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Money And Credit

Question

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Answer the questions asked below:

(i)Why are transactions are made in money?

(ii)Why is money is called a medium of exchange?

(iii)What is the most significant feature of the barter system?

Solution

(i) Because money is easily acceptable. A person holding money can easily exchange it for any commodity or service that he or she might want.

(ii) Because it acts as an intermediate in the exchange process.

(iii) Double coincidence of wants.

Some More Questions From Money and Credit Chapter

Manav needs a loan to set up a small business. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss.

In India, about 80 per cent of farmers are small farmers, who need credit for cultivation.

(a) Why might banks be unwilling to lend to small farmers?

(b) What are the other sources from which the small farmers can borrow?
(c) Explain with an example how the terms of credit can be unfavourable for the small farmer.

(d) Suggest some ways by which small farmers can get cheap credit.

Majority of the credit needs of the _________ households are met from informal sources.

_________ costs of borrowing increase the debt-burden.

_________ issues currency notes on behalf of the Central Government.

Banks charge a higher interest rate on loans than what they offer on ________.

_________ is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.

In a SHG most of the decisions regarding savings and loan activities are taken by:

Formal sources of credit does not include:

Why do we need to expand formal sources of credit in India?

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