MONEY AND CREDIT TEST……

Ans) A shoe manufacturer wants to sell his shoes and buy wheat.
Then first he will exchange his shoes for money. Then he would buy
wheat. But imagine if he had to directly exchange his shoes for wheat.
He would have to look for a farmer who not only wants to sell his
wheat but also but shoes. this is known as double coincidence of
wants.

Ans) 1) workers who receive their salary at the end of the month they
have extra money in the beginning of month.
2) they can deposit their money in bank by opening a bank account in
their name.
3) the money is safe with the bank and it also gains interest.
4) they can be withdrawn on the demand at any time so they are
known as demand deposits.

Ans) 1) Modern forms of money include currency- paper notes and

coins.
2) the modern money is not made up of precious metals like gold and
silver.
3) the reserve bank of India issues currency on the behalf of the
government.
4) no person in India legally can refuse the payment made in
currency.

Ans)1) BENEFITS OF DEPOSITORS:

 People’s money is safe with the bank.
  Bank accepts the funds and pay the interests.
 People can withdraw money when they require.
2) BENEFITS OF NATION:
 Banks use this money to afford loans.
 There is a huge demand for loans for various economic
activities.

Ans)
 Banks are not present everywhere in the rural India.
 If they are present getting a loan from informal sector is much
easier than getting it from banks.
 Getting loans from banks require proper documentation and
collateral. Documentation prevents the poor from getting loans
from banks.
 Whereas the informal lenders know borrowers personally and
give loans without documentation.
 They keep no documents, charge high rates, and harass poor
borrowers.
Ans)1) DEMERITS:
 Helps to meet the working capital needs of the production.
 Helps to finish production on time.
 Low interest rates.
 Helps in ongoing expenses.
2) DEMERITS
 Documents can cause problem in rural areas.
 Collateral issues.
 Getting loans is difficult.
Ans) credit is an agreement in which the lender supplies the borrower
with money or loan.
 1) Credit as a source of asset: suppose a shoe manufacturer gets a
bulk order on the Diwali festival. He would need labour, raw
materials and leather. He would ask the leather seller to pay him
in a month’s time. Then he will ask for advance from the trader.
He will repay by getting full payment and will enjoy a good
profit.

2) Credit as a source of debt: suppose a farmer takes a loan from an

informal source to yield his field. If his yield gets spoiled by
pests and failure. He would have to retake a loan to sow his field
again. The next year he would get a small profit. But he would
not be able to repay his earlier loan leading him to be in the debt
trap.

In the case of shoe manufacturer, credit plays a vital and

important role but in the case of farmer it pushes him in such a
situation where repaying the loan is nearly impossible.

Ans) Self Help Groups are