Economics

Money and Credit

Question:

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

Answer:

When the cultivation of any crop is dependent on rain , a natural resource, then the cultivation is risky. If the rains fail there is crop failure, then credit pushes the person into a debt trap. To repay the loan the farmer has to sell his assets. Then he is clearly much worse off than before. Whether credit would be useful or not, therefore, depends on the risks in the situation.

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Money and Credit

Q 1.

What are ˜demand deposits'?

Q 2.

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

Q 3.

How do cooperatives function?

Q 4.

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

Q 5.

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

Q 6.

What is Collateral ?

Q 7.

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

Q 8.

What are the transactions involving money ?

Q 9.

Write a short note on ˜cheques'.

Q 10.

What is a cheque?

Q 11.

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 12.

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

Q 13.

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

Q 14.

Analyse the role of credit for development.

Q 15.

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 16.

What are Demand Deposits?

Q 17.

What is the barter system and double coincidence of wants?

Q 18.

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

Q 19.

What is called the ˜terms of deposit' ?

Q 20.

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

Q 21.

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

Q 22.

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

Q 23.

Write about the functioning of Krishak Cooperative society.

Q 24.

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