NCERT Solutions for Class 10 Economics Chapter 3 Money and Credit

Money and Credit Class 10 NCERT Solutions Economics Chapter 3

NCERT Books Solutions for Class 10 Economics Chapter 3 Money and Credit

NCERT Books Solutions for Class 10 Economics Chapter 3 Money and Credit is the first stepping stone for a student in the competitive world. With the introduction of the CBSE Board Exam for class 10 a few years back, this has become an important gateway for a student. Based on the results of class 10th a student selects his future stream of Science, Commerce or Arts suiting his interest.

NCERT Solutions for Class 10 Economics Chapter 3 Money and Credit

Takshila Learning provides you with detailed and well explained NCERT Solutions for Class 10 Social Science of each chapter of each subject for NCERT Class 10. These NCERT Solutions help you to easily understand every concept so that you can score high in your CBSE Class 10 Board Exams.

Below you can find the NCERT solution for Class 10 Economics. You can get a Solution for the all-important question of “Money and Credit”

Q1. In situations with high risks, credit might create further problems for the borrower. Explain.

Answer: In high-risk situations, the loan can cause further problems for the borrower. Credit includes a fixed amount of loan that is taken from a lender at a higher interest rate. If a failure occurs and the borrower suffers a loss, it subsequently falls into the debt trap. This is known as a date trap. The borrower has to repay the loan with the interest charged by the lender and he further falls into the debt trap, adding to the problems for the borrower. The borrower also has to sell a part of his land to repay the loan.

Q2. How does money solve the problem of double coincidence of wants? Explain with an example of your own.

Answer: What one person wants to sell is what the other wants to buy, such a case is known as a double coincidence of wants. In the barter system, where goods are exchanged directly without the use of money, double coincidence of wants is an essential feature. Money solved the problem of double coincidence of wants because after the introduction of money, people used money as an intermediate to buy or sell things and did not require any specific buyer or seller to exchange products. For example, a trader wishes to sell 10 sacks full of rice and hopes that it will be found in exchange for five sacks of grain. It would be very difficult to find a suitable buyer to sell rice sacks for grain. However, money will solve this problem and the businessman can sell rice sacks to someone,The one who needs it and in return he buys the grain from the rice buyer.

Q3. How do banks mediate between those who have surplus money and those who need money?

Answer: Banks mediate between those who have surplus funds (depositors) and those who need money (borrowers) by lending money to the needy. People can open accounts in banks and banks use that money to meet people’s loan needs. A higher interest rate is charged to the borrower and it is paid to the depositor in the form of interest for the deposit amount.



Q4. Look at a 10 rupee note. What is written on top? Can you explain this statement?

Answer:”Reserve Bank of India” and “Guaranteed by the Central Government” are written at the top of the 10 rupee note. The currency in India is issued by the country’s central bank, in the case of India; the Reserve Bank of India is the country’s central bank. This currency is issued by the central government and these are both the authorities responsible for issuing currency and currency in India.



Q5. Why do we need to expand formal sources of credit in India?

Answer: Formal sources of credit are government-authorized organizations that are eligible to lend money to people. Expanding formal sources of credit in India is important as informal sources are not registered and lend money to people at very high interest rates which is unfair and should not be practiced.If formal sources of loans are increased, people will be able to borrow money at lower interest rates and will not be liable to do any additional work for the borrower. Especially in India, if formal sources of credit are extended, people will be able to take loans and use them for the development of the country.


Q6. What is the basic idea behind the SHGs for the poor? Explain in your own words.

Answer: Self Help Groups (SHGs) have been set up in India with the objective of rural poor, especially women. A typical self-help group consists of 15–20 people from the same neighborhood who save some money from their daily salary and gather them together. People can borrow money from these groups during emergencies or need and they charge minimum interest rate from the borrowers.Once SHGs have managed to save the defined amount, they are also eligible to take loans from banks. The main objective of starting these self-help groups was to increase small scale employment opportunities for rural people so that they could start a small business to earn a livelihood.

Q7. What are the reasons why the banks might not be willing to lend to certain borrowers?

Answer: Banks may not be ready to lend money to some borrowers, the reasons are given below:1. Some people fail to provide the necessary set of documents to get a loan2. Irregular wages and no fixed jobs are also a reason as it increases the chances of not repaying debt.3. Some borrowers have been added to the list of NPAs4. Entrepreneurs are at high risk in sanctioning loans.



Q8. In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?

Answer: The Reserve Bank of India is the central bank of India and all other public sector banks operate under the supervision of the Reserve Bank of India. It manages the functioning of banks in the following ways:1. It monitors the bank in maintaining the cash balance2. Loans are not only given to profit making organizations, but also to small farmers and small scale industries.3. RBI keeps periodic reports of other banks about the amount lent to the people4. It also conducts regular checks of interest rates sought on loans in public sector banks.     Q9. Analyse the role of credit for development. Answer: Credit is one of the most important aspects for the development of a country. Affordable credit plays a very important role in the development of the country. People need a loan for various reasons and loan is very important to fulfill this requirement.In India, a large part of the population is engaged in agricultural activities, credit plays a very important role in agricultural activities. People can borrow money and use modern farming methods to grow crops that are more reliable than traditional methods of growing crops. In addition, there are small scale industries, businesses and many other sectors where credit can help people and ultimately result in the development of the country.

Q10. 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.

Answer: Manav wants to set up a small business. When deciding whether to borrow money from a bank or money lender, he has to keep the following points in mind:1. He needs to compare the interest rate from both the bank and the moneylender. Whoever charges less should have that option.2. He needs to analyze whether he has all the eligible documents required by banks to approve his loan.3. How does he want to repay the lender



Q11. In India, about 80 per cent of farmers are small farmers, who need credit for cultivation.

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

Answer: Banks may not be ready to lend money to small farmers because there are high risks that if the crop is wasted there are a possibility that they will not be able to get the installments on time. Also, to obtain a loan from the bank, proper documentation is required which may not be available to small-scale farmers.


  1. b) What are the other sources from which the small farmers can borrow?

Answer: Small farmers may turn to informal sources of credit if they do not borrow money from the bank. These informal sources of credit include moneylenders, agricultural traders, etc.


  1. c) Explain with an example of how the terms of credit can be unfavourable for the small farmer.

Answer: When a small-scale farmer borrows money from a bank, he has to repay the amount at a fixed interest rate. For example, if a farmer borrows money from the bank and his crops are ruined during the harvest season, he will not be able to repay the amount borrowed by the bank and will get caught in the debt trap.


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

Answer: Small farmers can get cheap credit by the formal sources of credit like banks.



Q12. Fill in the blanks:

  1. Majority of the credit needs of the _________________households are met from informal sources.
  2. ___________________costs of borrowing increase the debt-burden.
  3. __________________ issues currency notes on behalf of the Central Government.
  4. Banks charge a higher interest rate on loans than what they offer on __________.
  5. _______________ is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.

Answer: a. poor

  1. high
  2. Reserve Bank of India
  3. deposits
  4. collateral



Q13. Choose the most appropriate answer.

  1. In a SHG most of the decisions regarding savings and loan activities are taken by
      1. Bank.
      2. Members.
      3. Non-government organisation.

Answer: b. Members


  1. Formal sources of credit does not include
      1. Banks.
      2. Cooperatives.
      3. Employers.

Answer: c. Employers


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