  1. Credit can help households meet urgent financial needs.
  2. Credit can also be used for productive purposes.
  3. Credit is useful only when it is taken by large businesses.

Which of the above statements are correct?

Q41.

Consider the following statements:

  1. The outcome of borrowing depends partly on how the loan is used.
  2. Productive credit may create income-generating opportunities.
  3. The same amount of credit can have different outcomes for different borrowers.

Which of the above statements are correct?

Q42.

Consider the following statements:

  1. Credit can support economic growth when it finances productive activities.
  2. Affordable credit can improve the ability of small producers to invest.
  3. Credit can never create financial difficulties for borrowers.

Which of the above statements are correct?

TOPIC 7: TERMS OF CREDIT

Q43.

Consider the following statements:

  1. Interest rate is an important term of credit.
  2. Collateral may be required by a lender as security.
  3. Repayment period is unrelated to the borrower’s loan obligations.

Which of the above statements are correct?

Q44.

Consider the following statements:

  1. Collateral is an asset that a borrower pledges as security.
  2. If the borrower fails to repay, the lender may have a claim over the collateral according to the agreement.
  3. Collateral has no connection with the lender’s assessment of risk.

Which of the above statements are correct?

Q45.

Consider the following statements:

  1. Different lenders may offer different interest rates.
  2. Repayment conditions can differ between loans.
  3. Borrowers should consider the complete terms of credit rather than only the amount borrowed.

Which of the above statements are correct?

Q46.

Consider the following statements:

  1. A loan with a lower interest rate is automatically the best loan for every borrower.
  2. Repayment period can affect the borrower’s financial burden.
  3. Collateral requirements can influence access to credit.

Which of the above statements are correct?

Q47.

Consider the following statements:

  1. A borrower should understand the repayment schedule before accepting a loan.
  2. The cost of borrowing depends partly on the interest charged.
  3. The terms of credit have no effect on the risk faced by the borrower.

Which of the above statements are correct?

Q48.

Consider the following statements:

  1. Collateral requirements can make it difficult for some poor borrowers to obtain formal credit.
  2. Borrowers who possess acceptable collateral may find it easier to meet some lending conditions.
  3. Collateral guarantees that the borrower will never face repayment difficulties.

Which of the above statements are correct?

Q49.

Consider the following statements:

  1. Interest rate affects the total repayment burden.
  2. Repayment period affects when the borrower must make payments.
  3. Documentation and collateral can influence access to loans.

Which of the above statements are correct?

TOPIC 8: FORMAL SOURCES OF CREDIT

Q50.

Consider the following statements:

  1. Banks are formal sources of credit.
  2. Cooperative societies can also provide formal credit.
  3. Formal sources operate completely outside government regulation.

Which of the above statements are correct?

Q51.

Consider the following statements:

  1. Formal financial institutions generally follow established rules.
  2. Regulation can help protect borrowers from certain unfair lending practices.
  3. Formal lenders can charge any interest rate they want without regulatory constraints.

Which of the above statements are correct?

Q52.

Consider the following statements:

  1. Formal credit may require documentation.
  2. Some formal loans may require collateral.
  3. Formal credit is automatically accessible to every person regardless of income or repayment capacity.

Which of the above statements are correct?

Q53.

Consider the following statements:

  1. Banks mobilise deposits from savers.
  2. Banks provide loans to borrowers.
  3. Banking activities are part of the formal credit system.

Which of the above statements are correct?

Q54.

Consider the following statements:

  1. Formal credit can provide borrowers with more transparent terms than some informal loans.
  2. Formal lenders are subject to institutional rules and oversight.
  3. Formal credit is necessarily free from all documentation requirements.

Which of the above statements are correct?

Q55.

Consider the following statements:

  1. Expanding formal credit can reduce dependence on moneylenders.
  2. Poor households may still face barriers in accessing formal credit.
  3. Improving access to formal credit requires only increasing the number of banks, regardless of lending conditions.

Which of the above statements are correct?

Q56.

Consider the following statements:

  1. Formal sources are important for providing regulated credit.
  2. Banks and cooperative institutions can serve different categories of borrowers.
  3. Regulation is one important distinction between formal and informal credit.

Which of the above statements are correct?

TOPIC 9: INFORMAL SOURCES OF CREDIT

Q57.

Consider the following statements:

  1. Moneylenders are an informal source of credit.
  2. Informal lenders generally do not operate under the same regulatory framework as banks.
  3. Informal credit always has lower interest rates than bank loans.

Which of the above statements are correct?

Q58.

Consider the following statements:

  1. Informal lenders may provide loans quickly.
  2. Informal lenders may require fewer documents.
  3. Easy access necessarily means that informal credit is cheap.

Which of the above statements are correct?

Q59.

Consider the following statements:

  1. Informal lenders can include moneylenders, traders, employers, relatives and friends.
  2. Informal lending conditions may vary considerably.
  3. Informal lenders are always subject to the same regulatory supervision as commercial banks.

Which of the above statements are correct?

Q60.

Consider the following statements:

  1. Borrowers may approach informal lenders when formal credit is difficult to obtain.
  2. Urgent financial needs may influence a borrower’s choice of lender.
  3. Informal loans are always preferable because they involve fewer formal procedures.

Which of the above statements are correct?

Q61.

Consider the following statements:

  1. Informal lenders may charge high interest rates.
  2. High interest can increase the repayment burden.
  3. High-cost credit can contribute to a debt trap in some circumstances.

Which of the above statements are correct?

Q62.

Consider the following statements:

  1. Informal credit may be based on personal relationships.
  2. Informal loans may sometimes involve fewer formal documents.
  3. Informal credit always provides borrowers with stronger legal protection than formal credit.

Which of the above statements are correct?

Q63.

Consider the following statements:

  1. Informal credit can be useful when quick access to funds is important.
  2. Its convenience does not necessarily mean that it is affordable.
  3. Borrowers should consider interest and repayment conditions before accepting such credit.

Which of the above statements are correct?

TOPIC 10: FORMAL VS INFORMAL SOURCES OF CREDIT

Q64.

Consider the following statements:

  1. Formal credit is generally regulated.
  2. Informal credit is generally less regulated.
  3. Both sources always charge identical interest rates.

Which of the above statements are correct?

Q65.

Consider the following statements:

  1. Informal credit may be easier to obtain in some situations.
  2. Formal credit generally provides greater institutional regulation.
  3. Therefore, informal credit is always economically better for borrowers.

Which of the above statements are correct?

Q66.

Consider the following statements:

  1. Formal lenders may ask for documentation and collateral.
  2. Informal lenders may sometimes provide loans with fewer formal requirements.
  3. The easiest loan to obtain is necessarily the cheapest loan.

Which of the above statements are correct?

Q67.

Consider the following statements:

  1. Formal credit can provide greater protection against certain exploitative practices.
  2. Informal credit may involve high interest rates.
  3. Informal credit should be judged only by how quickly the loan is received.

Which of the above statements are correct?

Q68.

Consider the following statements:

  1. Borrowers should compare interest rates before choosing a loan.
  2. Repayment conditions are also important.
  3. Availability, collateral and documentation can affect the suitability of a loan.

Which of the above statements are correct?

Q69.

Consider the following statements:

  1. Formal and informal sources differ in regulation.
  2. They may differ in interest rates and terms of credit.
  3. Because both provide loans, there is no meaningful difference between them.

Which of the above statements are correct?

Q70.

Consider the following statements:

  1. Greater access to formal credit can reduce dependence on moneylenders.
  2. Competition among lenders can give borrowers more choices.
  3. Access to formal credit is irrelevant to financial inclusion.

Which of the above statements are correct?

TOPIC 11: CREDIT IN RURAL AREAS AND DEBT TRAP

Q71.

Consider the following statements:

  1. A farmer may borrow money for seeds, fertilisers or other inputs.
  2. Crop failure can make repayment difficult.
  3. Agricultural borrowing is always free from risk.

Which of the above statements are correct?

Q72.

Consider the following statements:

  1. Rural borrowers may depend on informal lenders when formal credit is difficult to access.
  2. High interest rates can increase the repayment burden.
  3. Easy availability of informal credit necessarily prevents debt problems.

Which of the above statements are correct?

Q73.

Consider the following statements:

  1. A debt trap may occur when a borrower takes a new loan to repay an earlier loan.
  2. Repeated borrowing can increase the overall repayment burden.
  3. A debt trap can never occur when the original loan was used productively.

Which of the above statements are correct?

Q74.

Consider the following statements:

  1. Agricultural income may be uncertain.
  2. Weather conditions and market prices can affect a farmer’s ability to repay.
  3. Productive borrowing guarantees successful repayment irrespective of external conditions.

Which of the above statements are correct?

Q75.

Consider the following statements:

  1. High-cost credit can increase the possibility of a debt trap.
  2. A borrower with insufficient income may struggle to repay principal and interest.
  3. Debt problems are determined only by the size of the original loan.

Which of the above statements are correct?

Q76.

Consider the following statements:

  1. Rural households may borrow for both productive and consumption purposes.
  2. Medical emergencies can create a need for borrowing.
  3. Every rural loan is necessarily used to increase agricultural production.

Which of the above statements are correct?

Q77.

Consider the following statements:

  1. Affordable formal credit can reduce dependence on high-cost informal loans.
  2. Better access to credit can help rural producers make productive investments.
  3. Affordable credit completely eliminates all risks faced by farmers.

Which of the above statements are correct?

TOPIC 12: SELF-HELP GROUPS (SHGs) AND AFFORDABLE CREDIT

Q78.

Consider the following statements:

  1. SHGs encourage members to save regularly.
  2. Members can use pooled savings to provide small loans within the group.
  3. SHGs are designed only for wealthy households.

Which of the above statements are correct?

Q79.

Consider the following statements:

  1. SHGs can improve access to credit for poor households.
  2. Group members may collectively approach banks for loans.
  3. SHGs eliminate the need for any repayment by members.

Which of the above statements are correct?

Q80.

Consider the following statements:

  1. SHGs are based partly on collective responsibility.
  2. Mutual trust can help an SHG function effectively.
  3. An SHG can operate successfully even if members have no interest in cooperation.

Which of the above statements are correct?

Q81.

Consider the following statements:

  1. SHGs can reduce dependence on moneylenders.
  2. SHGs may provide loans for small businesses and other productive activities.
  3. SHGs are useful only for saving money and have no role in credit.

Which of the above statements are correct?

Q82.

Consider the following statements:

  1. SHGs can help members develop saving habits.
  2. They can improve access to formal financial institutions.
  3. They can strengthen the financial position of members by providing access to credit.

Which of the above statements are correct?

Q83.

Consider the following statements:

  1. SHGs can help poor borrowers overcome some barriers to formal credit.
  2. Collective organisation can increase the bargaining strength of members.
  3. SHGs guarantee that every member will receive an unlimited amount of credit.

Which of the above statements are correct?

Q84.

Consider the following statements:

  1. Affordable credit can support productive activities.
  2. Access to credit can help poorer households manage emergencies and investment needs.
  3. Financial inclusion is strengthened when reliable and affordable credit becomes accessible to more people.

Which of the above statements are correct?

DETAILED ANSWER KEY

Topic 1 — Money as a Medium of Exchange

QAnswerExplanation
1AStatements 1 and 2 are correct. Money removes double coincidence because a person can sell for money and later use that money to buy something else. Statement 3 describes the problem of barter rather than money.
2AStatements 1 and 2 correctly describe barter and its difficulty. Statement 3 is incorrect because money actually removes the need for direct matching of wants.
3AStatements 1 and 2 are correct. Statement 3 is incorrect because money actually provides a common basis for expressing prices.
4DAll three statements are correct. The farmer does not need a direct wheat-for-bicycle exchange, demonstrating the role of money in overcoming double coincidence.
5AStatements 1 and 2 are correct. Statement 3 is opposite to the idea of specialisation because specialisation allows people to produce fewer goods and buy others using money.
6AStatements 1 and 2 are correct. Statement 3 is incorrect because money does not physically make goods interchangeable; it facilitates their exchange.
7DAll three statements correctly describe the role of money as a medium of exchange.

Topic 2 — Modern Forms of Money

QAnswerExplanation
8ACurrency and demand deposits are modern forms of money. Statement 3 is false because currency does not derive its purchasing power mainly from the paper itself.
9AStatements 1 and 2 are correct. Statement 3 is false because modern currency does not need commodity value equal to face value.
10AStatements 1 and 2 are correct. Statement 3 is false because money would lose much of its usefulness if people stopped accepting it.
11AStatements 1 and 2 are correct. Statement 3 is false because the physical paper does not determine the note’s purchasing power.
12CStatements 2 and 3 are correct. Statement 1 is incorrect because modern currency is accepted due to legal recognition and confidence rather than necessarily being issued only by a government in every monetary context.
13AStatements 1 and 2 are correct. Statement 3 is false because the paper itself does not determine purchasing power.
14DAll three statements correctly explain the usefulness of money in facilitating exchange and price comparison.

Topic 3 — Currency and Bank Deposits

QAnswerExplanation
15AStatements 1 and 2 are correct. Statement 3 is incorrect because banks do not keep each depositor’s money physically locked separately.
16AStatements 1 and 2 are correct. Statement 3 is false because the depositor retains a claim against the bank.
17AStatements 1 and 2 are correct. Statement 3 is false because deposits are an important part of modern money.
18AStatements 1 and 2 are correct. Statement 3 is false because deposits remain accessible according to account conditions.
19AStatements 1 and 2 are correct. Statement 3 is false because banks cannot lend all deposits without maintaining liquidity.
20AStatements 1 and 2 are correct. Statement 3 is false because depositors have a claim on their deposits.
21DAll three statements correctly describe the intermediary role of banks and the economic importance of lending.

Topic 4 — Demand Deposits and Cheques

QAnswerExplanation
22AStatements 1 and 2 are correct. Statement 3 is false because demand deposits are an important part of modern money.
23AStatements 1 and 2 are correct. Statement 3 is false because a cheque cannot guarantee payment when adequate funds or applicable credit are unavailable.
24AStatements 1 and 2 are correct. Statement 3 is false because a cheque does not create money independently of the bank account.
25AStatements 1 and 2 are correct. Statement 3 is false because demand deposits can be used directly for payments.
26AStatements 1 and 2 are correct. Statement 3 is clearly false because banking facilities are central to such transactions.
27AStatements 1 and 2 are correct. Statement 3 is false because a cheque is connected with the issuer’s account.
28DAll three statements correctly explain why demand deposits and cheques are useful forms of modern money.

Topic 5 — Loan Activities of Banks

QAnswerExplanation
29AStatements 1 and 2 are correct. Statement 3 is false because banks need liquidity to meet withdrawals.
30DAll three statements correctly explain how lending and deposit-taking contribute to bank income.
31AStatements 1 and 2 are correct. Statement 3 is false because lending is a major banking activity.
32AStatements 1 and 2 are correct. Statement 3 is false because bank lending is closely connected with economic activity.
33AStatements 1 and 2 are correct. Statement 3 is false because banks must consider withdrawal requirements.
34AStatements 1 and 2 are correct. Statement 3 is clearly false.
35DAll three statements correctly explain the process through which banks mobilise deposits and provide credit.

Topic 6 — Credit and Its Importance

QAnswerExplanation
36AStatements 1 and 2 are correct. Statement 3 is false because credit does not automatically increase income.
37AStatements 1 and 2 are correct. Statement 3 is false because the benefit of borrowing depends on its terms and use.
38DAll three statements are correct. Productive borrowing can finance inputs or machinery and generate income for repayment.
39AStatements 1 and 2 are correct. Statement 3 is false because credit can be beneficial when used productively.
40AStatements 1 and 2 are correct. Statement 3 is false because households and small producers can also benefit from credit.
41DAll three statements are correct. The impact of credit varies with its purpose and the borrower’s circumstances.
42AStatements 1 and 2 are correct. Statement 3 is false because credit can create repayment difficulties.

Topic 7 — Terms of Credit

QAnswerExplanation
43AStatements 1 and 2 are correct. Statement 3 is false because repayment period is an important part of loan obligations.
44AStatements 1 and 2 are correct. Statement 3 is false because collateral is directly related to lender risk.
45DAll three statements are correct. Borrowers need to consider the complete package of credit terms.
46CStatements 2 and 3 are correct. Statement 1 is false because a lower interest rate does not automatically make a loan best for every borrower.
47AStatements 1 and 2 are correct. Statement 3 is false because credit terms can significantly affect borrower risk.
48AStatements 1 and 2 are correct. Statement 3 is false because collateral does not guarantee successful repayment.
49DAll three statements are correct and together explain the major terms affecting credit.

Topic 8 — Formal Sources of Credit

QAnswerExplanation
50AStatements 1 and 2 are correct. Statement 3 is false because formal institutions operate within regulatory frameworks.
51AStatements 1 and 2 are correct. Statement 3 is false because formal lenders operate under applicable rules and regulations.
52AStatements 1 and 2 are correct. Statement 3 is false because access depends on various factors including repayment capacity and documentation.
53DAll three statements correctly describe banks as formal financial institutions that mobilise deposits and provide loans.
54AStatements 1 and 2 are correct. Statement 3 is false because formal credit may require documentation.
55AStatements 1 and 2 are correct. Statement 3 is false because merely increasing the number of banks does not guarantee effective access.
56DAll three statements correctly identify important features of formal credit.

Topic 9 — Informal Sources of Credit

QAnswerExplanation
57AStatements 1 and 2 are correct. Statement 3 is false because informal credit can carry high interest rates.
58AStatements 1 and 2 are correct. Statement 3 is false because easy access does not imply low cost.
59AStatements 1 and 2 are correct. Statement 3 is false because informal lenders are generally not subject to the same supervision as formal institutions.
60AStatements 1 and 2 are correct. Statement 3 is false because fewer procedures do not make informal credit automatically preferable.
61DAll three statements are correct. High interest can substantially increase repayment obligations and may contribute to debt traps.
62AStatements 1 and 2 are correct. Statement 3 is false because informal borrowers may have less formal legal protection.
63DAll three statements are correct. Quick access may be useful, but borrowers must still examine the cost and repayment conditions.

Topic 10 — Formal vs Informal Sources of Credit

QAnswerExplanation
64AStatements 1 and 2 are correct. Statement 3 is false because interest rates can differ considerably.
65AStatements 1 and 2 are correct. Statement 3 is false because accessibility does not automatically make informal credit economically better.
66AStatements 1 and 2 are correct. Statement 3 is false because the easiest loan to obtain may be expensive.
67AStatements 1 and 2 are correct. Statement 3 is false because borrowers should consider several factors, not just speed.
68DAll three statements correctly identify important factors in selecting credit.
69AStatements 1 and 2 are correct. Statement 3 is false because regulation, cost and terms make the two sources significantly different.
70AStatements 1 and 2 are correct. Statement 3 is false because formal credit is important for financial inclusion.

Topic 11 — Credit in Rural Areas and Debt Trap

QAnswerExplanation
71AStatements 1 and 2 are correct. Statement 3 is false because agricultural borrowing carries risks such as crop failure and price fluctuations.
72AStatements 1 and 2 are correct. Statement 3 is false because easy informal credit can sometimes worsen debt problems.
73AStatements 1 and 2 are correct. Statement 3 is false because even productive borrowing can lead to a debt trap under unfavourable conditions.
74AStatements 1 and 2 are correct. Statement 3 is false because productive borrowing does not eliminate agricultural risks.
75AStatements 1 and 2 are correct. Statement 3 is false because debt problems depend on interest, income, repayment capacity and other factors, not only the original loan size.
76AStatements 1 and 2 are correct. Statement 3 is false because rural households borrow for many purposes.
77AStatements 1 and 2 are correct. Statement 3 is false because affordable credit cannot eliminate agricultural risks such as weather or market uncertainty.

Topic 12 — Self-Help Groups

QAnswerExplanation
78AStatements 1 and 2 are correct. Statement 3 is false because SHGs primarily support people with limited financial resources, particularly poor households.
79AStatements 1 and 2 are correct. Statement 3 is false because SHG members are expected to repay loans.
80AStatements 1 and 2 are correct. Statement 3 is false because cooperation and collective responsibility are important to SHG functioning.
81AStatements 1 and 2 are correct. Statement 3 is false because SHGs have an important credit role as well as a savings role.
82DAll three statements are correct. SHGs promote savings, improve access to formal finance and provide credit opportunities.
83AStatements 1 and 2 are correct. Statement 3 is false because SHGs do not guarantee unlimited credit.
84DAll three statements are correct. Affordable and reliable credit is an important component of financial inclusion and can support both investment and financial security.