Extra 40 Multiple Choice Questions (MCQs) with answers from Chapter: Money and Credit of Class 10 CBSE Economics:

1-10: Money and Its Functions

What is the primary function of money?

 

a) Medium of exchange

 

b) Store of value

 

c) Measure of value

 

d) All of the above

 

Ans:

d) All of the above

 

Which of the following is a characteristic of money?

 

a) Limited supply

 

b) Not widely accepted

 

c) Medium of exchange

 

d) Cannot be stored

 

Ans:

c) Medium of exchange

 

Why is money called a medium of exchange?

 

a) It allows people to barter

 

b) It eliminates the need for a double coincidence of wants

 

c) It is difficult to carry

 

d) It has no value

 

Ans:

b) It eliminates the need for a double coincidence of wants

 

Which of the following is an example of modern currency?

 

a) Cattle

 

b) Wheat

 

c) Paper notes and coins

 

d) Barter system

 

Ans:

c) Paper notes and coins

 

Which of the following statements about modern currency is true?

 

a) It is made of precious metals

 

b) It has no intrinsic value but is widely accepted

 

c) It can be issued by any person

 

d) It cannot be used for transactions

 

Ans:

b) It has no intrinsic value but is widely accepte

d

 

Who has the authority to issue currency notes in India?

 

a) Government of India

 

b) Reserve Bank of India (RBI)

 

c) State Bank of India

 

d) Private Banks

 

Ans:

b) Reserve Bank of India (RBI)

 

Which of the following is not a function of money?

 

a) Medium of exchange

 

b) Store of value

 

c) Unlimited supply

 

d) Standard of deferred payment

 

Ans:

c) Unlimited supply

What is a drawback of the barter system?

 

a) No need for double coincidence of wants

 

b) No standard unit of value

 

c) Easy transactions

 

d) Widely accepted medium

 

Ans:

b) No standard unit of value

 

Why is paper money preferred over commodity money?

 

a) It is heavier

 

b) It is perishable

 

c) It is easier to carry and store

 

d) It has intrinsic value

 

Ans:

c) It is easier to carry and store

 

What is the meaning of liquidity in terms of money?

 

a) The ability to store money for the long term

 

b) The ease of converting money into goods and services

 

c) The ability to print currency notes

 

d) The control of money by the government

 

Ans:

b) The ease of converting money into goods and services

11-20: Credit and Loans

Which institution regulates the banking sector in India?

 

a) State Bank of India

 

b) Reserve Bank of India

 

c) Ministry of Finance

 

d) NABARD

 

Ans:

b) Reserve Bank of India

 

Which of the following is an example of formal credit?

 

a) Loan from a moneylender

 

b) Loan from a cooperative bank

 

c) Borrowing from relatives

 

d) Informal lending groups

 

Ans:

b) Loan from a cooperative bank

 

Which of the following is an example of informal credit?

 

a) Loan from a government bank

 

b) Loan from a cooperative society

 

c) Loan from a local moneylender

 

d) Loan from a commercial bank

 

Ans:

c) Loan from a local moneylender

 

Why do banks keep a part of the deposits as cash?

 

a) To pay interest to customers

 

b) To meet daily withdrawal demands

 

c) To invest in stock markets

 

d) To give to the government

 

Ans:

b) To meet daily withdrawal demands

 

What is the main source of income for banks?

 

a) Charging customers for withdrawals

 

b) Interest on loans

 

c) Issuing credit cards

 

d) Selling government bonds

 

Ans:

b) Interest on loans

 

Which of the following is a characteristic of informal credit?

 

a) Low interest rates

 

b) Government supervision

 

c) No fixed repayment schedule

 

d) Loan provided by banks

 

Ans:

c) No fixed repayment schedule

 

Which of the following has the highest interest rate?

 

a) Commercial banks

 

b) Moneylenders

 

c) Cooperative banks

 

d) Government banks

 

Ans:

b) Moneylenders

 

What does collateral mean in the context of loans?

 

a) A type of loan

 

b) A guarantee given by the borrower in case of loan default

 

c) A government subsidy

 

d) A form of bank deposit

 

Ans:

b) A guarantee given by the borrower in case of loan default

 

Why do poor people mostly depend on informal sources of credit?

 

a) Banks are easily accessible

 

b) Informal sources require no paperwork

 

c) Government gives them loans directly

 

d) They prefer paying high interest

 

Ans:

b) Informal sources require no paperwork

 

Which of the following is an example of collateral?

 

a) Bank account balance

 

b) A house pledged for a home loan

 

c) A mobile phone

 

d) Credit card

 

Ans:

b) A house pledged for a home loan

21-30: Role of Banks and Credit in the Economy

Which of the following is an important function of banks?

 

a) Manufacturing goods

 

b) Accepting deposits and providing loans

 

c) Selling insurance

 

d) Collecting taxes

 

Ans:

b) Accepting deposits and providing loans

 

What do banks do with the majority of the deposits they receive?

 

a) Keep it in storage

 

b) Use it for paying salaries

 

c) Lend it to borrowers as loans

 

d) Distribute it among account holders

 

Ans:

c) Lend it to borrowers as loans

Which of the following helps in financial inclusion?

 

a) Increasing the number of moneylenders

 

b) Expansion of banking facilities in rural areas

 

c) High-interest loans

 

d) Restricting credit to the rich

 

Ans:

b) Expansion of banking facilities in rural areas

 

What does the term "credit" refer to?

 

a) Money given as a loan

 

b) Money saved in banks

 

c) Money printed by RBI

 

d) Money used for transactions

 

Ans:

a) Money given as a loan

 

Which organization regulates cooperative banks in India?

 

a) RBI

 

b) SEBI

 

c) NABARD

 

d) Finance Ministry

 

Ans:

c) NABARD

31-40: Impact of Credit and Banking Policies

Why do banks charge interest on loans?

 

a) To make profits and cover expenses

 

b) To discourage borrowing

 

c) To increase savings

 

d) To reduce inflation

 

Ans:

a) To make profits and cover expenses

 

Which type of loan is given without collateral?

 

a) Home loan

 

b) Personal loan

 

c) Car loan

 

d) Business loan

 

Ans:

b) Personal loan

 

What is the main purpose of microfinance institutions?

 

a) To provide small loans to the poor

 

b) To offer stock market investments

 

c) To control inflation

 

d) To regulate commercial banks

 

Ans:

a) To provide small loans to the poor

 

Which of the following is an example of a formal source of credit?

 

a) Moneylenders

 

b) Commercial banks

 

c) Relatives

 

d) Local shopkeepers

 

Ans:

b) Commercial banks

 

Which sector of society faces the most difficulty in obtaining credit from formal sources?

 

a) Large-scale industries

 

b) Government employees

 

c) Small farmers and landless laborers

 

d) IT professionals

 

Ans:

c) Small farmers and landless laborers

 

What is the main reason why the poor rely on informal sources of credit?

 

a) Banks charge higher interest rates

 

b) Banks require collateral and formal documents

 

c) Banks are too small

 

d) Banks do not lend to businesses

 

Ans:

b) Banks require collateral and formal documents

 

Which financial institution provides loans to farmers and rural people?

 

a) RBI

 

b) NABARD

 

c) SEBI

 

d) Commercial banks

 

Ans:

b) NABARD

 

What is the full form of SHG?

 

a) Self-Help Group

 

b) State Housing Group

 

c) Small Household Grant

 

d) Standard Household Group

 

Ans:

a) Self-Help Group

 

Why are Self-Help Groups (SHGs) important for rural credit?

 

a) They provide employment to urban workers

 

b) They help small borrowers access credit without collateral

 

c) They replace banks in rural areas

 

d) They work only for profit

 

Ans:

b) They help small borrowers access credit without collateral

 

Which of the following is a positive impact of credit?

 

a) It always leads to debt traps

 

b) It helps businesses grow and expand

 

c) It reduces the need for banking services

 

d) It increases dependency on moneylenders

 

Ans:

b) It helps businesses grow and expand

 

Which of the following is a negative impact of credit?

 

a) It always helps in development

 

b) It can lead to debt traps if not managed well

 

c) It eliminates all financial risks

 

d) It has no impact on the borrower

 

Ans:

b) It can lead to debt traps if not managed well

 

Which of the following is NOT a role of the Reserve Bank of India (RBI)?

 

a) Issuing currency

 

b) Regulating banks

 

c) Controlling the stock market

 

d) Maintaining financial stability

 

Ans:

c) Controlling the stock market

 

Why does the RBI regulate credit in the economy?

 

a) To control inflation and ensure financial stability

 

b) To increase dependence on moneylenders

 

c) To reduce bank deposits

 

d) To promote only rural businesses

 

Ans:

a) To control inflation and ensure financial stability

 

Which of the following statements is true about bank deposits?

 

a) Banks keep all deposits as cash reserves

 

b) Banks use a portion of deposits to give loans

 

c) Depositors lose money when banks give loans

 

d) Deposits are only used for government expenses

 

Ans:

b) Banks use a portion of deposits to give loans

 

What is the main benefit of using credit cards?

 

a) Money is deducted immediately from the account

 

b) It allows purchases without immediate payment

 

c) It does not require repayment

 

d) It increases cash dependency

 

Ans:

b) It allows purchases without immediate payment