Economics

Money and Credit

Question:

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

Answer:

People with extra cash deposit it with the banks by opening a bank account in their name. Banks accept the deposits and also pay an interest on the deposits. Banks use the major portion of the deposits to extend loans to those who need money. In this way, banks mediate between those who have surplus funds (the depositors) and those who are in need of these funds (the borrowers). Banks charge a higher interest rate on loans than what they offer on deposits.

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Money and Credit

Q 1.

What were the objects that were used before the use of currency?

Q 2.

What is a cheque?

Q 3.

What is Collateral ?

Q 4.

What are ˜demand deposits'?

Q 5.

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

Q 6.

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.

Q 7.

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

Q 8.

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

Q 9.

How do cooperatives function?

Q 10.

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

Q 11.

Write a short note on ˜cheques'.

Q 12.

What are the transactions involving money ?

Q 13.

What is the barter system and double coincidence of wants?

Q 14.

In India, about 80 per cent of farmers are small farmers, who need credit for cultivation.
(a) Why might banks be unwilling to lend to small farmers?
(b) What are the other sources from which the small farmers can borrow?
(c) Explain with an example how the terms of credit can be unfavourable for the small farmer.
(d) Suggest some ways by which small farmers can get cheap credit.

Q 15.

Analyse the role of credit for development.

Q 16.

What are Demand Deposits?

Q 17.

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

Q 18.

What is called the ˜terms of deposit' ?

Q 19.

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

Q 20.

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

Q 21.

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

Q 22.

Write about the functioning of Krishak Cooperative society.

Q 23.

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

Q 24.

Cheap and affordable credit is crucial for the countries development . Discuss.