FMM Reference Material Class IX

CLASS- IX

Unit1: Money-What it is?

1. What is money?

Ans: Money is a medium of exchange. It allows us to satisfy our needs and wants. Money is actually
what money does.

2. What is symbolic money?

Ans: Early in pre-history, people began exchanging items that had no real value, but which had only
agreed – upon value or symbolic value. Examples are cowrie shells, salt, snails etc.

3. What is Minting?

Ans: The Lydians in the 7th century used lumps of metals stamped with pictures to confirm their
weights. The process of stamping is called minting.

4. What is plastic money?

Ans: Plastic money is a term that is used predominantly in reference to the hard plastic cards we use
every day in place of actual bank notes. They can come in many different forms such as cash cards,
credit cards, debit cards, pre-paid cash cards and store cards.

5. What do you mean by barter system? State its limitation.

Ans: Initially, people had to exchange one commodity with another commodity. But this kind of
transaction was possible only when commodities were available according to their needs.

6.Which country first invented paper money and when it was discontinued?

Ans: The earliest paper money was invented in China during 10th the century. But in 1445 AD,China
discontinued paper money due to increase in price.

7.Who introduced paper money in India and when?

Ans: The Moguls in India introduced paper money in the year 1236 AD.

8. Why creation of money was made possible?

Ans: The creation of money was made possible because human beings had the capacity to accord
value to symbols
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 9.Explain the sequence of evolution of money.

Ans (i) Barter System—To get a particular commodity, people had to exchange it with another
commodity. But this kind of transaction was possible only when commodities were available according
to our needs and wants.

(ii) Symbolic Money : To overcome the limitation of barter system people started using symbolic
money which had no real value but which had only agreed upon value. Examples are Salt, Snails,
wampum etc

(iii) Metals: The ancient Egyptians used weighed amounts of precious metals.

(iv) Coins: The earliest coins were made in Turkey in the 7th century B.C. They used lump of metals
stamped with pictures to confirm their weight. The process of stamping is called Minting.

(v) Paper Money : The earliest paper money was invented in China during the 10th century. Paper
money was adopted in Europe much later than in Asia. The first paper mill in Europe was established in
Spain in 1151 A.D. The Moguls in India introduced paper money in the year 1236 AD. The Sanskrit word
RUPYAKAM means coin of silver.

(vi) Plastic Money: Plastic money is a term that is used predominantly in reference to the hard plastic
cards we use every day in place of actual bank notes. They can come in many different forms such as
cash cards, credit cards, debit cards, pre-paid cash cards and store cards.

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Unit-2

Money-Exchange System

1. What led to the concept of specialization?

Ans: Initially people were concerned about their survival. But over time, people and societies sought
ways to improve their economic lot in life. They sought ways to produce more and better goods and
services and to produce them efficiently so that better use was made of resources. As a result of this
search for better ways, a major evolution occurred-specialization.

2. What do you mean by specialization?

Ans: Specialization means people become more skilled and can produce more.

3. What led to concept of division of labour? Explain it.

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Ans: Through specialization and trade, more is produced, better goods and services are produced and
the standard of living in a society rises. Specialization is associated with the concept of the division of
labour, that is, labour becomes specialized and concentrated on certain activities. Rather than trying to
do everything, a person concentrates his or her labour skills on one activity or on just a few activities in
which he or she is good at.

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Unit-3
Key Characteristics of Money
1. What is the criterion for anything to serve as money?
Ans: The most important to serve anything to serve as money is that it must be readily
acceptable.
2. Explain how money serves as a standard of value or a unit of Account.
Ans: Earlier people used to exchange one commodity with another commodity and after
that symbolic money was used as medium of exchange which had agreed value between the
traders or it was limited to particular locality. But with the invention of money, money is
considered as a standard value of any tangible item .If the computer cost is set at Rs
35000,it is the common standard value of the computer for anyone who wants to buy the
computer.
3. What do you mean by Store value of money?
Ans: People used commodity money in earlier times which were mostly perishable in
nature. Now, with the invention of money, it can be stored for future and so purchasing can
be postponed. Moreover, if the money is stored and invested by postponing purchase, it will
grow which is unlike commodity money.
4. State some general characteristics for acceptability as money.
Ans (i) It must be durable.
(ii) It should be relatively scarce.
(iii) It has to be easy to transport
(iv) It must be divisible into usable quantities or fractions.
5. What do you mean by Trading?
Ans: Trading means buying and selling of goods and services.

Unit-4:WHAT IS FINANCIAL PLANNING?

Q.1. Define Financial Planning.

Ans: Financial Planning is the ongoing process of defining goals, developing a plan to achieve them, and
putting the plan into action. It is the blueprint for handling all aspects of our money, including spending,
saving and investing.

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Q.2. State the difference between needs and wants.

Ans: Needs are essentials, the basics of life like food, clothing and a place to live etc. Needs and
resources are limited.

Wants simply increase the quality of living and wants are unlimited.

Q.3. Your needs can be someone`s wants- Justify it.

Ans: It is true. People define needs and wants differently, depending on their own values. Your values
are simply the beliefs and practices in your life that are very important to you.

Q.4.Write the steps in financial planning in proper order;

Ans: Setting goals-Analyzing Information- Creating a Plan-Implementing the Plan-Monitoring and

Modifying the plan.

Q.5. Goal Setting should be in a SMART Way, define it.

Ans: It should be Specific like someone wants to buy a motorcycle in another two years. Here, buying
motorcycle is specific.

It should be Measurable like it must be known how much someone requires to achieve his/her set goal.
e.g. someone requires Rs 60000 to to buy a motorcycle.

It should be Attainable i.e, it must be reachable to the person, i.e, saving of Rs 2500 per month out of
his salary of Rs 20000 in another two years.

The goal set must be Realistic i.e, It should have the possibility of doing

The goal set by someone should be Time bound like he/she will buy a motorcycle within another two
years.

Q.6. Discuss the steps briefly in financial planning.

• Setting the Goals in SMART way

• Analyzing Information: Here the emphasis is given to analyze information about oneself, i.e.
what is the present financial position of the person.
• Create Plan: After analyzing own Financial position one can match his resources with the goal.
• Implementing the plan: To achieve the goal it has to be implemented otherwise it will be on
paper only.
• Monitor and modify the plan: After implementing the plan it has to be monitored continuously
and if necessary the goal has to be revised. e.g. if saving of Rs 2500 p.m. for buying a motorcycle
may not be possible because of some unexpected expense in a particular month, then double
amount can be saved in the next month by curtailing other expenses.
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Q.7. Define short term, Intermediate term and Long term goal.

Ans: Short term goal: Goal planned to achieve within a day or a week or maximum within three
months.

Intermediate goal: Goals planned to achieve in few months or within a Year. Its range is in between
three months to one year.

Long term goal: Goals planned to achieve after a year.

UNIT-5: WHAT IS INCOME

Q.1.What is budget?

Ans: A budget is a plan for managing money during a given period of time. It can be monthly , half
yearly or yearly.

Q.2. What is Income? Name the sources of Income .

Ans: Income may be defined as the true increase in the amount of wealth which comes to a person
during a fixed period of time.

Sources of Income:

(a) Income from salary (b) Income from house property (c) Profit and Gains of Business or
Profession

(d) Income from capital Gain (e) Income from other Sources.

Q.3. What is Gross Income?

Ans: Gross Income is the total income received by a person from the above sources.

Q.4. What is net Income?

Ans: Net Income is the income after deduction allowed under the provision of Income Tax from the
gross income.

Q.5. What is disposable income?

Ans: It is the amount a person receive actually , i.e. the net income which is available to him for
spending or saving.

Q.6 What do you mean by direct tax and indirect tax?

Ans: Direct Tax is the tax imposed by the government on one person and paid by the same person.
Example: Income tax for the salary earned by a person.
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Indirect Tax is the tax imposed by the government on one person and actually paid by another person.
Example: Goods and Service Tax.

Q.7. How the Taxes collected by the Government are utilized?

Ans: Taxes are utilized by the Government for public spending like welfare scheme, education system,
infrastructure development, employment provision etc.

Unit-6

Expenses

Q.1. What is expense?

Ans: The money spent to satisfy needs and wants may be termed as money going out or otherwise
called expenses.

Q.2. State different types of expenses with example.

Ans: Variable expenses: It can be changed due to some reasons like usage, consumption etc. which
means a person can have some control over it. Example, fooding expenses etc.

Fixed Expenses: Fixed expenses are fixed in nature and over which a person cannot have control and
it is not depending on usage or consumption. Example, house rent.

Q.3. What is Cash Budget?

Ans: It is a statement showing the inflow of Cash from different source of income and outflow of Cash
which are required to meet the variable and fixed expenses during a particular period.

Q.4. Define the concept “P.Y.F.”

Ans: “P.Y.F” stands for pay yourself first. The moment we earn, we can set aside a fixed sum of money
in the form of savings regularly or every month depending on the time of earning so that we can achieve
our financial goals. It is nothing but savings regularly before making plan for any spending.

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UNIT-7

WHAT IS A BANK?

Q. 1. What is Bank and what does it do?

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 Ans: A bank is a place where someone can deposit money for saving and safe-keeping and withdraw it
when necessary. Banks pay interest to Depositor ( Account holder) in return for depositing the money. If
an accountholder needs money over and above his saving, then banks also lend money to him in the
form of loan against interest.

Q.2. How can one deposit and withdraw money from bank?

Ans: Deposits ( cash or cheque) can be made in a particular bank account by using pay in slip which
contains details of account holder like his name, account number, bank branch name apart from other
details like amount to be deposited, cheque number of the cheque which are to be deposited,
depositors signature.

Money from bank can be withdrawn by ATM, by withdrawal form which contains details like name of
account holder, his account number, date of withdrawal, amount and his signature. Money can be
withdrawn from bank by using cheque also writing “SELF”.

Q.3. Name the documents given to Account-holder after opening Bank account.

Ans: (i) Pass Book (ii) Cheque Book (iii) ATM card or debit card.

Q.4. State the difference between Bearer Cheque and A/C Payee Cheque.

Ans: Bearer cheque means payee ( who receive the money) is the person whose name is appearing in
the cheque and who carries the cheque to the bank to encash it.

A/C Payee cheque means the amount mentioned in the cheque cannot be encashed over the counter by
the bearer of the cheque, rather the amount will be credited to the account-holder account whose
name is appearing in the cheque.

Q.5. State the types of Bank accounts.

Ans: Savings Bank account: This account is opened by generally individual in bank which offers low
interest rate. One can deposit and withdraw any amount of money anytime. But savings bank account
may have some restrictions like limited number of deposits and withdrawals during a particular period.

Current Account: This type of account is generally opened by businessmen, companies . The
balance maintained in these accounts do not earn any interest. Accountholders get the benefit of more
number of deposits and more number of withdrawals during a particular period. Moreover, the account
holders get the facility to overdraw from their current account.

Fixed Deposits: In a fixed deposit, the depositor invests a lump sum amount with the bank for a
predetermined period. The bank offers interest for the same. This interest rate is higher than what is
offered on the savings bank account. For premature withdrawal, bank will offer lower interest rate.

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Q.6. State the benefits of electronic banking.

Ans: (i) Checking bank balances (ii) Checking the banking transactions (iii) Bill payment facilities like
telephone bill payment. (iv) Money transfer from one bank account to another bank account.

Unit- 8

WHY SAVE ?

Q.1.What is savings?

Ans: Savings is keeping aside a part of the money you earn for future needs. Savings can be termed as
disposable income ( income after taxes) minus spending.

Q.2. What do mean by The Rule of 72 or doubling period?

Ans: The Rule of 72 is a simplified way to determine how long a saving will take to double, given a rate of
interest.

Q.3. Calculate by using Rule of 72, the rate of return when Rs 500 becomes Rs 1000 in 6 years.

Ans: Doubling period= 72/ Interest rate

Or, Interest rate= 72/ Doubling period

Or, Interest rate=72/6

Or, Interest rate= 12%.

Q.4. State the difference between simple interest and compound interest.

Ans: Simple interest is the interest paid only on the principal amount borrowed and compound interest
is paid on the original principal and on the accumulated past interest.

UNIT-9

SETTING GOALS

Q.1. What is a Goal?

Ans: Goals can be defined as things we want to achieve in life, towards which we direct effort.

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Q.2. What do mean by SMART Goal?

Ans: SMART Goals mean

Specific- It should be specific not general.

Measurable- We can tell when we have completed.

Achievable- It should be within our means.

Realistic- It is based on resources available to us.

Time bound-It should be completed within time frame specified.

UNIT-10

SYSTEMATIC SAVINGS AND INVESTMENTS

Q.1.Whai is Investment?

Ans: Investments means employment of funds in Financial or Real assets with an element of risk
involved in respect of return and the principal amount with the hope of deriving future benefits.

Q.2. Name the types of assets with examples in which investment can be made.

Ans: (i) Financial assets: e.g. Equity Shares, Debentures, provident Fund investment, Insurance policies
etc.

(ii) Real assets: e.g. Real estate, Gold, silver, Stamps, coins etc.

Q.3. What is Speculation?

Ans: Short term investments are known as speculation. The speculator makes use of the fluctuations in
the movement of price of an asset and has high risk. There are mainly two categories of speculators in
stock market namely bulls and bears.

Q.3.Why investment is necessary?

Ans: (i) To earn above inflation.

(ii) To get tax advantage.

(iii) To get return on investment.

(iv) To create collateral (additional) security for future needs.

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Q.4. What do you mean by Time value of money ?

Ans: Time value of money is a concept that addresses the way the value of money changes over a
period of time. Finding Amount from A=P(1+r/100)n is the future value of money and finding principal
from the given formula is the present value of money.

Q.5. What is Systematic Investment Plan (SIP)?

Ans: Systematic Investment Plan is the investment of a fixed amount in any of the financial assets at
regular interval. It is the the simple and timely investment strategy for accumulating wealth and capital
appreciation.

Q.6. What is the present value of Rs 121 to be received after 2 years, when discounted at 10% p.a?

Ans: We know that Amount=Principal(1+r/100)2

Or, 121=Principal (1+10/100)2

Or, 121= Principal(1.10)2

Or, 121/(1.10)2= Principal

Or, 121/1.21= Principal

Or, Principal= 100.

Unit-11

MAKING A BUDGET

Q.1.What do you mean by Budget?

Ans: A budget is a plan which helps us to manage our limited financial resources more efficiently so that
we can achieve our goals.

Q.2. State the difference between Discretionary and Non-Discretionary expense.

Ans: Discretionary expense is an expense where we can have better control like fooding expense and
Non Discretionary expense is an expense which is fixed in nature and we have no or very less control
over it like House Rent .

Q.3. What is Budget Review?

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Ans: After preparing the budget it has to be reviewed continuously to see if there is any deviation
between inflow and outflow of cash and in case of deviation the budget has to be revised to suit the
needs.

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