CLASS    10

NCERT Solutions for Class 10 Economics Chapter 3 – Money and Credit

 Exercises Page No 52

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

Answer: In situations with high risks, credit might create further problems for the borrower. Credit involves a certain amount of loan that is taken by a borrower from a lender at a high-interest rate. In case there is a failure, and the borrower faces loss, then they further fall into the trap of credit. This is known as a debt trap. The borrower has to repay the credit along with interest applied by the lender, and they further fall into the trap of credit, increasing the problems for the borrower. The borrower also has to sell a part of their land to repay the loan.

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

Answer: ‘Double coincidence of wants’ is when whatever a person desires to sell is exactly what the other wishes to buy. In a barter system, where goods are directly exchanged without the use of money, double coincidence of wants is an essential feature. Money solved the problem of double coincidence of wants because, after the introduction of money, people could use money as an intermediate to buy or sell things, and no specific buyer or seller was required to exchange products. For example, a trader wishes to sell 10 sacks full of rice and expects to get it in exchange for five sacks of cereal. Finding a suitable buyer to sell the sacks of rice in exchange for cereals would be very tough. However, the money will solve this problem, and the trader can sell the sacks of rice to someone who needs it and, in return, buy cereals from the money they get from the buyer of rice.

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

Answer: Banks mediate between those who have surplus funds (the depositors) and those who are in need of funds (the borrowers) by lending money to people who are in need. People can open accounts in banks, and banks make use of that money to fulfil the loan requirements of the people. A higher interest rate is charged for the borrower, and that profit is given to the depositor as interest for offering deposits.

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

Answer: “Reserve Bank of India” and “Guaranteed by the Central Government” is written on the top of a 10 rupee note. Currency in India is issued by the central bank of the country; in the case of India, the Reserve Bank of India is the central bank of the country. The currency is issued on behalf of the Central Government, and these two are the only authorities which are responsible for issuing currency in India.

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

Answer: Formal sources of credit are the Government authorised organisations that are eligible to lend money to people. It is important to expand formal sources of credit in India because the informal sources are not registered and lend money to people at very high-interest rates, which is unfair and must not be practised. If formal sources of credit are increased, people will be able to borrow money at lesser interest rates and will not be liable to do any extra work for the borrower. Especially in India, if formal sources of credit are increased, people will be able to take loans and use them for the development of the country.

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

Answer: The Self Help Groups (SHGs) have been set up in India with an aim to help the rural poor, especially women. A typical Self Help Group comprises 15-20 people from the same neighbourhood who save some money from their daily wages and collect them together. People can borrow money from these groups during an emergency or when they are in need. They charge a minimum rate of interest from the borrowers. Once the SHG has managed to save a defined amount of money, they are also eligible to take loans from banks. The main purpose of introducing these Self Help Groups was to increase small-scale employment opportunities for the rural people so that they could start small businesses to earn a livelihood.

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

Answer: The reasons why banks might not be willing to lend money to certain borrowers are given below:

1. Some people fail to provide the required set of documents to get a loan.
2. Irregular wages and no fixed job is also one reason because it increases the chances of non-repayment of loans.
3. Certain borrowers are added to the list of NPAs.
4. There is a high risk in approving loans to entrepreneurs.

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

Answer: The Reserve Bank of India is the central bank of India, and all the other public sector banks work under the supervision of the Reserve Bank of India. It manages the functioning of the banks in the following ways:

1. It monitors the bank in maintaining the cash balance.
2. Loans are not just given to profit-making organisations but also to small cultivators and small-scale industries.
3. RBI maintains a periodic report of other banks regarding the amount loaned to people.
4. It also keeps a regular check on the interest rates set for loans in public sector banks.

9. Analyse the role of credit for development.

Answer: Credit is one of the major aspects of the development of a country. Affordable credit plays a very important role in the country’s development. People need loans for different reasons, and to meet this requirement, credit is very important. In India, a major part of the population is engaged in agricultural activities; credit plays a very crucial role in agricultural activities. People can borrow money and use modern farming methods to grow crops which are more reliable than the traditional methods of growing crops. Apart from this, there are small-scale industries, businesses and various other sectors where credit can help people and ultimately result in the development of the country.

10. 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.

Answer: Manav wants to set up a small business. He needs to keep the below-mentioned things in mind while deciding whether to borrow money from a bank or money lender:

1. He needs to compare the interest rate charged by both the bank and the moneylender. Whoever charges less should be his option.
2. He needs to analyse whether he has all the eligible documents required by the banks to get his loan approved.
3. How he wishes to repay the lender.

11. 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?

Answer: Banks might be unwilling to lend money to small farmers because there are high risks. If the harvest gets ruined, there is a possibility that they might not be able to receive the instalments on time. Also, proper documentation is required to get a loan from the bank, which might not be available to small-scale farmers.

b. What are the other sources from which the small farmers can borrow?

Answer: Small farmers can move to informal sources of credit if they are not borrowing money from a bank. These informal sources of credit include moneylenders, agricultural traders, etc.

c. Explain with an example of how the terms of credit can be unfavourable for the small farmer.

Answer: When a small-scale farmer borrows money from a bank, they have to repay the amount at a fixed rate of interest. For example, if a farmer borrows money from the bank and, during the harvest season, their crops are ruined, then they shall not be able to repay the amount loaned to them by the bank and will further fall into the debt trap.

d. Suggest some ways by which small farmers can get cheap credit.

Answer: Small farmers can get cheap credit from formal sources of credit like banks.

12. Fill in the blanks:

1. Majority of the credit needs of the _________________households are met from informal sources.
2. ___________________costs of borrowing increase the debt-burden.
3. __________________ issues currency notes on behalf of the Central Government.
4. Banks charge a higher interest rate on loans than what they offer on __________.
5. _______________ is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.

Answer a: Poor

Answer b: High

Answer c: Reserve Bank of India

Answer d: Deposits

Answer e: Collateral

13. Choose the most appropriate answer.

1. 1. In an SHG, most of the decisions regarding savings and loan activities are taken by
      1. Bank
      2. Members
      3. Non-government organisation

Answer: b. Members

2. 2. Formal sources of credit do not include
      1. Banks
      2. Cooperatives
      3. Employers

Answer: c. Employers

 

                                    CLASS   10 

NCERT Solutions for Class 10 Economics Chapter 4 – Globalisation And The Indian Economy

 Exercises Page No 72

1. What do you understand by globalisation? Explain in your own words.

Answer: Globalisation is defined as the integration between countries through foreign trade and foreign investments by multinational corporations (MNCs). Increase in foreign trade, migration of people from one country to another, the flow of capital finance from one country to another and private and public investments from foreign countries all together contribute to globalisation.

2. What was the reasons for putting barriers to foreign trade and foreign investment by the Indian government? Why did it wish to remove these barriers?

Answer: The main reason for putting barriers to foreign trade and foreign investment by the Indian government was to protect the interest earned by producers and small industrialists of our country from foreign competition.

But later it was accepted by the government that foreign competition would encourage Indian industrialists to improve the quality of their products and removing these barriers would increase trade and quality of products produced in the country.

3. How would flexibility in labour laws help companies?

Answer: Flexibility in labour law helps companies because it helps to attract foreign investments. Instead of hiring workers on a regular basis, companies hire workers flexibly for short periods when there is intense pressure of work. This is done to reduce the cost of labour for the company. However, still not satisfied, foreign companies are demanding more flexibility in labour laws. The competition in the market is increasing each day, and if the Government does not allow flexibility with these laws, the foreign companies will not be able to reach their desired profit levels.

4. What are the various ways in which MNCs set up, or control, production in other countries?

Answer: MNCs set up and control production by investing a huge amount of money in a country’s economy. It sets up production units close to the market so that they get cheaper labour. To increase production, MNCs collaborate with some local companies as the production rate would rapidly increase. In most of the cases, the MNCs buy local companies and expand their production. The other way in which they control production is by placing the orders for production with small and local producers. They help production using technology and heavy machinery, which makes the work more efficient and productive.

5. Why do developed countries want developing countries to liberalise their trade and investment? What do you think should the developing countries demand in return?

Answer: Developed countries want developing countries to liberalise their trade and investment because MNCs can set up industries in small and developing nations, which are less expensive and can earn them more profit. The labour cost decreases the manufacturing cost, and these decreases in cost results in an increase in profit. Also setting up factories and industries in developed countries increases competition. The developing countries should, in turn, ask for a fair removal of trade barriers in order to protect their own industries.

6. “The impact of globalisation has not been uniform.” Explain this statement.

Answer: The impact of globalisation has not been uniform because only the developed countries have gained profits due to globalisation. The developing countries are only a source of setting industries and getting cheaper labour, and the entire profits are earned by the developed countries. The small industries and companies in developing countries have constantly been facing challenges in terms of earning profits and brings their goods in the market.

7. How has liberalisation of trade and investment policies helped the globalisation process?

Answer: The liberalisation of trade and investment policies helped the globalisation process because it has helped in the removal of trade barriers. It has made foreign trade and investment easier. The choices of the buyers have also expanded, as now they get to choose products manufactured by not only domestic companies but also by the foreign companies. Competition among traders has resulted in the cheaper price of products. Liberalisation has spread globalisation as the decision making power of export and import now lies with the businessmen themselves.

8. How does foreign trade lead to integration of markets across countries? Explain with an example other than those given here.

Answer: Foreign trade has led to the integration of markets across the countries. Because of foreign trade, the producers are now able to compete and export their goods to the markets of other countries. Opportunities are provided not just for the seller but also for the buyer to get goods outside their own country. Their choices have expanded as now they get to choose products manufactured by not only domestic companies but also by the foreign companies.

The price of these goods has decreased because of the competition in the market. Producers from different countries are now able to compete not just with the competitors in their own country, but with across the world. The Indian market today is not flooded with goods made in India but goods from all across the world at an affordable price.

9. Globalisation will continue in the future. Can you imagine what the world would be like twenty years from now? Give reasons for your answer.

Answer: Globalisation will continue in the future as well. Twenty years from now, the production of goods will be more efficient, competition in the market will increase, advancement in every field will be evident and the quality and quantity of goods produced will also increase. Small industries and entrepreneurs will increase as more opportunities will be provided to them.

10. Supposing you find two people arguing: One is saying globalisation has hurt our country’s development. The other is telling, globalisation is helping India develop. How would you respond to these arguments?

Answer: Globalisation has its pros and cons, and there are various advantages and disadvantages of the increasing globalisation in the country. The advantages of increased globalisation include improved trade opportunities and the increase in the number of employed because of small scale industries. The profit market has increased, and the increase in imports and exports has increased the economy of the nation. People can buy goods that are made across the world at cheaper prices.

The disadvantages of globalisation include that globalisation has increased the income of the rich and has decreased the income of the poor because the small scale local industrialists are unable to earn much profit. Thereby increasing income inequality.

11. Fill in the blanks.

Indian buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of ______________. Markets in India are selling goods produced in many other countries. This means there is increasing ______________ with other countries. Moreover, the rising number of brands that we see in the markets might be produced by MNCs in India. MNCs are investing in India because _____________ ___________________________________________ . While consumers have more choices in the market, the effect of rising _______________ and ______________has meant greater _________________among the producers.

Answer:

Indian buyers have a greater choice of goods than they did two decades back. This is closely associated with the process of globalisation. Markets in India are selling goods produced in many other countries. This means there is increasing trade with other countries. Moreover, the rising number of brands that we see in the markets might be produced by MNCs in India. MNCs are investing in India Because of the cheaper production costs. While consumers have more choices in the market, the effect of rising demand and purchasing power has meant greater competition among the producers.

12. Match the following.

(i) MNCs buy at cheap rates from small	(a) Automobiles producers
(ii) Quotas and taxes on imports are used to regulate trade items	(b) Garments, footwear, sports
(iii) Indian companies who have invested abroad	(c) Call centres
(iv) IT has helped in spreading of production of services	(d) Tata Motors, Infosys, Ranbaxy
(v) Several MNCs have invested in setting up factories in India for production	(e) Trade barriers

Answer:

(i) MNCs buy at cheap rates from small producers	(b) Garments, footwear, sports items
(ii) Quotas and taxes on imports are used to regulate trade	(e) Trade barriers
(iii) Indian companies who have invested abroad	(d) Tata Motors, Infosys, Ranbaxy
(iv) IT has helped in spreading of production of services	(c) Call centres
(v) Several MNCs have invested in setting up factories in India for production	(a) Automobiles producers

13. Choose the most appropriate option.

1. The past two decades of globalisation has seen rapid movements in

1. goods, services and people between countries.
2. goods, services and investments between countries.
3. goods, investments and people between countries.

Answer: c. goods, services and investments between countries

2. The most common route for investments by MNCs in countries around the world is to

1. set up new factories.
2. buy existing local companies.
3. form partnerships with local companies.

Answer: c. buy existing local companies

3. Globalisation has led to improvement in living conditions

1. of all the people
2. of people in developed countries
3. of workers in the developing countries
4. none of the above

Answer: d. none of the above