How does money solve the problem of double coincidence of wants? Explain with an example of your own.
In an economy where money is in use, money by providing the crucial intermediate step eliminates the need for double coincidence of wants.
For example, if money is used in trading, then if a person who manufacture utensils wants to buy clothes, he need not go in search of a clothes manufacturer who wants to buy utensils. He can sell his utensils to anybody for money and then buy the clothes he wants from anybody.
In situations with high risks, credit might create further problems for the borrower. Explain.
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.
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.
How does money solve the problem of double coincidence of wants? Explain with an example of your own.
In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?
In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?