Money and Credit – Class 10 Economics Board Exam Booster

Money and Credit is the most significant chapter in Class 10 Economics, and it mostly determines how good you do in your board examination.

Knowing Money and Credit makes you aware of how money acts as a medium of exchange and how credit shapes people’s lives and the economy.

Additionally, this Money and Credit – Class 10 Economics Board Exam Booster presents to you the 20 most significant questions which you need to

practice prior to the exam.

Every question is strictly picked to reinforce your concepts and increase confidence.

Therefore, prior to entering the exam hall, ensure you practice these questions and convert your preparation into success!

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Money and Credit – Class 10 Economics Board Exam Booster

Most Asked MCQ’s from Money and Credit Chapter in 10th Board Exams

While trying MCQs in board exams, carefully read every question and go through all options before giving your answer mark.

Don’t mark blindly; eliminate clearly wrong options. Watch out for words such as “not,” “except,” or “always.”

Manage time well and mark answers accordingly as directed.

Finally, do quick lookouts at your answers if there is time to avoid careless errors.

Multiple Choice Questions

1. Which among the following is a medium of exchange in contemporary economies?
A. Barter system
B. Money
C. Goods
D. Services
Answer: B. Money

2. What is the primary source of credit for Indian rural households?
A. Commercial banks
B. Cooperatives
C. Moneylenders
D. Government agencies
Answer: C. Moneylenders

3. Which of the following is NOT a characteristic of formal sources of credit?
A. Charge higher rates of interest
B.  Overseen by the RBI
C. Need adequate documentation
D. Cover banks and cooperatives
Answer: A. Charge higher interest rates

4. What is SHG in rural credit terminology?
A. Self Help Group
B. Social Health Group
C. Small Housing Group
D. Self Housing Group
Answer: A. Self Help Group

5. Why is credit useful for development?
A. Raises borrowing
B. enables individuals to settle everyday expenses
C. It assists in expanding production and income
D. minimizes dependence on banks
Answer: C. It assists in expanding production and income

Money and Credit – Class 10 Economics Board Exam Booster

Most Asked Short Answer Type Questions from Chapter 3 – Money and Credit

While answering very short answer type questions, be clear, accurate, and brief.

These questions typically have 1 mark and must be answered in a sentence or two.

Read the question slowly and write merely the main point or definition without providing additional information.

Write using simple and concise language directly expressing the main point.

Do not provide lengthy explanations, examples, or repetition.

In the case of factual questions, quote the precise term, year, or name requested.

Keep in mind, the purpose is to provide a whole but brief response that answers the question directly.

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Short Answer Type Question 1

1. What are the primary functions of money?

Answer: Money serves as a unit of account, a store of value, and a medium of exchange.

Money makes it easy for people to purchase goods and services, compare prices, and store wealth for future use.

Short Answer Type Question 2

2. Highlight the difference between formal and informal sources of credit.

Answer: Formal sources are banks and cooperatives that are governed by RBI, and they provide loans with low interest.

Informal sources are moneylenders and traders who take high interest and are not governed by any agency.

Short Answer Type Question 3

3. What is a Self Help Group (SHG)?

Answer: A Self Help Group (SHG) comprises a small group of poor individuals, typically women, who save together and lend money to members.

SHGs can later also obtain bank loans for micro business purposes.

Short Answer Type Question 4

4. Why is credit sometimes viewed as harmful?

Answer: Credit turns into a bane when borrowers don’t repay on time.

It generates debt traps, loss of assets, and added poverty, particularly if loans are availed from moneylenders who charge high interest.

Short Answer Type Question 5

5. Money is used to solve the double coincidence of wants problem.

Answer: In a barter system, there needs to be a double coincidence of wants for exchange to occur.

Money solves this issue by providing a common medium of exchange through which individuals can purchase goods and services directly with money.

Money and Credit – Class 10 Economics Board Exam Booster

Most Asked Short Answer Type Questions (3 marks) from Money and Credit

To get full marks for 3-mark short answer questions, begin by reading the question carefully and determining what is literally asked.

Organize your answer in 2–4 straightforward points, using bullet points or numbers if permitted, since this makes it convenient for examiners to read.

Use short sentences that encompass all essential facts, definitions, or explanations.

Employ examples or textbook terms where applicable, but not as much detail as possible.

Start with a straight answer, and then justify it with 1–2 points.

End by making sure your handwriting is clear and points are well-organized, which helps score full marks.

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Short Question 1 (3 marks)

Q1. What are the benefits of formal sources of credit?

Answer:

• Formal sources such as banks and cooperatives have a lower rate of interest.
• They have legal and transparent methods while providing loans.
• The borrowers are saved from exploitation and debt traps.

Short Question 2 (3 marks)

Q2. Why do poor households remain reliant on informal sources of credit?

Answer:

• Banks tend to ask for collateral and papers, to which the poor have no access.
• Informal lenders such as moneylenders are readily available in villages.
• Poor individuals usually require instant money without procedures, which are offered by informal sources.

Short Question 3 (3 marks)

Q3. Why is credit an essential ingredient in the growth of a nation?

Answer:

• Credit helps farmers and small producers make an investment in equipment, seeds, and machines.
• It facilitates the growth of business and job opportunities.
• It raises production, income, and general economic development.

Short Question 4 (3 marks)

Q4. Describe any three distinctions among formal and informal sources of credit.

Answer:

• Regulation: RBI regulates formal sources; informal sources are not regulated.
• Interest Rate: Formal sources have low interest; informal sources have high interest.
• Documentation: Formal loans need documents; informal loans are on trust.

Short Question 5 (3 marks)

Q5. What are the main features of Self Help Groups (SHGs)?

Answer:

• Every SHG typically has 15–20 members, who are predominantly women.
• Members save and lend at low interest among themselves.
• SHGs may also avail loans from banks for small-scale ventures, encouraging self-employment.

Money and Credit – Class 10 Economics Board Exam Booster

Long Answer Type Questions of 5 Marks

To attain full marks in 5-mark long answer questions, first read the question carefully and note down all that it requires.

Organize your answer in 4–6 distinct points or short paras, addressing each point methodically.

Begin with a clear introduction or definition, followed by an explanation with suitable examples, facts, or points.

Employ numbered points or headings if available, as this enhances clarity and presentation.

Make sure your language is clear, concise, and to the point, without irrelevant information.

Lastly, go through your answer for completeness, accuracy, and neat work, which leads to full marks.

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Long Answer Type Question 1

Q1. Describe the role of credit in development. How can credit be detrimental at times?

Answer:
Role of Credit in Development:

Credit enables individuals to increase production by buying machinery, seeds, or raw materials.

It encourages entrepreneurship and aids small enterprises.

It helps farmers and traders earn more and live better.

Credit enables employment generation and economic progress.

When Credit Turns Harmful:

When borrowers do not repay the loan on time, they get caught in the debt trap.

They can lose property or land to moneylenders.

Informal sources with high interest rates cause poverty and exploitation.

Long Answer Type Question 2

Q2. Explain the differences between formal and informal credit sources in India. Why should formal sources be promoted?

Answer:
Differences:

Regulation: Formal sources are regulated by the RBI; informal sources are not.

Interest Rate: Formal sources charge lower and fixed rates; informal sources charge high and variable rates.

Documentation: Formal loans require proper documents; informal loans are extended without documents.

Transparency: Formal sources are legally equitable; informal sources tend to exploit borrowers.

Examples: Formal – Banks, Cooperatives; Informal – Moneylenders, Traders.

Why Promote Formal Sources:

They provide secure and equitable lending.

Moreover, they assist in avoiding exploitation of poor borrowers.

Also they facilitate financial inclusion and sound economic growth.

Long Answer Type Question 3

Q3. What are Self Help Groups (SHGs)? What are their benefits for the rural poor?

Answer:
Meaning: Self Help Groups (SHGs) are small voluntary groups, typically 15–20 of the poor, predominantly women,

who save their money collectively and lend to members.

Benefits:

SHGs offer low-interest loans without collateral.

They inculcate saving culture and financial discipline.

Also, they make the poor self-reliant and assertive.

SHGs facilitate women’s empowerment by joint decision-making.

They enable members to get connected with banks for bigger loans.

Moreover, they facilitate small business activities such as tailoring, candle-making, or cultivation.

Long Answer Type Question 4

Q4. Describe how the Reserve Bank of India (RBI) regulates the operations of banks.

Answer:

The RBI keeps a minimum cash balance with banks for satisfying withdrawal requirements.

It oversees the lending activities of banks to curb unfair practices.

RBI directs banks to provide loans to the priority sectors, such as agriculture and small-scale industries.

It controls interest rates to ensure financial stability.

RBI ensures that banks adhere to fair and transparent lending guidelines.

It makes sure that banks report on a regular basis and keep accurate records of credit transactions.

Long Answer Type Question 5

Q5. Outline the role of credit for rural families in India. How can the formal credit system make their situation better?

Answer:
Role of Credit in Rural Areas:

Farmers require credit to purchase seeds, fertilizers, and machinery.

Credit facilitates financing for expenses at the time of crop failure or in case of an emergency.

It facilitates non-farm enterprises such as dairy, fishery, or small trade.

Improvement through Formal Credit:

Banks and cooperatives offer low-interest loans with legal cover.

They reduce reliance on moneylenders.

Formal credit facilitates investment and development in rural areas.

It leads to economic equality and lessens rural poverty.

It assists in the self-sustainability of farmers and rural businessmen.

Money and Credit – Class 10 Economics Board Exam Booster

Conclusion

Money and Credit constitute the backbone of all contemporary economies, and their role needs to be known by every Class 10 board exam aspirant.

By going through this Money and Credit – Class 10 Economics Board Exam Booster, you have practiced the most critical questions that fetch emphasis

on the functions of money, the functions of banks, and the importance of credit for development.

Additionally, Money and Credit not only support people in meeting their financial requirements but also serve to promote the economic growth of the country.

As you proceed with your preparation, pay attention to how responsible lending and borrowing ensure a balanced and equitable economy.

Finally, understanding this chapter will not only increase your confidence in exams but also enlighten you about the power of financial systems in everyday life.

So, how about you try your hand at this questions and find out how much of Money and Credit you grasp before your board exam?