ECONOMICS CH-4

Question 2

The currency notes on behalf of the Central Government are issued by whom?

Answer 2

Reserve Bank Of India

Question 3

What is the main informal source of credit for rural households in India?

Answer 3

Money lenders are the main source of informal credit for rural households.

Question 4

‘Modern currency is without any use of its own’; then why is it accepted as a medium of exchange?

Answer 4

Modern currency is accepted as a medium of exchange because it is certified for a particular denomination (10, 100, etc.) of the country by authorities set up by the Central Government. It is issued by the Reserve Bank of India and it can be used for buying any commodity which is on sale. It is authorized by the government of the country

Question 5

What is the meaning of ‘barter system’?

Answer 5

Barter system refers to the system of exchange of goods and services. It is the system by which one commodity is exchanged for another without the use of money. Before money was introduced, people practised barter system.Example: A farmer could buy a dhoti from a weaver or a pair ofshoes from a cobbler in exchange of grains he produced.

Question 6

How does money act as a medium of exchange?

Answer 6

Money acts as a medium of exchange as it acts as an intermediate in the exchange process and transactions. A person holding money can easily exchange it for any commodity or services that he or she might want.

Question 7

What is banking?

Answer 7

Banking is the financial activity of managing and safeguarding money, and it involves a variety of services and products

Question 8

What is an economic activity?

Answer 8

a process that involves the production, distribution, or consumption of goods or services, and is a means of generating wealth and revenue

Question 9

what are the functions of money?

Answer 9

1. store of value: Money is a widely accepted currency that can hold its value over time. People can earn, save, and spend money, knowing that its value has been preserved.
2. Medium of exchange: Money is used to exchange goods and services.
3. Unit of account: Money is used to measure value.
   Standard of deferred payment: Money can be used to pay for something in the future.