TOPIC 1: MONEY AS A MEDIUM OF EXCHANGE
Q1.
A farmer sells wheat for ₹20,000 and later uses the money to purchase a motorcycle. In this process, money is functioning as a __________.
Q2.
If a carpenter wants rice but the rice seller does not want furniture, direct exchange becomes difficult because of the problem of __________ coincidence of wants.
Q3.
Money allows a person to sell a commodity today and use the proceeds to purchase another commodity __________.
Q4.
In a barter transaction, the goods of one person are exchanged directly for the goods or services of __________ person.
Q5.
By allowing people to specialise in particular activities and exchange their output for other goods, money can promote __________.
Q6.
A person does not have to find someone who wants exactly what they are selling because money serves as an __________ in the exchange process.
Q7.
The difficulty of finding two people who simultaneously want each other’s goods is known as the problem of __________ coincidence of wants.
TOPIC 2: MODERN FORMS OF MONEY
Q8.
Currency notes and coins are examples of __________ money used in modern economies.
Q9.
The usefulness of modern currency depends greatly on people’s __________ that others will accept it.
Q10.
The ₹500 note can purchase goods worth ₹500 even though the paper itself has very little __________ value.
Q11.
In India, the Reserve Bank of India issues most currency notes, while the __________ issues the one-rupee note.
Q12.
Money provides a common __________ in which the prices of different goods and services can be expressed.
Q13.
For money to function effectively, it must be generally __________ by people in transactions.
Q14.
Modern currency is accepted not because of the high value of the material used to make it but because of its legal status and people’s __________ in it.
TOPIC 3: CURRENCY AND BANK DEPOSITS
Q15.
Money deposited in a bank account is called a bank __________.
Q16.
A bank records the deposits of its customers as its __________ because it owes this money to depositors.
Q17.
Banks keep only a small proportion of deposits as __________ so that they can meet the withdrawal requirements of customers.
Q18.
The remaining major portion of bank deposits can be used by banks for providing __________ to borrowers.
Q19.
A person who deposits money in a bank continues to have a __________ against the bank for the deposited amount.
Q20.
Bank deposits are important in modern economies because they can be used for making __________ without physically carrying currency.
Q21.
Banks act as an intermediary between people with surplus funds and people who need __________.
TOPIC 4: DEMAND DEPOSITS AND CHEQUES
Q22.
Deposits that can be withdrawn on demand, subject to account conditions, are called __________ deposits.
Q23.
A cheque is an instruction to a bank to make a payment from the account of the person who __________ the cheque.
Q24.
Demand deposits can function as money because they can be used to make __________.
Q25.
A cheque can reduce the need to carry large amounts of physical __________ during a transaction.
Q26.
A cheque cannot normally be successfully honoured if the issuer’s account does not have sufficient __________ or an applicable credit facility.
Q27.
When a cheque is processed, the bank may transfer funds from the payer’s account to the __________ account.
Q28.
Demand deposits and currency together form important components of __________ money.
TOPIC 5: LOAN ACTIVITIES OF BANKS
Q29.
Banks accept deposits from people and use a part of these funds to provide __________.
Q30.
Banks must retain some cash because depositors may want to __________ money from their accounts.
Q31.
The money charged by a bank from a borrower for using a loan is called __________.
Q32.
Banks earn income partly from the difference between the interest received from __________ and the interest paid to depositors.
Q33.
By accepting deposits and providing loans, banks act as __________ between savers and borrowers.
Q34.
Banks cannot safely lend all the deposits they receive because they must maintain sufficient __________ to meet withdrawal demands.
Q35.
The lending activity of banks increases the availability of __________ in an economy.
TOPIC 6: CREDIT AND ITS IMPORTANCE
Q36.
A farmer may use credit to purchase seeds and fertilisers before receiving income from the sale of the __________.
Q37.
When borrowed money is used for an activity that generates additional income, the credit is being used for a __________ purpose.
Q38.
A loan can become a burden when the borrower’s income is insufficient to meet the __________ obligations.
Q39.
Credit can help a producer overcome the time gap between expenditure on inputs and receipt of __________.
Q40.
The outcome of borrowing depends partly on the purpose for which the __________ is used.
Q41.
Credit can support economic development when it finances productive activities that increase __________ and income.
Q42.
A borrower who repeatedly takes a new loan to repay an old one may become trapped in a cycle of __________.
TOPIC 7: TERMS OF CREDIT
Q43.
The percentage charged by a lender on the amount borrowed is known as the __________ rate.
Q44.
An asset pledged by a borrower as security against a loan is called __________.
Q45.
The period within which a borrower is expected to repay a loan is called the __________ period.
Q46.
A borrower should compare the complete __________ of credit rather than considering only the amount of the loan.
Q47.
If the interest rate on a loan rises while all other conditions remain unchanged, the borrower’s repayment __________ generally increases.
Q48.
Collateral provides __________ to the lender against the possibility of non-repayment.
Q49.
Interest rate, collateral, documentation and repayment period are examples of the __________ of credit.
TOPIC 8: FORMAL SOURCES OF CREDIT
Q50.
Banks and cooperative societies are examples of __________ sources of credit.
Q51.
Formal financial institutions operate within an established system of rules and __________.
Q52.
The central bank that supervises and regulates the formal banking system in India is the __________ Bank of India.
Q53.
Formal lenders generally require proper __________ and records for credit transactions.
Q54.
Regulation of formal credit can provide borrowers with greater protection against certain __________ lending practices.
Q55.
Greater access to formal credit can reduce people’s dependence on __________ lenders.
Q56.
Banks mobilise deposits and provide loans, making them important institutions in the __________ credit system.
TOPIC 9: INFORMAL SOURCES OF CREDIT
Q57.
A local person who regularly lends money to borrowers without operating as a formal financial institution is commonly called a __________.
Q58.
Moneylenders, traders, employers, relatives and friends can all be __________ sources of credit.
Q59.
Informal lenders generally operate outside the same regulatory __________ that applies to formal financial institutions.
Q60.
Informal loans may be obtained quickly because they often involve fewer formal __________.
Q61.
A major disadvantage of informal credit can be a very __________ rate of interest.
Q62.
High interest rates can increase the total __________ burden on a borrower.
Q63.
A borrower should not choose an informal loan merely because it is easily __________.
TOPIC 10: FORMAL VS INFORMAL SOURCES OF CREDIT
Q64.
Formal credit is generally subject to greater government and institutional __________ than informal credit.
Q65.
Informal lenders may provide loans with fewer documents, making them more __________ in some situations.
Q66.
A loan that is easy to obtain is not necessarily __________ because its interest rate may be very high.
Q67.
Borrowers should compare interest rates, collateral and __________ conditions before selecting a loan.
Q68.
Formal sources generally provide a greater degree of regulatory __________ to borrowers.
Q69.
Informal sources may become exploitative when borrowers have few other __________ for obtaining credit.
Q70.
Greater availability of affordable formal credit can reduce dependence on __________ sources.
TOPIC 11: CREDIT IN RURAL AREAS AND DEBT TRAP
Q71.
Farmers may borrow money to purchase seeds, fertilisers and other agricultural __________.
Q72.
A poor harvest can reduce a farmer’s income and make loan __________ difficult.
Q73.
When a borrower takes a new loan to repay an earlier loan, the borrower may enter a debt __________.
Q74.
High interest rates can increase the amount that a borrower has to __________.
Q75.
Weather conditions, crop failure and changes in market prices can create __________ for agricultural borrowers.
Q76.
Rural households may borrow for emergencies such as illness, as well as for __________ activities.
Q77.
Affordable formal credit can reduce rural borrowers’ dependence on high-cost __________ lenders.
TOPIC 12: SELF-HELP GROUPS (SHGs) AND AFFORDABLE CREDIT
Q78.
Members of a Self-Help Group generally contribute small amounts regularly to create a common __________ fund.
Q79.
The pooled savings of an SHG can be used to provide small __________ to its members.
Q80.
SHGs encourage members to develop the habit of regular __________.
Q81.
Mutual trust and __________ responsibility are important for the successful functioning of an SHG.
Q82.
SHGs can be linked with __________ to help members obtain larger loans and formal credit.
Q83.
By providing an alternative source of credit, SHGs can reduce the dependence of poor borrowers on __________.
Q84.
Members may use SHG loans for small businesses and other __________-generating activities.
DETAILED ANSWER KEY
Topic 1 — Money as a Medium of Exchange
| Q | Answer | Detailed Explanation |
| 1 | medium of exchange | Money acts as an intermediary in the exchange of goods and services. The farmer does not need to directly exchange wheat for the motorcycle. |
| 2 | double | In barter, both parties must want what the other offers. Money removes this requirement. |
| 3 | later | Money allows the selling and buying decisions to take place at different times. |
| 4 | another | Barter involves direct exchange between two parties. One person’s goods are exchanged for the goods or services of another person. |
| 5 | specialisation | Money enables people to specialise in particular occupations and purchase other goods using the income earned. |
| 6 | intermediary | Money stands between the sale of one commodity and the purchase of another. |
| 7 | double | Double coincidence of wants means that both parties must want each other’s goods for direct barter to occur. |
Topic 2 — Modern Forms of Money
| Q | Answer | Detailed Explanation |
| 8 | currency | Currency consists of notes and coins used as a means of payment. |
| 9 | confidence | People accept money because they trust that others will accept it in future transactions. |
| 10 | intrinsic | The physical paper has very little intrinsic value compared with the purchasing power represented by the note. |
| 11 | Government of India | The Government of India issues the one-rupee note, while the RBI issues most other currency notes. |
| 12 | unit | Money serves as a common unit of account, making it possible to express and compare prices. |
| 13 | accepted | General acceptability is an essential characteristic of money. |
| 14 | confidence | Modern currency depends on legal recognition and people’s confidence in its acceptability. |
Topic 3 — Currency and Bank Deposits
| Q | Answer | Detailed Explanation |
| 15 | deposit | Money placed in a bank account is called a bank deposit. |
| 16 | liability | The bank owes the deposited amount to the customer, so deposits appear as liabilities on the bank’s balance sheet. |
| 17 | cash | Banks retain a proportion of deposits as cash to meet withdrawals. |
| 18 | loans | Banks use a substantial part of deposits to provide loans to borrowers. |
| 19 | claim | The depositor has a claim against the bank for the amount deposited. |
| 20 | payments | Bank deposits can be used for payments through cheques and other banking facilities. |
| 21 | credit | Banks connect people with surplus funds to people who need credit by accepting deposits and lending part of them. |
Topic 4 — Demand Deposits and Cheques
| Q | Answer | Detailed Explanation |
| 22 | demand | Demand deposits can generally be withdrawn when required, subject to account conditions. |
| 23 | issues | The person who writes and gives the cheque is the person issuing it. |
| 24 | payments | Demand deposits are part of modern money because they can be used for payments. |
| 25 | cash | Cheques and other banking methods reduce the need to carry large amounts of physical currency. |
| 26 | funds | A cheque normally requires sufficient funds or an applicable credit arrangement in the issuer’s account. |
| 27 | payee’s | The payee is the person or entity receiving the payment. |
| 28 | modern | Currency and demand deposits are important components of modern money. |
Topic 5 — Loan Activities of Banks
| Q | Answer | Detailed Explanation |
| 29 | loans | Banks use a portion of deposited funds to provide loans to borrowers. |
| 30 | withdraw | Banks need liquidity because customers may demand their money. |
| 31 | interest | Interest is the cost paid by the borrower for using borrowed funds. |
| 32 | borrowers | Banks receive interest from borrowers and generally pay interest to depositors. |
| 33 | intermediaries | Banks act as intermediaries between depositors and borrowers. |
| 34 | liquidity | Banks need enough liquid funds to satisfy withdrawal demands. |
| 35 | credit | Lending by banks increases the availability of credit to households, producers and businesses. |
Topic 6 — Credit and Its Importance
| Q | Answer | Detailed Explanation |
| 36 | crop | Farmers may borrow before harvesting and selling their crops, creating a time gap that credit helps bridge. |
| 37 | productive | Productive credit is used for activities that can generate income or output. |
| 38 | repayment | If income is insufficient, meeting repayment obligations can become difficult. |
| 39 | income | Credit can bridge the gap between spending on inputs and receiving income from sales. |
| 40 | loan | The outcome depends significantly on how the borrowed money is used. |
| 41 | output | Productive credit can increase production and income, contributing to economic development. |
| 42 | debt | Repeated borrowing to repay earlier loans can create a cycle of debt. |
Topic 7 — Terms of Credit
| Q | Answer | Detailed Explanation |
| 43 | interest | The interest rate determines the cost of borrowing. |
| 44 | collateral | Collateral is an asset pledged as security against a loan. |
| 45 | repayment | The repayment period indicates the time available to repay the loan. |
| 46 | terms | Borrowers should consider interest, collateral, documentation and repayment conditions together. |
| 47 | burden | A higher interest rate generally increases the total repayment amount when other conditions remain unchanged. |
| 48 | security | Collateral provides security to the lender against the risk of default. |
| 49 | terms | Interest, collateral, documentation and repayment period are important terms of credit. |
Topic 8 — Formal Sources of Credit
| Q | Answer | Detailed Explanation |
| 50 | formal | Banks and cooperative societies are recognised formal sources of credit. |
| 51 | regulations | Formal financial institutions function within established rules and regulations. |
| 52 | Reserve | The Reserve Bank of India is India’s central bank and regulates the formal banking system. |
| 53 | documentation | Formal credit generally involves proper documentation and records. |
| 54 | unfair | Regulation can protect borrowers from certain unfair or exploitative lending practices. |
| 55 | informal | Greater availability of formal credit can reduce dependence on moneylenders and other informal lenders. |
| 56 | formal | Banks are key institutions within the formal credit system. |
Topic 9 — Informal Sources of Credit
| Q | Answer | Detailed Explanation |
| 57 | moneylender | A moneylender is a common informal credit provider. |
| 58 | informal | These sources are generally outside the formal regulated financial system. |
| 59 | framework | Informal lenders do not generally operate under the same regulatory framework as formal financial institutions. |
| 60 | procedures | Fewer documents and procedures can make informal credit quicker to obtain. |
| 61 | high | High interest rates are a major disadvantage associated with some informal loans. |
| 62 | repayment | High interest increases the total amount the borrower has to repay. |
| 63 | available | Easy availability is not enough to judge whether a loan is suitable; its cost and terms must also be considered. |
Topic 10 — Formal vs Informal Sources of Credit
| Q | Answer | Detailed Explanation |
| 64 | regulation | Formal credit is subject to greater institutional and regulatory oversight. |
| 65 | accessible | Informal lenders may be more accessible in some situations because they may require fewer formal procedures. |
| 66 | cheap | A loan may be easy to obtain but expensive because of a high interest rate. |
| 67 | repayment | Repayment conditions are an important factor when comparing loans. |
| 68 | protection | Formal credit generally offers greater institutional and regulatory protection. |
| 69 | alternatives | Borrowers with few alternatives may become vulnerable to exploitative informal lenders. |
| 70 | informal | Affordable formal credit can reduce dependence on informal sources. |
Topic 11 — Credit in Rural Areas and Debt Trap
| Q | Answer | Detailed Explanation |
| 71 | inputs | Seeds, fertilisers and other agricultural inputs often require money before the crop generates income. |
| 72 | repayment | A poor harvest can reduce income and make repayment of loans difficult. |
| 73 | trap | A debt trap occurs when a borrower becomes dependent on further borrowing to meet previous obligations. |
| 74 | repay | High interest increases the amount that the borrower has to repay. |
| 75 | risks | Agriculture is exposed to weather, crop and market risks. |
| 76 | productive | Rural households may borrow for both consumption needs and productive activities. |
| 77 | informal | Affordable formal credit can reduce dependence on high-cost informal lenders. |
Topic 12 — Self-Help Groups
| Q | Answer | Detailed Explanation |
| 78 | savings | SHG members regularly contribute small amounts to create a common savings fund. |
| 79 | loans | The pooled savings can be used to provide small loans to members. |
| 80 | saving | Regular contributions help members develop disciplined saving habits. |
| 81 | collective | Collective responsibility, cooperation and mutual trust help an SHG function effectively. |
| 82 | banks | SHGs can be linked with banks, enabling members to access larger formal loans. |
| 83 | moneylenders | SHGs can provide an affordable alternative to high-cost moneylenders. |
| 84 | income | SHG loans may be used for small businesses and other income-generating activities. |