CBSE Notes Class 10 Economics Chapter 3 Money and Credit

2022-10-26

For example, laborers who accept their pay rates toward the finish of every month have additional money toward the start of the month. How in all actuality do individuals manage this additional money? They store it with the banks by opening a ledger in their name. Banks acknowledge the stores and furthermore pay a financing cost on the stores. Along these lines, individuals’ cash is protected by the banks and it procures revenue.

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Basically, cheques, bills of exchange, and drafts are widely used bank money. Making something as valuable as money incurs some cost therefore, money material should have some durability. The notes and coins should be built out of materials that have quality and life both. Money is circulated in an economy and is frequently exchanged. These are created by the central bank and commercial banking system. If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment.

Bank Money

It is acknowledged as a mechanism of trade on the grounds that the money is approved by the public authority of the country. It connotes something deposited for safekeeping, like currency in a safe-deposit box. When one brings currency to a bank for deposit, the bank does not put the currency in a vault and keep it there. As part of the inducement to depositors to lend it money, a bank provides facilities for transferring demand deposits from one person to another by check. In addition to currency, bank deposits are counted as part of the money holdings of the public.

In the 19th century most economists regarded only currency and coin, including gold and other metals, as “money.” They treated deposits as claims to money. In economies with multiple individuals, money facilitates market transactions. Money facilitates exchanges by allowing individuals to sell their produce for money, which is then used to purchase necessary commodities. what are the modern forms of money It serves various functions in a modern economy, including the facilitation of exchanges, market transactions, and facilitating the exchange of goods and services. Any person who has an account with the bank can make his payments through cheques. A cheque is a paper instructing the bank to pay a specific amount from the person’s account to the person in whose name the cheque has been made.

More Modern India (National Movement ) Questions

The formal sector meets only about half of the total credit needs of rural people. It is important that formal credit is distributed more equally so that the poor can benefit from cheaper loans. The Reserve Bank of India supervises the functioning of formal sources of loans. Banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate, etc. Every loan agreement specifies an interest rate that the borrower must pay to the lender along with the repayment of the principal.

A cheque is a paper teaching the bank to pay a particular sum from the individual’s record to the individual in whose name the cheque has been made. Consequently, we see that request stores share the fundamental elements of cash. The office of checks against request stores makes it conceivable to settle installments without the utilization of money straightforwardly. In most countries the bulk of the currency consists of notes issued by the central bank.

Some of those who received gold this way would hold it as gold, but others would deposit it in a bank. For example, if two-thirds was redeposited, on average, some bank or banks would find $50 added to deposits and to reserves. The receiving bank would repeat the process, adding $12.50 (25 percent of $50) to its reserves and lending out $37.50. Although no individual bank created money, the system as a whole did. This multiple expansion process lies at the heart of the modern monetary system. Current types of cash incorporate money — paper notes and coins.

Money is circulated in an economy and is frequently exchanged.
The deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits.
The advanced types of cash — money, and stores — are firmly connected to the working of the cutting edge financial framework.
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Wholesalers, thus, offer their merchandise to the retailers and the retailers offer these products to the buyers in return for cash.

To overcome these problems, people created Self Help Groups (SHGs). SHGs are small groups of poor people who promote small savings among their members. A typical SHG has members, usually belonging to one neighbourhood, who meet and save regularly. Here are two examples which help you to understand how credit works.

Money has served as a medium of exchange, with Indians using grains and cattle since ancient times. Metallic coins like gold, silver, and copper were introduced in the last century. Commercial banks are also called joint stock banks because they are organized in the same manner as joint stock companies. This office loans is the fundamental attributes of cash (that of a mode of trade). You would have known about installments being made by cheques rather than cash. For installment through a cheque, the payer who has a record with the bank makes out a cheque for a particular sum.

Right all along, cash has been filling the significant role of the vehicle of trade in the general public. Cash works with exchanges of labor and products as a vehicle of trade. Makers offer their products to wholesalers in return for cash.

Thereafter came the use of metallic coins – gold, silver, copper coins – a phase which continued well into the last century. Now, the modern forms of money include currency – paper notes and coins. The modern forms of money – currency and deposits – are closely linked to the workings of the modern banking system. Modern money is anything that widely accepted for a transaction and which has a monetary value. Other than these two there are many types of money there are e-money, mobile wallet are some types which are as money currently in our economy.

How do Income and Interest Rates influence the demand and supply of money in the Context of Money and Banking?

Money has wide acceptability and people are willing to complete the transaction in terms of money rather than any other medium. For example, when you buy a biscuit and try to pay the shop using gold, he might be hesitant. Even though gold is much valuable and has an intrinsic value, gold is not widely accepted. Instead of gold, if you offer a Rs. 10 or Rs. 1000 to the shop, the shop will accept the note.

CBSE Notes Class 10 Economics Chapter 3 – Money and Credit

Other economists include nonchecking deposits, such as “time deposits” in commercial banks.
Money is a widely used instrument and it is an essential instrument in any economy.
As metallic money is heavy, incurs a higher cost of production, and is difficult to handle, it is difficult to use the money in large quantities.
In India, the rupee is widely accepted as a medium of exchange because of the authentication of the Reserve Bank of India (RBI).
The rupee is widely accepted as a medium of exchange in India.

The rupee is widely accepted as a medium of exchange in India. Money acts as an intermediate in the exchange process, it is called a medium of exchange. A person holding money can easily exchange it for any commodity or service that he or she might want. In CBSE Notes Class 10 Economics Chapter 3 – Money and Credit, you will learn modern forms of money and how they are linked with the banking system. In the second half of the chapter, you will know about credit and how it impacts borrowers, depending upon the situation. So, go through these notes to understand these topics in-depth.

How has the role of Money and Banking transformed from a Medium of Exchange to facilitating Cashless Transactions?

In Swapna’s case, the failure of the crop made loan repayment impossible. Credit, instead of helping Swapna improve her earnings, left her worse off. Credit, in this case, pushes the borrower into a situation from which recovery is very painful. Whether credit would be useful or not depends on the risks in the situation and whether there is some support in case of loss.

All the modern money have the function of the store of value. The definition of money has been the subject of much dispute. The chief point at issue is which categories of bank deposits can be called “money” and which should be regarded as “near money” (liquid assets that can be converted to cash). Many economists include as money only deposits transferable by check (demand deposits)—in the United States the sum of currency and checking deposits is known as M1. Other economists include nonchecking deposits, such as “time deposits” in commercial banks.