Class 10 Economics Chapter 3 MCQ

This article is determined to provide you with Class 10 Economics Chapter 3 MCQ. These MCQs can be very helpful for your class 10 board exams. Use these to score well on your exams and achieve the best possible marks. I scored 98 in my Class 10 social science exams, and below I have provided the study materials for Class 10 economics that I personally used for my preparation of Class 10 Economics Chapter 1 MCQ. If you use these Sectors of the Indian Money and Credit Important MCQs, you can also get good marks.

CHAPTER 3 : MONEY AND CREDIT

Table of Contents

1. What is the essential feature of a barter system?

(a) Use of money as a medium of exchange. (b) Double coincidence of wants. (c) Promise to pay money later. (d) Use of cheques for transactions.

Answer: (b) Double coincidence of wants.

2. How does money solve the problem of double coincidence of wants?

(a) By acting as a unit of account. (b) By acting as a store of value. (c) By acting as a crucial intermediate step in the exchange process.

(d) By being authorized by the government.

Answer: (c) By acting as a crucial intermediate step in the exchange process.

3. Since money acts as an intermediate in the exchange process, it is called a:

(a) Store of value. (b) Unit of account. (c) Medium of exchange.

(d) Standard of deferred payment.

Answer: (c) Medium of exchange.

4. Modern forms of money include:

(a) Grains and cattle. (b) Gold, silver, and copper coins. (c) Currency (paper notes and coins).

(d) Punch-marked coins.

Answer: (c) Currency (paper notes and coins).

5. Why is modern currency accepted as a medium of exchange?

(a) It is made of precious metals. (b) It has its own use in everyday life. (c) It is authorized by the government of the country.

(d) It is easy to carry.

Answer: (c) It is authorized by the government of the country.

6. In India, which institution issues currency notes on behalf of the central government?

(a) The State Bank of India. (b) The Ministry of Finance. (c) The President of India. (d) The Reserve Bank of India.

Answer: (d) The Reserve Bank of India.

7. Deposits in bank accounts that can be withdrawn on demand are called: (

a) Fixed deposits. (b) Recurring deposits. (c) Demand deposits.

(d) Time deposits.

Answer: (c) Demand deposits.

8. A paper instructing the bank to pay a specific amount from a person’s account to another person is called a:

(a) Demand draft. (b) Cheque.

Answer: (b) A cheque.

9. What is the main source of income for banks?

(a) The interest they pay to depositors.

(b) The service charges on accounts.

(d) Government grants and subsidies.

Answer: (c) The difference between the interest charged from borrowers and the interest paid to depositors.

10. Banks in India these days hold about what percentage of their deposits as cash?

(a) 5 percent.

(b) 10 percent. (c) 15 percent. (d) 20 percent.

Answer: (a) 5 percent.

11. The agreement in which a lender supplies a borrower with money, goods, or services in return for the promise of future payment is known as:

(a) Barter. (b) Investment. (c) Credit (loan).

(d) Deposit.

Answer: (c) Credit (loan).

12. In Swapna’s case, the failure of the crop led to a situation commonly called a:

(a) Profit trap. (b) Credit boom. (c) Debt-trap.

(d) Capital gain.

Answer: (c) A debt-trap.

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

(a) Interest. (b) Principal. (c) Installment. (d) Collateral.

Answer: (d) Collateral.

14. Which of the following is NOT a part of the ‘terms of credit’? (a) Interest rate. (b) Collateral. (c) The borrower’s age. (d) Mode of repayment.

Answer: (c) The borrower’s age.

15. Besides banks, what is the other major source of cheap credit in rural areas?

(a) Moneylenders. (b) Traders. (c) Landowners. (d) Cooperative societies.

Answer: (d) Cooperative societies.

16. Loans from banks and cooperatives are grouped under:

(a) Informal sector loans. (b) Formal sector loans.

Answer: (b) Formal sector loans.

17. Which of the following is a source of informal sector credit?

(a) Banks. (b) Cooperatives. (c) Moneylenders, traders, and employers.

(d) National Bank for Agriculture and Rural Development (NABARD).

Answer: (c) Moneylenders, traders, and employers.

18. Which organization supervises the functioning of formal sources of loans in India?

(a) The Central Government. (b) The State Government. (c) The Reserve Bank of India (RBI).

(d) The Supreme Court of India.

Answer: (c) The Reserve Bank of India (RBI).

19. Compared to formal lenders, the interest rates charged by most informal lenders are: (a) Much lower. (b) Slightly lower. (c) The same. (d) Much higher.

Answer: (d) Much higher.

20. According to Graph 2, which households in urban areas take the highest percentage of loans from informal sources?

(a) Rich households. (b) Well-off households. (c) Households with a few assets. (d) Poor households.

Answer: (d) Poor households.

21. What is a major reason that prevents the poor from getting bank loans?

(a) They do not want to take loans. (b) The interest rates are too high. (c) The absence of collateral.

(d) Banks are not present in their areas.

Answer: (c) The absence of collateral.

22. A typical Self-Help Group (SHG) has how many members?

(a) 5-10 members. (b) 15-20 members.

Answer: (b) 15-20 members.

23. How do Self-Help Groups (SHGs) help borrowers overcome the problem of a lack of collateral?

(a) They provide the collateral themselves. (b) Banks are willing to lend to SHGs without collateral because of their regular savings and group responsibility for repayment.

(d) They only provide very small loans that do not require collateral.

Answer: (b) Banks are willing to lend to SHGs without collateral because of their regular savings and group responsibility for repayment.

24. The Grameen Bank of Bangladesh was founded by:

(a) Amartya Sen. (b) Muhammad Yunus.

Answer: (b) Muhammad Yunus.

25. Almost all of the borrowers of the Grameen Bank of Bangladesh are:

(a) Men from urban areas. (b) Women from the poorest sections of society.

Answer: (b) Women from the poorest sections of society.

26. In the example of M. Salim, the shoe manufacturer, credit played a:

(a) Negative and destructive role. (b) Neutral role. (c) Vital and positive role.

(d) Minor and insignificant role.

Answer: (c) Vital and positive role.

27. What is an important function of the Reserve Bank of India (RBI)?

(a) To provide loans directly to the public.

(b) To ensure that banks give loans not just to profit-making businesses but also to small cultivators.

(d) To print all the coins in the country.

Answer: (b) To ensure that banks give loans not just to profit-making businesses but also to small cultivators.

28. In a cheque transaction, how is the money transferred?

a) Through physical delivery of cash by the bank. (b) From one bank account to another bank account.

Answer: (b) From one bank account to another bank account.

29. The modern forms of money—currency and deposits—are closely linked to the working of the:

(a) Stock market. (b) Modern banking system.

Answer: (b) Modern banking system.

30. In India, during November 2016, which currency notes were declared invalid in a process known as ‘demonetisation’?

(a) Rs. 100 and Rs. 500. (b) Rs. 500 and Rs. 1,000.

Answer: (b) Rs. 500 and Rs. 1,000.

31. In the story of Arun, the medium farmer, what was the annual interest rate on his bank loan?

(a) 60% per annum. (b) 36% per annum. (c) 8.5% per annum.

(d) 5% per month.

Answer: (c) 8.5% per annum.

32. The process of encouraging the use of bank deposits instead of cash for transactions is a move towards:

(a) A barter system. (b) Demonetisation. (c) Digital transactions.

(d) Informal credit.

Answer: (c) Digital transactions.

33. What is the main reason banks need to lend more in rural areas?

(a) To compete with urban banks. (b) To reduce the dependence on informal sources of credit.

Answer: (b) To reduce the dependence on informal sources of credit.

34. According to Graph 1, what is the largest source of credit in rural India?

(a) Moneylenders. (b) Cooperative Banks and Society. (c) Landlords. (d) Commercial Banks.

Answer: (d) Commercial Banks.

35. A higher cost of borrowing from informal lenders means:

(a) Borrowers have more income left for themselves. (b) A larger part of the borrower’s earnings is used to repay the loan.

Answer: (b) A larger part of the borrower’s earnings is used to repay the loan.

36. Besides helping women become financially self-reliant, what other benefit do regular SHG meetings provide?

(a) A place to sell their products. (b) A platform to discuss and act on various social issues like health and domestic violence.

Answer: (b) A platform to discuss and act on various social issues like health and domestic violence.

37. When Salim obtains a loan in cash from the large trader as an advance payment, it is an example of:

(a) A formal sector loan. (b) A loan from a cooperative. (c) Credit from a trader, an informal source.

(d) A loan with collateral.

Answer: (c) Credit from a trader, an informal source.

38. The law in India legalizes the use of which currency as a medium of payment that cannot be refused in settling transactions?

(a) Dollar. (b) Euro. (c) Rupee.

(d) Pound.

Answer: (c) Rupee.

39. How do banks mediate between two groups of people?

(a) Between employers and employees.

(b) Between those who have surplus funds (depositors) and those who are in need of funds (borrowers).

(d) Between the government and the public.

Answer: (b) Between those who have surplus funds (depositors) and those who are in need of funds (borrowers).

40. What is the main reason that the repayment of crop loans is crucially dependent on the income from farming?

(a) Farmers usually take loans at the beginning of the season and repay after the harvest.

(b) Banks offer lower interest rates to farmers.

(d) Farmers do not have any other source of income.

Answer: (a) Farmers usually take loans at the beginning of the season and repay after the harvest.

41. In the village of Sonpur, what interest rate did the moneylender charge Shyamal?

(a) 3% per month. (b) 5% per month (60% per annum).

Answer: (b) 5% per month (60% per annum).

42. Why are informal lenders often willing to give a loan without collateral?

(a) They are supervised by the RBI. (b) They know the borrowers personally.

(c) They charge very low interest rates. (d) They are not interested in getting their money back. Answer: (b) They know the borrowers personally.

43. SHGs can become eligible for a bank loan if:

(a) They have more than 50 members. (b) All members are from the same family. (c) The group is regular in savings for a year or two.

(d) They have a powerful political leader as a member.

Answer: (c) The group is regular in savings for a year or two.

44. What does the RBI monitor to ensure banks have enough cash for depositors?

(a) That banks maintain a minimum cash balance.

(b) The number of loans given by banks. (c) The profits made by banks. (d) The number of employees in banks.

Answer: (a) That banks maintain a minimum cash balance.

45. What happens when a person deposits a cheque in their bank account?

(a) They receive cash immediately over the counter. (b) The money is transferred from the payer’s bank account to their account in a couple of days.

Answer: (b) The money is transferred from the payer’s bank account to their account in a couple of days.

46. The interest rate, collateral, documentation, and mode of repayment together are called:

(a) Terms of credit.

(b) Loan agreement. (c) Banking regulations. (d) Credit score.

Answer: (a) Terms of credit.

47. In the example of Megha’s house loan, what was used as collateral?

(a) Her employment records and salary. (b) The papers of the new house.

Answer: (b) The papers of the new house.

48. What is the primary problem with informal credit sources like moneylenders?

(a) They are not easily accessible. (b) They require too much documentation. (c) They charge very high rates of interest and can harass borrowers.

(d) They do not give loans for consumption purposes.

Answer: (c) They charge very high rates of interest and can harass borrowers.

49. Cheap and affordable credit is crucial for: (a) The country’s development.

(b) The profitability of banks only. (c) The rich households only. (d) Discouraging small-scale industries.

Answer: (a) The country’s development.

50. What is a key benefit of digital transactions?

(a) They eliminate the need for banks. (b) They increase the requirement for cash. (c) They can reduce the requirement of cash and help control corruption.

(d) They are only accessible to rural populations.

Answer: (c) They can reduce the requirement of cash and help control corruption.

Assertion and Reason Questions

Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as: (a) Both A and R are true and R is the correct explanation of A. (b) Both A and R are true but R is not the correct explanation of A. (c) A is true but R is false. (d) A is false but R is true.

1. Assertion (A): In a barter system, double coincidence of wants is an essential feature.

Reason (R): In a barter system, goods are directly exchanged without the use of money, so both parties must agree to sell and buy each other’s commodities.