Chapter 20: Money and Credit — Online MCQ Test
SOCIAL SCIENCE · Grade 10 · CBSE(NCERT)
Practice Chapter 20: Money and Credit with a free chapter-wise online MCQ test.
This chapter covers: Money Currency Banking Credit Loans Deposits Collateral Interest Self help groups Financial institutions.
AI-generated questions from basic to board-exam level, with instant results and explanations.
Chapter 20: Money and Credit — Important Questions & Answers
What is the main function of money in an economy?
- A. It acts as a medium of exchange
- B. It replaces all forms of credit
- C. It stops the need for banks
- D. It fixes the price of every good
Answer: A. It acts as a medium of exchange
Money is accepted as a medium of exchange, making the buying and selling of goods and services easier.
Money is accepted as a medium of exchange, making the buying and selling of goods and services easier.
The situation where both parties agree to sell and buy each other's commodities is called:
- A. Collateral agreement
- B. Double coincidence of wants
- C. Demand deposit
- D. Formal credit
Answer: B. Double coincidence of wants
Double coincidence of wants occurs when two persons have goods that the other wants and are willing to exchange them.
Double coincidence of wants occurs when two persons have goods that the other wants and are willing to exchange them.
Modern forms of money mainly include:
- A. Grains and cattle
- B. Gold ornaments only
- C. Currency notes, coins and bank deposits
- D. Barter goods only
Answer: C. Currency notes, coins and bank deposits
Modern money includes currency notes, coins and deposits with banks that can be used for payments.
Modern money includes currency notes, coins and deposits with banks that can be used for payments.
In India, who issues currency notes on behalf of the Central Government?
- A. State Bank of India
- B. Reserve Bank of India
- C. Ministry of Education
- D. Commercial banks
Answer: B. Reserve Bank of India
The Reserve Bank of India issues currency notes on behalf of the Central Government.
The Reserve Bank of India issues currency notes on behalf of the Central Government.
Why is money preferred over barter in modern economies?
- A. Money creates double coincidence of wants
- B. Money eliminates the need for exchange
- C. Money removes the need for double coincidence of wants
- D. Money can be used only by banks
Answer: C. Money removes the need for double coincidence of wants
Money makes exchange easier because a seller can accept money and use it later to buy other goods, so double coincidence of wants is not required.
Money makes exchange easier because a seller can accept money and use it later to buy other goods, so double coincidence of wants is not required.
Banks keep only a small proportion of deposits as cash because:
- A. All depositors withdraw their money at the same time
- B. Most depositors do not withdraw their deposits at the same time
- C. Banks are not allowed to give loans
- D. Demand deposits cannot be withdrawn
Answer: B. Most depositors do not withdraw their deposits at the same time
Banks keep a small cash reserve for daily withdrawals and use the major portion of deposits to extend loans.
Banks keep a small cash reserve for daily withdrawals and use the major portion of deposits to extend loans.
A farmer needs a loan but has no land, livestock or other valuable asset to pledge. Which difficulty is he most likely to face from a formal lender?
- A. The bank will not ask for any documents
- B. The bank may hesitate to give a loan because there is no collateral
- C. The bank will automatically waive the loan
- D. The bank will issue currency notes to him
Answer: B. The bank may hesitate to give a loan because there is no collateral
Formal lenders often require collateral and documentation, making it difficult for poor borrowers without assets to access bank loans.
Formal lenders often require collateral and documentation, making it difficult for poor borrowers without assets to access bank loans.
Which statement best compares formal and informal sources of credit?
- A. Formal sources are regulated by the RBI, while informal sources are usually not regulated
- B. Informal sources always charge lower interest than banks
- C. Formal sources include only moneylenders and traders
- D. Informal sources require no repayment
Answer: A. Formal sources are regulated by the RBI, while informal sources are usually not regulated
Formal sources like banks and cooperatives are regulated by the RBI, whereas informal sources such as moneylenders are generally unregulated.
Formal sources like banks and cooperatives are regulated by the RBI, whereas informal sources such as moneylenders are generally unregulated.
Consider the statements: Statement I: Currency is accepted as a medium of exchange because it is authorised by the government. Statement II: No individual in India can legally refuse a payment made in rupees. Which option is correct?
- A. Both statements are true and Statement II supports Statement I
- B. Both statements are true but Statement II does not support Statement I
- C. Statement I is true but Statement II is false
- D. Statement I is false but Statement II is true
Answer: A. Both statements are true and Statement II supports Statement I
Indian currency is authorised by the government and is legal tender, so it is generally accepted as a medium of exchange.
Indian currency is authorised by the government and is legal tender, so it is generally accepted as a medium of exchange.
A bank receives Rs 10,000 as a deposit. It keeps a small proportion as cash reserve and lends the rest. Which outcome best describes this process?
- A. Deposits are destroyed because the bank cannot use them
- B. The bank uses deposits to create credit while keeping cash for withdrawals
- C. The bank must keep the entire amount idle in its lockers
- D. The depositor loses the right to withdraw money
Answer: B. The bank uses deposits to create credit while keeping cash for withdrawals
Banks accept deposits, keep a fraction as cash reserve, and use the major portion to provide loans, thereby creating credit.
Banks accept deposits, keep a fraction as cash reserve, and use the major portion to provide loans, thereby creating credit.