521_PYQSocial 10th

CH 17 : SECTORS OF THE INDIAN ECONOMY CBSE CHAPTERWISE PYQ CLASS 10 SOCIAL SCIENCE
flour to a biscuit company for Rs. 10 per natural resources. For the growth of
kg. Biscuit company uses flour, sugar the wheat plant, we depend mainly on
and oil to make the packets of biscuits it natural factors like soil, rainfall, sunshine
sells biscuits in the market to consumer and climate. And the product of this
for Rs. 16 per packet. Now, biscuits are activity, wheat is a natural product.
the final goods, i.e., goods that reach the 2. (i) This sector is called primary sector
customer. because it forms the base for all other
products that we subsequently make.
89. What is National Rural Employment (ii) Since most of the natural products
Guarantee Act, 2005 ? State three measures we get are from agriculture, dairy,
taken under NREGA 2005 to help the rural fishing, and forestry, this sector is also
poor. called agriculture and related sector.
or
Describe the role Played by NREGA in 91. Give the meaning of tertiary sector. How is it
improving the employment situation in different from the other two sectors ? Why is
India., it also called service sector ?
Ans : SQP 2018, 2009
or
Service sector in India employs different
The law recently made by the central kinds of people. Explain with example.
government to implement the right to work
in 200 districts which will be extended to 600 Ans : Foreign 2012
districts is called National Rural Employment 1. This sector includes those activities that
Guarantee Act, 2005. help in the development of the primary
Following are the three measures taken under and secondary sectors. For example, the
NREGA 2005 to help the rural poor : goods that are produced in the primary
1. This act provides 100 days assured or secondary sector, e.g., wheat or books,
employment every year to every rural would need to be transported by roadways,
households. railways or airways for marketing purposes.
2. One third of the proposed jobs would be Thus, this sector includes transport,
reserved for women. storage, communication, banking,
3. If an applicant is not provided insurance and trade activities.
employ¬ment within fifteen days, he or 2. This sector is different from other two
she will be entitled to a daily employment sectors because primary and secondary
allowance. sectors produce goods but the service
sector activities, by themselves do not
90. What is primary sector ? Why is this sector produce a good but they are an aid or a
called primary sector or agriculture and support for the production process. That
related sector ? is, they help in the development of the
or primary and secondary sectors.
What do you mean by primary sector ? Enlist 3. Since these activities generate services,
any four activities of this sector. this sector is also called the service sector.
Ans : OD 2007
92. What is the difference between final goods
1. When we produce a good by exploiting and intermediate goods ? Why are only final
natural resources, it is an activity of goods and services counted to know the total
the primary sector. This sector includes production in each sector of the economy ?
agriculture, dairy, fishing, forestry and
mining activities. For example, the Ans : Delhi 2017
cultivation of wheat. Wheat is cultivated 1. (i) Final goods : Final goods are those
within a crop season by directly using goods that reach the consumers. For
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PAGE 521
example, chocolate, biscuit, almirah, 94. What is Gross Domestic Product (GDP). In
etc. India, which institution measures it ?
(ii) Intermediate goods : These are the or
goods which are used up in producing What is Gross Domestic Product (GDP) ?
final goods and services. For example, Which organisation in India under-takes the
steel. task of measuring GDP ?
However, some goods may be both. Ans : Foreign 2016, 2014
For example, sugar, milk which are
directly consumed but also used to make 1. The sum of production in three sectors
products like chocolate, biscuit, etc. gives Gross Domestic Product (GDP) of
2. While calculating the total production a country. Thus, GDP is the value of all
of the economy, only final goods and final goods and services produced within
services are counted. This is so because a country during a particular year. It
the value of final goods already includes shows the strength of the economy.
the value of all the intermediate goods 2. In India, GDP is measured by a central
that are used in making final goods. For government ministry with the help of
example, if we count the value of sugar various government departments of all
cane, sugar and chocolate separately, the Indian states and union territories.
we would be counting the value of the They collect information relating to total
same things a number of times. First as volume of goods and services and their
sugar cane, then as sugar and finally as prices and then estimates the GDP.
chocolate. That is why, we should count 95. Why is the tertiary sector growing so rapidly
only final good, i.e., chocolate. in India? Explain it with four reasons.
93. How do we count the various goods and Ans : Comp 2010
services and know the total production in 1. The development of agriculture and
each sector ? industry leads to the development of
or services such as trade, transport, storage,
How do we count the various goods and etc.
services of each economic sector ? Explain 2. As income levels rise, certain sections
with examples. of people start demanding many
Ans : OD 2009 more services like eating out, tourism,
1. We count the value of final goods and shopping, private hospitals, private
services produced in each sector during schools, professional training, etc.
a particular year. This provides the total 3. Over the past decade or so, certain new
production of the sector for that year. services such as those based on information
2. Remarkably, the values of goods and and communication technology have
services are used rather than adding up become important and essential.
the actual numbers. 4. A large number of workers engaged in
3. For example, if 10,000 kg of rice is sold services such as small shopkeepers, repair
at RO5 per kg. the value of rice will be persons, transport persons, etc.
Rs.1,50,000. The value of 10,000 T.V 96. Where are most of the people employed ?
sets at Rs. 10,00 per set will be Rs. Why did not a similar shift out of primary
10,00,00,000. sector happen in case of employment ?
4. Similarly, the value of goods and services
Ans : SQP 2005
in the three sectors are calculated and
then added up. 1. The most of the working people are still
employed in primary sector. Though
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81. “Tertiary sector activities help in the 3. The well being of the secondary sector
development of the primary and secondary depend on the on the primary sector.
sectors.” Evaluate the statement. This sector generally takes the output
Ans : Delhi 2020
of primary sector as raw material to
manufacture finished goods. Flourishing
“Tertiary sector activities help in the primary sector help in the development
development of the primary and secondary of strong secondary and tertiary sectors.
sectors” because of following reasons : All of these sectors are required for the
1. Tertiary sector activities, by themselves, development of the country.
do not .produce any good but they are
an aid or support for the primary and 83. Show how tertiary sector has emerged as the
secondary sectors production process. For largest producing sector in India.
example the transport, trade, storage, Ans : SQP 2019
etc. helps the primary, sector industries
like agriculture. Importance of Tertiary Sector :
2. Tertiary sector comprises of several 1. Basic services like hospitals, educational
essential services such as hospitals, institutions, defence, and transport are
educational institutions, post and the part of tertiary sector.
telegraph services, police stations, courts, 2. Development of agriculture and industry
defence, transports, banks, etc. All these leads to the development of services.
are required as a basic service that helps 3. As the income level rises, tourism,
the primary and secondary sectors. shopping, private schools and professional
3. Over the past decade or so, certain new training also expands. People start
services such as those based on information demanding more services, this leads to
and communication technology have the expansion of the tertiary sector.
become important and essential. 3. Information and communication
technology also play an important role in
82. “Primary sector’ was the most important this expansion.
sector of economic activity at initial stages of 4. Large number of workers are engaged in
development.” Evaluate the statement. this sector, as the demand for services
Ans : Delhi 2020 , 2015
grow.
“Primary sector was the most important 84. Explain any three types of unemployment
sector of economic activity at initial stages of found in India.
development” because of : Ans : OD 2012
1. The history of developed countries
indicates that in the initial stage of Different types of unemployment found in
development, the primary sector was India are as under :
the most important sector of economic 1. Disguised unemployment : Disguised
activities. As the methods of farming unemployment exists when Marginal
changed and agriculture sector began to Physical Productivity (MPP) of labour is
prosper, it started producing much more zero or sometimes it becomes negative. In
food than before and most people were India, disguised unemploy-ment is 25% to
also employed in this sector. 30%.
2. Primary sector is still the largest economic 2. Seasonal unemployment : Agriculture
sector and plays a significant role in the is a seasonal industry and India has an
overall socio-economic development of agrarian economy. Therefore, seasonal
the country. unemploy¬ment exists in India among
166 lakhs people.
PAGE 523
3. Targeted employment generation 4. Working hours are No limitation on

programmes, like skill development ideal. working hours.
programme, etc.
5. Provision for over- No provision
100. Define unorganised sector. What are the time allowance. for over-time
conditions of work in this sector ? allowance.
or 6. Employee benefit No employee
What is an unorganised sector ? Describe the schemes. benefit scheme.
working procedure of this sector.
Ans : SQP 2009, 2006 102. Describe any three problems faced by workers
in the unorganised sector.
The unorganised sector includes small and
or
scattered units which are largely outside the
Do you agree that workers are exploited in
control of the government. There are rules
the unorganised sector? Support your answer
and regulations but these are not followed.
with any three arguments.
1. There is no formal process and procedures.
The person is not given any formal letter Ans : SQP 2017
by the employer. Jobs are low-paid and 1. This sector does not follow government
often not regular. rules and regulations.
2. There is no job security. People can be 2. Low salary; minimum wages are not fixed
asked to leave any time without any and there is no regular employment.
reason by his employer. There is no fixed 3. There is no provision of overtime, paid
number of working hours. Also, there is leave, holidays, leave due to sickness, etc.
no provision of overtime. 4. There is no job security. People may be
3. People get daily wages. There is no asked to leave without any reason, or
provision of other benefits apart from when there is less work or on the whim of
daily wages. There is no leave, paid the employer.
holidays or leave due to sickness, etc. 5. Many people work on their own doing
small jobs such as selling on the streets;
101. Explain the difference in employment
they have no safety yet.
conditions in organised and unorganised
sectors. 103. Explain how public sector contributes to the
or economic development of India.
Compare the employment conditions
Ans : OD 2005
prevailing in organised and unorganised
sectors. 1. Public sector contributes in providing
economic infrastructure facilities like
Ans : Foreign 2018
roads, bridges, railways, etc.
Working conditions Working 2. This sector undertakes railways, shipping,
in organized sector conditions in currency, etc. They help in promoting all
unorganized industries.
Sector 3. It runs educational institutions, hospitals,
water supply, electricity supply which
1. High salaries are Low salaries. is useful in economic development of a
provided. nation.
2. Job security. No job security. 4. Welfare of the people is the main aim of
3. Working conditions Working this sector.
are good. conditions are
poor.

there has been a change in the share of requires the service of 5 people only
the three sectors in GDP, but a similar but all 9 family members are engaged.
shift has lot taken place in employment. Thus, 4 people are extra. So, these 4
The primary sector continues to be the people are said to be underemployed
largest employer even in the year 2000. or disguisedly employed.
2. There had not been a similar shift out (ii) Apart from agriculture,
of primary sector in case of employment. underemployment also exists in other
This has the following reasons : sectors such as casual workers in the
(i) Secondary sectors did not create service sector in urban areas, e.g.,
enough jobs to absorb people from repair persons, hawkers, the person
primary sector. Though industrial selling something on a cart, etc. They
production went up by 8 times during spend the whole day but earn very
1973 to 2003, employment in the little.
industry went up by only 2.5 times.
(ii) Tertiary sector also did not create 98. Explain the objectives of implementing the
sufficient jobs. The production in the NREGA 2005.
service sector rose by 11 times during or
1973-2003, employment in this sector Write three provisions of National Rural
increased byless than 3 times. Employment Guarantee Act 2005.
(iii)More than half of the workers in the Ans : Delhi 2007
country are working in the primary Provisions under NREGA are :

sector. But, they are producing only 1. All those who are able to and are in need
a quarter of the GDP. of work have been guaranteed 100 days of
(iv) There are more people in agriculture employment in a year by the government.
than is necessary. That is, workers in 2. If the government fails in its duty to
agriculture sector are underemployed. provide employment within 15 (lays, it
97. Define underemployment or disguised will give unemployment allowance to the
unemployment with an example. In which people.
sector is this underemployment found ? 3. The types of work that would in future
or help to increase the production from land
Explain what is meant by disguised will be given preference under the Act.
unemployment? Give examples from rural and 4. It promotes decentralisation of planning
urban areas where disguised unemployment and empower panchayats to plan and
exists. execute them.
Ans : Comp 2012 99. Suggest three ways in which states or regions
1. (i) Underemployment or disguised can increase their income and employment
unemployment is the situation when opportunities of their people.
the people are visibly employed but Ans : OD 2011
actually unemployed. To increase income and employment of

(ii) In this situation, more people are people of a region we will have to identify the
engaged in a work than required. resources that are available in that area and
That is, they are made to work less accordingly plan a mechanism to put into
than their potential. its optimum use. Thus the steps to be taken
2. (i) Underemployment is generally found have to be region specific. Few activities are
in agriculture sector. For example, a 1. Promote tourism.
family of a people has an agricultural 2. Development and promotion of regional
plot where they all find work. The work craft industry.
PAGE 525
Sumit, on the other hand, works in the owns most of the assets and provides all the
unorganised sector which is characterised by services e.g., Railways, post and telegraph.
small and scattered units which are largely Demerits of Private sector :
outside the control of the government. There 1. Activities in the private sector are guided
are rules and regulations but these are not by the motive to earn profits and not
followed. So, his job will be low-paid and welfare of the people.
often not regular. There will be no provision 2. There are several services needed by the
for overtime, paid leave, holidays, leave due society which the private sector cannot
to sickness, etc. Employment is not secure. provide at a reasonable price. Activities
He can .be asked to leave without any reason like construction of roads, bridges,
when there is less work, such as, during some railways, irrigation through dams, etc.,
seasons. A lot also depends on the whims of require huge amount of money which is
his employer. beyond the capacity of the Private sector.
Private sector charges high rates for the
108. What steps should be taken to create more use of these services.
employment? Explain. 3. It is difficult for the Private sector to
Ans : SQP 2015 collect money from thousands of people
1. Education system should be made who use these services.
employment-oriented. Vocational 4. The Private sector sometimes ignores
training should be merged in mainstream regional balanced development, equality
education pattern. of income and development of basic
2. Government should encourage cottage industries.
and small-scale industries, agro-based, 110. How can the workers in the unorganised
handicraft industries, etc. sector be protected ? Explain.
3. Cheap credit should be provided so that or
people may take up new enterprises. Suggest any four ways to protect workers in
4. Labour intensive techniques should be the unorganised sector.
adopted in place of capital intensive
techniques. Ans : Foreign 2010, 2007
5. Cheap credit should be provided so that 1. Farmers need to be supported through

people may take up new enterprises. timely delivery of seeds, agricultural
6. Encouraging foreign investments will also inputs, credit marketing, storage facilities.
generate employment. 2. In urban areas, casual workers need
7. Research and development work in all government support for procuring raw
sectors must be promoted to evolve new material.
avenues of generating employment. 3. Small-scale industry also needs support
8. Government should frame policies to for procuring raw material, marketing,
promote business activities to enhance loans at cheap rate.
growth and employment.
4. Implementation of Minimum Wages Act.
9. Sectors like education, health, banking
5. Government should devise schemes for
must be promoted which have huge job
their literacy, skill development, social-
opportunities.
security.
109. Define the term ‘Public sector’. Explain any 6. A Board can be set up for overlooking
three demerits of Private sector. as well as suggesting over the law for
protection of people from unorganised
Ans : OD 2011
sector.
Public sector : The Public sector is that sector
of the economy in which the government

104. What is Gross Domestic Product (GDP)? 5. Due to Globalization, people have
How do we count the various goods and become more aware of new services like
services for calculating Gross Domestic Transport, Communication because of
Product ? Explain with examples. which Tertiary sector has gained more
Ans : Foreign 2005
importance.
6. The sector has a big contribution to the
GDP is the market value of final goods and growth of Indian Economy.
services produced in a country in a year.
1. The final value of goods and services 106. ‘Public sector contributes to the economic
produced in a sector is calculated. development of India.’ Justify the statement.
2. Only the final value of a product or Ans : SQP, 2020 Comp 2021
service is taken into account to avoid
Public sector contributes to the economic
double counting. For example, suppose a
development of India because
farmer sells wheat to a flour, it to a baker
1. It promotes rapid economic development
for Rs. 10 and then baker after converting
through creation and expansion of
it into a bread sells to a consumer for Rs.
infrastructure.
20. Here the final product is bread, so Rs.
2. It creates employment opportunities.
20 should be added not Rs. 8 + Rs. 10 +
3. It generates financial resources for
Rs. 20 = Rs. 38.
development.
3. Similarly, the final value of products or
4. It is ensuring equality of income, wealth
services produced is calculated.
and thus, a balanced regional development
4. The sum total of all the final goods
5. It encourages development of small,
and services produced in all the sectors
medium and cottage industries.
provides GDP.
6. It ensures easy availability of goods at
moderate rates.
7. Contributes to community development,
LONG ANSWER QUESTION Human Development Index i.e. health
and educational services.
105. ‘Tertiary sector is playing a significant role in
the development of Indian Economy’. Justify 107. Rohan works in a bank as a clerk while Sumit
the statement. works on a construction site as a labourer.
or Find out the difference in their conditions of
Why is the tertiary sector becoming more work and judge the benefits and drawbacks
important in India ? Explain. of working in the respective sectors.
Ans : OD 2021 SQP, 2022 Ans : SQP 2018
Yes , It is true that Tertiary sector is playing Rohan works in the organised sector. He will
a significant role in the development of the thus enjoy security of employment. He will
Country. be expected to work only a fixed number of
1. It provides basic services to the people hours. If he works more, he will have to be
like Transport, Communication, etc. paid overtime by the employer. He will also
2. It provides employment to the large get several other benefits from the employers
number of people. like getting paid leave, payment during
3. The development of Primary and holidays, provident fund, gratuity etc. He is
secondary sector leads to the development supposed to get medical benefits and, under
of tertiary sector. the laws, the bank manager has to ensure
4. As Income level rise, certain sections of facilities like drinking water and. a safe
people start demanding the services like working environment. When he will retire, he
eating out, tourism etc. will get pension as well.
PAGE 527
time to time to promote and expand and then sells at a lower price through
social and infrastructure services. ration shops.
2. India has adopted new economic 3. There are a large number of activities
policy. Globalisation, liberalisation and which are the primary responsibilities of
internationalism have been followed by the government. For example, education,
Indian Government since last decade of health, security, safe drinking water,
20th century. Due to globalisation and housing facilities, etc. The government
liberalisation there is a great demand of has to spend on them.
Indian experts-doctors, engineers, teachers, 4. It is also the duty of the government to
technicians etc. in other countries. take care of the backward regions of the
3. Due to scientific inventions, new country through increased spending. It
discoveries, arrival of latest technology, has to create employment opportunities.
establishment of multinational Public sector is also necessary for
corporations in India, expansion of service redistribution of income and wealth.
sector is taking place of reasonably good
space. Some Indian business households 115. How can income and employment be
and companies have establish their own increased if farmers are provided with a loan
industry and units in other countries. or irrigation facility? Explain with the help
4. Due to internet services, website, e-mail of an example.
services, mass media, new opportunities or
of employment and promotions are How would a farmer increase his income
informed to the people, several agencies and employment if he is provided with
are working on commission basis to loan, irrigation facilities and means of
provide new job opportunities to service transportation ?
class people. Ans : OD 2012
114. Is it necessary to have the public sector ? 1. Loan facility :

Substantiate your answer by examining the (i) As we have seen in the case of Laxmi
role of the government. in our textbook, farmers need seeds,
fertilizers, agricultural equipments
Ans : SQP 2006
and pump sets to draw water. Poor
Yes, it is necessary to have the public sector. farmers cannot afford many of these.
This has the following reasons : So, they have to borrow money from
1. Only the government can invest large village moneylenders and pay a high
sums of money on the essential public rate of interest.
projects like roads, bridges, railways, (ii) If they are provided loan to buy these
harbours, electricity, irrigation through inputs at a reasonable rate of interest,
dams, etc.. The government spends huge they can save money given as high
money on them to ensure that these interest and increase their income.
facilities are available for everyone. (iii)If they get loan easily at a reasonable
2. It helps private enterprises. The private rate of interest, they will be able to
sector may not continue their production take second and third crops. In this
without the government’s help. To way, they will be able to increase
encourage private sector small-scale their employment opportunities.
units, the government provides electricity 2. Irrigation facilities :
at the price lower than the actual cost. (i) Water is essential for agricultural
The government buys foodgrains from production. But rainfall, in many
farmers and stores them in its godowns areas, is not only inadequate but
also uncertain. So, in these areas,

111. Differentiate between sectors on the basis of 1. As the methods of farming changed and
ownership with examples. the agricultural sector started to prosper,
or it produced much more food than before.
Distinguish between public and private 2. Several people could now take up other
sectors giving at least two examples from activities. Infact buying and selling
each sector. activities increase many time in primary
or sector.
Differentiate between the public and private 3. However, at this stage most of the goods
sectors on the basis of assets and services. produced from natural products from the
Give at least one example from each sector. primary sector and most people working
Ans : OD 2019
employed in this sector.
Historical changes in secondary sector:
Public Sector Private Sector 1. Over a long time, and specially because
1. Most of the assets Assets are owned new methods of manufacturing work
are owned by the by private introduced, factories came up and started
government. individuals. expanding day by day.
2. Some of those people who had earlier
2. All the services are Services are
worked on farms now began to work in
provided by the provided or are
factories or mills at cheap rate By and
Government. in the hands of
by secondary sector became the most
individuals.
important sector in the total production
3. Activities of public Activities are and employment.
sector are guided guided by the Historical changes in the tertiary sector :
by the interest of motive to earn 1. In the passed more than 100 years, there
the nation as a profit. have been a further shift from secondary
whole. to tertiary sector in developed countries.
4. Employees feel Jobs of the 2. The service sector have became the most
secured and there employees are important in terms of total production.
is discipline and less secured and 3. Most of the working people are also
regular work. the whims of the employed in the service sector and this is
owners are above the general pattern observed in developed
all. countries.
5. Government raises To get such 113. Why has tertiary sector becomes the largest
money through services we have producer in India over the last 30 years ?
taxes and other to pay money. Explain four reasons.
ways. or
6. For example, For example, Why is the tertiary sector growing so rapidly
‘Railways or Post TISCO, Reliance in India? Explain it with four reasons.
Office. industries. Ans : SQP 2010
Tertiary sector has becomes the largest

112. What historical changes have been brought
producer in India over the last 30 years due
about in the primary, secondary and tertiary
to many reasons. Out of these four reasons
sectors ?
are explained below :
Ans : Delhi 2007 1. The Government of India as well as of
Historical changes in primary sector : state and local levels are encouraging this
sector directly or indirectly. Huge funds,
grants and donations are provided from
PAGE 529
rice from farmers at a ‘fair price’. This it Private Sector Public Sector
stores in its godowns and sells at a lower
price to consumers through ration shops. The (i) Private sector Public sector
government has to bear some of the cost. In this organisations organisations
way, the government supports both farmers are owned, are owned,
and consumers. There are a large number of controlled and controlled and
activities which are the primary responsibility managed by managed by the
of the government. The government must individuals government or
spend on these. Providing health and groups or other state-run
education facilities for all is one example. business entities. bodies.
Running proper schools and providing quality (ii) The main The main
education, particularly elementary education, motive of these motive of these
is the duty of the government. India’s size of organisations organisations
illiterate population is one of the largest in is to earn is to engage in
the world. Similarly, we know that nearly half profits from activities that
of India’s children are malnourished and a their business serve the general
quarter of them are critically ill. The infant operations. public.
mortality rate of Odisha (40) or Madhya
118. Read the given extract and answer the
Pradesh (48) is higher than some of the
following questions.
poorest regions of the world. Government also
needs to pay attention to aspects of human
development such as availability of safe Another way of classifying economic activities
drinking water, housing facilities for the poor into sectors could be on the basis of who owns
and food and nutrition. It is also the duty of assets and is responsible for the delivery of
the government to take care of the poorest and services. In the public sector, the government
most ignored regions of the country through owns most of the assets and provides all the
increased spending in such areas. services. In the private sector, ownership of
Questions : assets and delivery of services is in the hands
1. Why is there a need of public sector in an of private individuals or companies.
economy? Railways or post office is an example of the
2. Give some examples of public sector. public sector whereas companies like Tata
3. Differentiate between the private and Iron and Steel Company Limited (TISCO)
public sectors. or Reliance Industries Limited (RIL) are
Ans : privately owned.
1. There are several things needed by the Activities in the private sector are guided by
society as a whole but which the private the motive to earn profits. To get such services
sector will not provide at a reasonable we have to pay money to these individuals and
cost. The private sector may not continue companies.
their production or business unless
government encourages it. The purpose of the public sector is not just
2. Providing health and education facilities to earn profits. Governments raise money
for all is one example. Running proper through taxes and other ways to meet expenses
schools and providing quality education, on the services rendered by it.
particularly elementary education, is the
Modern day governments spend on a whole
duty of the government.
range of activities. There are several things
3. Difference between the private and public
needed by the society as a whole but which the
sectors.
private sector will not provide at a reasonable

irrigation facilities will be helpful in and communication technology have become

growing more than one crop in the important and essential. The production of
year. these services has been rising rapidly.
(ii) Obviously, as we grow more crops,
Questions :
mere income and employment will be
1. What do you understand about the
generated on the same piece of land.
primary sector of an economy?
2. What is the reason behind shift in the
labour force from primary sector to
CASE BASED QUESTION secondary and tertiary sectors?
3. Briefly define the differences between
primary and tertiary sector.
116. Read the given extract and answer the
Ans :
following questions.
1. Primary Sector (or Agriculture sector)
Over the forty years between 1973-74 and includes all those economic activities
2013-14, while production in all the three which are connected with extraction and
sectors has increased, it has increased the most production of natural resources.
in the tertiary sector. As a result, in the year 2. As the economy grows, there is a shift
2013-14, the tertiary sector has emerged as in the labour force from primary sector
the largest producing sector in India replacing to Secondary and tertiary sectors. This
the primary sector. Why is the tertiary sector takes place due to following reasons
becoming so important in India? There could • Increase in demand for goods and
be several reasons. First, in any country services produced by Secondary and
several services such as hospitals, educational Tertiary sectors
institutions, post and telegraph services, police • Improved techniques of production in
stations, courts, village administrative offices, agriculture, leading to less need for
municipal corporations, defence transport, human resources in that area
banks, insurance companies, etc, are required. 3. Primary Sector (or Agriculture sector)
These can be considered as basic services. In includes all those economic activities
a developing country the government has to which are connected with extraction and
take responsibility for the provision of these production of natural resources.
services. On the other hand, Tertiary Sector (or
Second, the development of agriculture and Service sector) is concerned with providing
industry leads to the development of services support services to the primary and
such as transport, trade, storage and the secondary sector and includes transport,
like, as we have already seen. Greater the banking, insurance, warehousing,
development of the primary and secondary communication, advertising, etc.
sectors, more would be the demand for such
services.
Third as income levels rise, certain sections
of people start demanding many more services
like eating out. tourism, shopping, private
hospitals, private schools, professional
training etc. You can see this change quite
sharply in cities, especially in big cities. 117. Read the given extract and answer the
Fourth, over the past decade or so certain new following questions.
services such as those based on information The Government in India buys wheat and
PAGE 531
120. Study the given sources and answer the 121. Read the extract and answer the questions
questions that follows: that follow:
Over the thirty years between 1973 and 2003, Money or material things that one can buy
while production in all the three sectors with it, is one factor on which our life depends.
has increased, it has increased the most in But the quality of our life also depends on non-
the tertiary sector. As a result, in the year material things mentioned above. If it is not
2003, the tertiary sector has emerged as the obvious to you, then just think of the role of
largest producing sector in India replacing the your friends in your life. You may desire their
primary sector. friendship. Similarly, there are many things
that are not easily measured but they mean
Every state or region has potential for a lot to our lives. These are often ignored.
increasing the income and employment for However, it will be wrong to conclude that
people in that area. It could be tourism, or what cannot be measured is not important.
regional craft industry, or new services like
IT. Some of these would require proper Consider another example. If you get a job in
planning and support from the government. a far-off place, before accepting it you would
For example, a study by the Planning try to consider many factors, apart from
Commission says that if tourism as a sector income, such as facilities for your family,
is improved, every year we can give additional working atmosphere, or opportunity to learn.
employment to more than 35 lakh people. In another case, a job may give you less pay but
may offer regular employment that enhances
Workers in the organised sector enjoy your sense of security. Another job, however,
security of employment. They are expected to may offer high pay but no job security and also
work only a fixed number of hours. If they leave no time for your family. This will reduce
work more, they have to be paid overtime your sense of security and freedom. Similarly,
by the employer. They also get several other for development, people look at a mix of
benefits from the employers. What are these goals. It is true that if women are engaged
benefits? They get paid leave, payment during in paid work, their dignity in the household
holidays, provident fund, gratuity etc. They and society increases. However, it is also the
are supposed to get medical benefits, and, case that if there is respect for women there
under the laws, the factory manager has to would be more sharing of household work
ensure facilities like drinking water and a safe and a greater acceptance of women working
working environment. When they retire, these outside. A safe and secure environment may
workers get pensions as well. allow more women to take up a variety of jobs
Questions : or run a business. Hence, the developmental
1. Which sector has the highest share in the goals that people have are not only about
year 2003? better income but also about other important
2. How to create more employment in rural things in life.
areas? Questions :
3. Write any two benefits of organised sector 1. “It will be wrong to conclude that what
employees. cannot be measured is not important.”
Ans : Explain the statement in the context of
development.
1. Tertiary sector.
2. What do you mean by the term ‘Job
2. Focusing on tourism and regional craft
Security’ ?
industry.
3. What is the role of a safe and secure
3. They get paid leave, payment during
environment in case of women?
holidays, provident fund, gratuity, and
4. What can be a development goal for an
medical benefits.
employee?

Ans : Questions :
1. Money or material things that one can 1. How many days of employment in a year
buy with it, is one factor on which our are guaranteed by the Mahatma Gandhi
life depends. But the quality of our life National Rural Employment Guarantee
also depends on non-material things. For Act 2005?
example, we may consider the role of our 2. What does the Gross Domestic Product
friends in our lives, in the form of their (GDP)?
friendship. Similarly, there are many 3. Which sector of economies managed by
things that are not easily measured but the individual or company?
they mean a lot to our lives. Ans :
2. A job may give you less pay but may offer
regular employment. This is regarded as 1. 100 days of employment in a year are
sense of security of the job. guaranteed by the Mahatma Gandhi
3. A safe and secure environment may allow National Rural Employment Guarantee
more women to take up a variety of jobs Act 2005.
or run a business. 2. The Gross Domestic Product (GDP)
4. Promotion with job security. shows how small or big economy is.
3. In the private sector, ownership of assets
122. Read the sources given below and answer the and delivery of services is in the hands of
questions that follows: private individuals or companies.
The central government in India made a law 123. Study the given diagram and answer the
implementing the Right to Work in about 625 questions that follow :
districts of India. It is called Mahatma Gandhi
National Rural Employment Guarantee Act
2005 (MGNREGA 2005). Under MGNREGA
2005, all those who are able to, and are in need
of work in rural areas are guaranteed 100 days
of employment in a year by the government.
The value of final goods and services produced
in each sector during a particular year provides
the total production of the sector for that year.
And the sum of production in the three sectors
gives what is called the Gross Domestic
Product (GDP) of a country. It is the value of 1. Which sector shows the highest increase
all final goods and services produced within a in share of G.D.P. in the given period ?
country during a particular year. 2. Which sector shows the decreasing trend
in the share of its G.D.P. ?
Another way of classifying economic activities
3. Why has the primary sector remained
into sectors could be on the basis of who owns
more important than other sectors in
assets and is responsible for the delivery of
spite of its smaller share in G.D.P. ? Give
services. In the public sector, the government
one reason.
owns most of the assets and provides all the
services. In the private sector, ownership of Ans :
assets and delivery of services is in the hands 1. Tertiary sector.
of private individuals or companies. Railways 2. Primary sector.
or post office is an example of the public 3. More than half of the workers in the
sector whereas companies like Tata Iron and country are still working in the primary
Steel Company Limited (TISCO) or Reliance sector.
Industries Limited (RIL) are privately owned.
PAGE 533
124. Study the graph given below and answer the 2. Which was the largest producing sector
following questions : in 2003 ?
3. Which sector has grown the most over
thirty years ?
4. What was the GDP of India in 2003 ?
Ans :
1. Primary sector,
2. Tertiary sector,
3. Tertiary sector,
4. Rs 210,000 crore.
126. Read the extract and answer the questions

that follows:
Questions :
There are many activities that are undertaken
1. Which was the largest producing sector
by directly using natural resources. Take, for
in 1973 ?
example, the cultivation of cotton. It takes
place within a crop season. For the growth
in 2003 ?
of the cotton plant, we depend mainly, but
3. How much percent is the contribution of
not entirely, on natural factors like rainfall,
secondary sector to total GDP in 2003 ?
sunshine and climate. The product of this
4. What is the approximate share of
activity, cotton, is a natural product.
tertiary sector in GDP (%) in 1973 ?
Similarly, in the case of an activity like
Ans : dairy, we are dependent on the biological
1. Primary sector process of the animals and availability of
2. Tertiary sector fodder etc. The product here, milk, also
3. 24% approximately is a natural product. Similarly, minerals
4. 35% approximately and ores are also natural products. When
we produce a good by exploiting natural
125. Study the graph given below and answer the resources, it is an activity of the primary
following questions : sector. This is because it forms the base
for all other products that we subsequently
make. Since most of the natural products
we get are from agriculture, dairy, fishing,
forestry, this sector is also called agriculture
and related sector. The secondary sector
covers activities in which natural products
are changed into other forms through ways
of manufacturing that we associate with
industrial activity. It is the next step after
primary sector activities if the product is
not produced by nature but has to be made
and therefore some process of manufacturing
is essential. After primary and secondary
sector activities there is a third category
of activities that falls under tertiary sector
Questions :
and is different from the above two. These
are activities that help in the development
in 1973 ?

of the primary and secondary sectors. These Worker in Different Sectors (in Millions)
activities, by themselves, do not produce a
good but they are an aid or a support for the Sector Organised Unorganised Total
production process. For example, goods that Primary 2 242
are produced in the primary or secondary Total % 7% 93 % 100%
sector would need to be transported by trucks
or trains and then sold in wholesale and retail
shops. Questions :
Questions : 1. What is the number of persons engaged
1. What do you understand by primary in the unorganized sector?
sector? What is the other name of primary 2. Which is the most important sector that
sector? provides the most jobs to the people?
2. What do you understand by secondary 3. How many workers are working in the
activities? tertiary sector ?
3. What do you understand by tertiary 4. Which organised sector is most important
activities? What is the other name for and why ?
tertiary sector? Ans :
Ans : 1. We complete the table by doing calculation
1. When we produce a good by exploiting as given below.
natural resources, then it is called the Worker in Different Sectors (in Millions)
primary sector. Primary sector is also
Sector Organised Unorganised Total
known as agriculture sector.
2. When the natural products are changed Primary 2 240 242
into other forms by ways of manufacturing Secondary 9 54 63
then it is called as secondary activities. Tertiary 17 76 93
3. The activities that help in the development Total 28 370 398
of the primary and secondary sectors is
Total % 7% 93 % 100%
called as a tertiary activities. The other
name for the tertiary sector is service sector. The number of people engaged in the
unorganized sector is 370 million.
127. Read the source given below and answer 2. Primary sector is the most important
questions hat follow by choosing the most sector that provides the most jobs to the
appropriate option: people?
The table above shows the estimated number 3. 93 million.
of workers in India in the organized and 4. Tertiary sector is most important
unorganized sectors. Read the table carefully. organised becuse more workers are here
Fill in the missing data and answer the than any other organized sector.
questions that follow. www.nodia.in
Worker in Different Sectors (in Millions)

Sector Organised Unorganised Total
Primary 2 242
Secondary 9 54 63
Tertiary 76
Total 28 398
PAGE 535
CHAPTER 18
MONEY AND CREDIT
SUMMARY 12. Monetary System : A system of exchange in

which every good or service is sold against
money and in return for money another good
1. Money : Anything that is generally acceptable
or service can be purchased.
as a means of exchange and at the same time
13. Collateral : An asset that the borrower owns
acts as a measure and store of value.
and uses as a guarantee to a lender until the
2. Barter System : The system of exchanging
loan is repaid.
goods is known as the barter system.
14. Bank Rate : It is the rate at which Central
3. Credit : (Loan) refers to an agreement in
Bank of a country lends money to its member
which the lender supplies the borrower with
banks.
money, goods or services in return for the
promise of future payment.
4. Cash Reserve Ratio (CRR) : Banks always
keep some part of the total amount deposited MULTIPLE CHOICE QUESTION
as cash reserve to meet the needs of the
depositors. That part of the total deposits
which the bank keeps with itself in the cash 1. Look at the given picture carefully and infer
form is called the Cash Reserve Ratio. the income of the bank.
5. Double Coincidence of Wants : It means both
parties, i.e., the buyer and the seller have to
agree to sell and buy each others commodities.
6. Formal Lender Resources : These include
those resources which are controlled by the
government. Banks and cooperatives fall into
the formal category.
7. Informal Lender Resources : These include
Choose the correct option from the following.
moneylenders, traders, relatives and friends.
(a) The difference between the amount
8. Medium of Exchange : When money acts as
deposited and borrowed by the bank to
an intermediate in the exchange process, it is
Reserve Bank of India
called as medium of exchange.
(b) The difference of amount of interest
9. Currency : It is modern form of money like
between what is charged from borrowers
paper notes and coins.
and what is paid to depositors
10. Cheque : A cheque is a paper instructing
(c) The difference of interest rate between
the bank to pay a specific amount from the
what is charged from borrowers and what
person’s account to the person in whose name
is charged from depositor
the cheque has been issued.
(d) The difference between the amount
11. Demand Deposits : Demand deposit is that
deposited by the depositor and borrowed
deposit in the bank accounts which can be
by the borrower
withdrawn on demand any time.

CH 18 : MONEY AND CREDIT CBSE CHAPTERWISE PYQ CLASS 10 SOCIAL SCIENCE
Ans : OD 2024 Ans : SQP 2021
(b) The difference of amount of interest (d) Asset as guarantee for loan
between what is charged from borrowers and
what is paid to depositors 6. The exchange of goods with a commodity is
known as :
2. Why do lenders often require collateral before (a) Double coincidence of wants
lending loan? Choose the most suitable option (b) Local trade
from the following. (c) Domestic trade
(a) To lower interest rates for borrowers (d) Foreign trade
(b) To establish personal relations Ans : Comp 2021
(c) To increase their profit margins
(d) To mitigate the risk of loan default (a) Double coincidence of wants
Ans : OD 2024 7. Which one of the following mediums of

(d) To mitigate the risk of loan default exchange is convenient ?
(a) Money
3. Who among the following takes the decision (b) Commodity
regarding saving and loan activities in the (c) Gold
Self Help Groups (SHGs)? (d) Silver
(a) Manager of a Bank Ans : Comp 2021
(b) Members of Non-Governmental (a) Money
Organisation (NGO)
(c) Local Money Lenders 8. Which of the following authorities of India
(d) Members of Self-Help Group (SHG) issues currency notes on behalf of the Central
Ans : OD 2023
Government ?
(a) The State Bank of India
(d) Members of Self-Help Group (SHG) (b) The Reserve Bank of India
4. Most of the agricultural labourers like Mohan (d) The Allahabad Bank
depend upon loans from informal sector. (d) The Punjab National Bank
Which of the following statements about this Ans : Comp 2021
sector is correct – (b) The Reserve Bank of India

(a) There are government bodies to supervise
informal sector. 9. Which one of the following is a formal source
(b) Money lenders ask for a reasonable rate of loan ?
of interest. (a) Relatives
(c) Cost of informal loans to the borrower is (b) Landlord
quite high. (c) Bank
(d) Money lenders use fair means to get their (d) Friend
money back. Ans : Comp 2021
Ans : SQP 2021 (c) Bank

(c) Cost of informal loans to the borrower is 10. Which one of the following options provides
quite high. assured payment ?
(a) Voucher
5. Which one of the following options describe
(b) Demand Deposit
‘Collateral’ ?
(c) Cheque
(a) Double coincidence of wants
(d) Collateral
(b) Certain products for barter
(c) Trade in barter Ans : Comp 2020
(d) Asset as guarantee for loan (b) Demand Deposit

PAGE 537
11. Find the incorrect option : 15. A porter making pots, wants to exchange
(a) Demand deposit share the essential pots for wheat. Luckily, he meets a farmer
features of money. who has wheat and is willing to exchange it
(b) With demand deposit payments can be for the pots. What is this situation known
made without cash. as?
(c) Demand deposits are safe way of money (a) Incidence of wants
transformation. (b) Double coincidence of wants
(d) Demand deposit facility is like cheque. (c) Barter system of wants
Ans : SQP 2020
(d) None of the above
(d) Demand deposit facility is like cheque. Ans : OD 2015
(b) Double coincidence of wants

12. Rita has taken a loan of 7 lakhs from the
bank to purchase a car. The annual interest 16. Identify the biggest problem faced by the
rate on the loan is 14.5 per cent and the small farmers during cultivation season:
loan is to be repaid in 3 years in monthly
instalments. The bank retained the papers
of the new car as collateral, which will be
returned to Rita only when she repays the
entire loan with interest.
Analyse the loan information given above,
considering one of the following correct
option :
(a) Mode of re-payment
(b) Terms of credit
(c) Interest on loan
(d) Deposit criteria
Ans : SQP 2020
(b) Terms of credit
13. Which among the following issues currency (a) lack of Government Support and
notes on behalf of the Central Government ? Subsidies.
(a) State Bank of India (b) Debt trap from the money lenders
(b) Reserve Bank of India (c) Small piece of land
(c) Commercial Bank of India (d) Lack of using modern mode of cultivation
(d) Union Bank of India
Ans : Comp 2016
Ans : OD 2020
(b) Debt trap from the money lenders
(b) Reserve Bank of India
17. The problem of similar wants made exchange
14. A system where goods were exchanged difficult, so a new medium of exchange was
without using money is batter known as developed known as
(a) goods system (a) capital
(b) exchange system (b) cost
(c) barter system (c) rent
(d) no-money system (d) money
Ans : SQP 2018, 2013
Ans : Foreign 2011
(c) no-money system (d) money

Modern forms of money include currency – 137. Read the sources given below and answer the
paper notes and coins. Unlike the things that questions that follows :
were used as money earlier, modern currency
Every loan agreement specifies an interest
is not made of precious metal such as gold,
rate which the borrower must pay to the lender
silver and copper. And unlike grain and cattle,
along with the repayment of the principal.
they are neither of everyday use. The modern
In addition, lenders may demand collateral
currency is without any use of its own. Then,
(security) against loans. Collateral is an asset
why is it accepted as a medium of exchange? It
that the borrower owns (such as land, building,
is accepted as a medium of exchange because
vehicle, livestocks, deposits with banks) and
the currency is authorised by the government
uses this as a guarantee to a lender until the
of the country.
loan is repaid.
The other form in which people hold money
The various types of loans can be conveniently
is as deposits with banks. At a point of time,
grouped as formal sector loans and informal
people need only some currency for their
sector loans. Among the former are loans from
day-to-day needs. For instance, workers who
banks and cooperatives. The informal lenders
receive their salaries at the end of each month
include moneylenders, traders, employers,
have extra cash at the beginning of the month.
relatives and friends, etc. The Reserve Bank
What do people do with this extra cash? They
of India supervises the functioning of formal
deposit it with the banks by opening a bank
sources of loans. For instance, we have seen
account in their name. Banks accept the
that the banks maintain a minimum cash
deposits and also pay an interest rate on the
balance out of the deposits they receive.
deposits. In this way people’s money is safe
The RBI monitors the banks in actually
with the banks and it earns an interest. People
maintaining cash balance.
also have the provision to withdraw the money
as and when they require. Since the deposits Banks keep only a small proportion of
in the bank accounts can be withdrawn on their deposits as cash with themselves. For
demand, these deposits are called demand example, banks in India these days hold about
deposits. 15 per cent of their deposits as cash. This is
Questions : kept as provision to pay the depositors who
1. In which system, double coincidence of might come to withdraw money from the bank
wants is an essential feature? on any given day. Since, on any particular
2. Why are paper notes and coins accepted day, only some of its many depositors come
as a medium of exchange? to withdraw cash, the bank is able to manage
3. Why do people prefer demand deposits? with this cash.
Ans : Questions :
1. What do you mean by collateral in
1. In barter system, double coincidence of
banking system?
wants is an essential feature.
2. Who supervises the functioning of formal
2. Because they are authorised by the
sources of loans?
government of the country.
3. What per cent of deposits is used as cash
3. Because demand deposits in the bank
by Bank?
accounts can be withdrawn on demand.
Ans :
1. Collateral is an asset that the borrower
owns (such as land, building, vehicle,
livestocks, deposits with banks) and uses
this as a guarantee to a lender until the
loan is repaid.
PAGE 539
(a) Both assertion and reason are true, Options :

and reason is the correct explanation of (a) 1, 4, 2, 3
assertion. (b) 3, 4, 2, 1
(b) Both assertion and reason are true, but (c) 3, 4, 2, 1
reason is not the correct explanation of (d) 1, 3, 2, 4
assertion. Ans : SQP 2008
(c) Assertion is true, but reason is false.
(d) Both assertion and reason are false. (a) 1, 4, 2, 3
Ans : Delhi 2018

28. A person can withdraw money by issuing a
(d) Both assertion and reason are false. cheque. What is a cheque?
(a) Loan taken by the bank.
25. Raghav has surplus money so he opens a (b) Loan taken by the depositor from the
bank account and deposits in it. Whenever bank.
he needs money. he can go to his bank and (c) Paper instructing the bank to pay a
withdraw from there. This kind of deposit specific amount.
with the banks are known as (d) Paper valid to withdraw money
(a) demand deposit
Ans : OD 2014
(b) term deposit
(c) fixed deposit (c) Paper instructing the bank to pay a
(d) surplus deposit specific amount.
Ans : Foreign 2011
29. Assertion : Banks keep only a small proportion
(a) demand deposit of their deposits as cash with themselves.
26. Read the given data and find out which Reason : Banks in India these days hold
country has most equitable distribution of about 15 per cent of their deposits as cash.
income. (a) Both assertion and reason are true,
and reason is the correct explanation of
Countries Monthly Income of Citizens in four Countries in 2018
assertion.
Citizen Citizen Citizen Citizen Citizen Average
I II III IV V (b) Both assertion and reason are true, but
Country 10,500 11,200 10,800 11,000 10,700 10,840 reason is not the correct explanation of
A assertion.
Country 600 5,000 600 600 600 1,480 (c) Assertion is true, but reason is false.
B
(d) Both assertion and reason are false.
Country 550 10,500 400 7,500 2000 4,190
C
Ans : Comp 2005
Country 800 4,800 700 5,000 750 2,410
D (b) Both assertion and reason are true, but
(a) Country A reason is not the correct explanation of
(b) Country B assertion.
(c) Country C 30. What is the most important function of the
(d) Country D banks?
Ans : OD 2012 (a) Accept deposits and extend loans.
(a) Country A (b) Give loans to government.
(c) Open as many bank accounts as possible.
27. Arrange the following in the correct sequence (d) Give loans to businesses.
1. Commodity money
Ans : SQP 2010
2. Paper notes and coins
3. Bank money and digital payments (a) Accept deposits and extend loans.
4. Metallic coins.

18. Assertion : The modern currency is used as 21. Modern forms of money include which of the
a medium of exchange; however, it does not following?
have a use of its own. (a) Currency notes and coins
Reason : Modem currency is easy to carry (b) Cowrie shells and stones
(a) Both assertion and reason are true, (c) Gold and silver coins
and reason is the correct explanation of (d) Grains and cattle
assertion. Ans : OD 2008
(b) Both assertion and reason are true, but
reason is not the correct explanation of (a) Currency notes and coins
assertion. 22. What is the most important function of
(c) Assertion is true, but reason is false. money?
(d) Both assertion and reason are false. (a) Used in banking transactions
Ans : OD 2010, 2008 (b) Payment of loans
(b) Both assertion and reason are true, but (c) Medium of exchange
reason is not the correct explanation of (d) Stock market exchange
assertion. Ans : Comp 2010
19. Read the information given below and select (c) Medium of exchange
the correct answer:
23. Identify the kind of such groups present in
Rajaram is a landlord who grants loan. to
some part of rural India.
farmers for sowing new crops and purchasing
farm inputs. He grants the loan at a higher
rate of interest. If the farmer fails to repay
the loan, he has to work on Rajaram’s field
as a bonded labour. Also, a farmer cannot
get another credit till the time he had cleared
his previous dues. Which of the following
Rajaram is offering?
(a) Informal sector credit
(b) Formal sector credit
(c) Banking credit
(d) Community credit
Ans : SQP 2018
(a) Informal sector credit (a) Self Help groups

(b) Panchayats
20. Arrange the following in the correct sequence:
(c) Small rural banks
1. Banks give loans to borrowers
(d) Women empowerment movements
2. Banks keep a small amount of the deposits
as cash Ans : OD 2005
3. Banks deposit the savings from lenders (a) Self Help groups
4. Banks pay interest to the lenders
Options : 24. Assertion : The facility of demand deposits
(a) 2, 4, 3, 1 makes it possible to settle payments without
(b) 3, 4, 2, 1 the use of cash.
(c) 4, 3, 2, 1 Reason : Demand deposits are paper orders
(d) 4, 3, 2, 1 which make it possible to transfer money
from one person’s account to another person’s
Ans : Delhi 2011
account.
(b) 3, 4, 2, 1
PAGE 541
39. Assertion : Banks charge a higher interest rate

on loans than what they offer on deposits.
Reason : The difference between what is
charged from borrowers and what is paid to
depositors is their main source of income.
(a) Both assertion and reason are true,
assertion.
(b) Both assertion and reason are true, but (a) The ancient system of economic activity
reason is not the correct explanation of (b) The barter system
assertion. (c) Non-economic based activities
(c) Assertion is true, but reason is false. (d) Both (a) and (b)
(d) Both assertion and reason are false. Ans : SQP 2019
Ans : Comp 2013 (d) both (a) and (b)

(a) Both assertion and reason are true, and 43. Assertion : Collateral is an asset that the
reason is the correct explanation of assertion. borrower owns (such as land, building,
40. Which of the following is not a feature of Self vehicle, livestock, deposits with banks) and
Help Groups (SHGs)? uses this as a guarantee to a lender until the
(a) It consists of 15-20 members or more. loan is repaid.
(b) Here members pool their savings which Reason : Collateral is given as the lender can
acts as collateral. sell the collateral to recover the loan amount
(c) Loans are given at nominal rate of if the borrower fails to repay the loan.
interest. (a) Both assertion and reason are true,
(d) It is an informal source of credit. and reason is the correct explanation of
assertion.
Ans : OD 2007
(d) It is an informal source of credit. reason is not the correct explanation of
assertion.
41. Ram and Shyam are small farmers. Ram has
taken credit 1.5% per month on < 20000 from (d) Both assertion and reason are false.
a trader while Shyam has taken credit at 8%
Ans : OD 2017
per annum from bank on the same amount.
Who is better off? (a) Both assertion and reason are true, and
(a) Ram is better because he has to do no reason is the correct explanation of assertion.
paperwork.
44. Identify the bank:
(b) Shyam is better because his interest
• Which has the presence in neighbour
payment is less.
country of India.
(c) Ram is better because he has not paid
• Started in 1970s.
any collateral.
• Most of the borrower are women.
(d) Both Ram and Shyam are equal so no one
• Professor Muhammad Yunuswas the
is better off.
founder of this bank.
Ans : Foreign 2020
Option :
(b) Shyam is better because his interest (a) National Bank Of Bangladesh
payment is less. (b) Grameen Bank Of Bangladesh.
(b) Rural Bank Of Bangladesh.
42. Observe the following picture cautiously (b) State Bank Of Bangladesh.
which depicts about.

portion of the deposits to extend (1) Banks mediate between those who have
loans. surplus money and those who need money.
(iv) They mediate between those who They take deposits from those who have
have surplus funds and those who are surplus money and use the major portion
in need of these funds. They charge of the deposits to extend loans.
a higher interest rate on loans than (2) They account for 25% of rural credit in
what they offer on deposits. The India. In this way, they help in increasing
difference between what is charged economic activities of the borrowers.
from borrowers and what is paid to (3) In India, banks give loans not just to
depositors is their main source of profit-making businesses and traders
income. but also to small cultivators, small-scale
industries, small borrowers, etc.
117. Why are the poor households still dependent (4) Undoubtedly, cheap and affordable credit
on informal sources of credit ? Explain. is crucial for the country’s development.
Ans : OD 2007 It helps to grow crops, to meet working
Following are the main reasons for formal capital needs of production and in setting
credit not being available to the rural poor : up new industries or trade in goods.
(1) There is need for collateral or complicated (5) In this way, they help poor people to
paper work which the rural poor are not increase their standard of living. If credit
capable of providing. is available to the poor people at low
(2) The moneylenders and rich landowners rate of interest and on reasonable terms
continue to extend loans to defaulters and conditions, they can improve their
even if the previous loan is unpaid. economic conditions.
(3) The banks are mostly unwilling to lend 119. How do SHGs act to provide a platform for
loans to small farmers because the women to address their various social issues ?
repayment of loans is dependent on the
income from farming. In case of crop Ans : SQP 2012, 2006
failure, repayment becomes impossible. (1) A Self-Help Group is an organisation of

So, the recovery from small farmers rural poor, particularly women who pool
becomes difficult. their savings.
(4) They are hesitant and unsure about the (2) The SHG encourages its members for
functioning of the banks. savings and enables them to take small
(5) They may not have access to banks in loans from the group itself to meet their
their villages. needs. In this way, it addresses their
economic issue that is the base of many
118. How do banks play an important role in the social issues.
economy of India ? Explain. (3) SHGs are the building blocks of
or organisation of the rural poor. Not only
What is the role of a bank in the economic does it help women to become financially
development of a country ? Explain. self-reliant, the regular meetings of the
or group provide a platform to discuss and
“Banks are playing an important role in the act on a variety of social issues such as
development of the Indian economy.” Support health, nutrition, domestic violence, etc.
the statement with examples. (4) The SHG provides self-employment
Ans : Delhi 2018 opportunities to its members by providing
Banks play an important role in the economy them loans for meeting working capital
of India as is given below : needs, for housing materials, for acquiring
PAGE 543
50. Study the pie chart and answer the given (a) Credit (b) Collateral
questions: (c) Guarantee (d) Interest
Ans : OD 2014
(b) Collateral
53. Assertion : The Reserve Bank of India

supervises the functioning of formal sources
of loans.
Reason : The RBI sees that the banks give
loans not just to profit-making businesses
and traders but also to small cultivators,
small scale industries, to small borrowers etc.
(a) Which are the formal sources of credit for
assertion.
rural households in India?
(b) Which is the most dominant source of
reason is not the correct explanation of
credit for rural household? Why?
assertion.
(c) What is the total percentage of informal
sources of credit for rural household?
Ans : Comp 2016
Ans : SQP 2007, 2005
(a) Commercial Banks and Cooperative
societies.
(b) Moneylenders, as they are ready to give
assertion.
loan without collateral and borrower can
get loans even without repaying their 54. Assume there are four families in a country.
earlier loans. The average per capita income of these
(c) 48% families is < 6000. If the incomes of three
families are < 5000, < 8000, and < 4000
51. Arrange the following in the correct sequence:
respectively, what is the income of the fourth
1. Uses as medium of exchange
family?
2. Authorised medium of exchange
(a) < 5500 (b) < 2000
3. Currency
(c) < 3000 (d) < 7000
4. Reserve Bank of India issues currency
notes Ans : Delhi 2019
Options : (d) < 7000

(a) 3, 4, 2, 1 (b) 3, 1, 4, 2
(c) 1, 3, 2, 4 (d) 1, 4, 3, 2 55. Neha has taken a loan of < 5 lakhs from
the bank to purchase a house. The annual
Ans : Foreign 2015
interest rate on the loan is 12 percent and the
(b) 3, 1, 4, 2 loan is to be repaid in 10 years in monthly
instalments. Neha had to submit to the bank,
52. Read the information given below and select
documents showing her employment records
the correct answer:
and salary before the bank agreed to give her
Ramesh has approached the bank for securing
the loan. What are the documents required
loan. The bank asked him to keep the papers
for the loan?
of his home to avail the loan. Ramesh has
(a) Blue print of the house to be made
agreed for the same. Ramesh has used ..........
(b) Employment records and salary
to secure loan from the bank.

31. Banks give out loans and charge .......... on 35. Which among the following lenders will
the loan amount from the borrower. possibly not ask the borrower to sign the
(a) rent (b) wages terms of credit?
(c) interest (d) money (a) Banks
Ans : Delhi 2009, 2006
(b) Moneylenders
(c) Cooperatives
(c) interest (d) Private agencies
32. Arrange the following options in the correct Ans : Comp 2016, 2011
sequence of evolution of money: (b) Moneylenders
1 Modern currency as notes and coins
2. Use of metallic coins like gold, silver, 36. Which among the following is not a feature of
copper coins informal source of credit?
3. Cryptocurrency-a form of payment that (a) It is supervised by the Reserve Bank of
can be exchanged online for goods and India.
services (b) Rate of interest is not fixed.
4. Use of grains and cattle as money (c) Terms of credit are very flexible.
Options : (d) Traders, employers, friends, relatives, etc
(a) 3, 4, 2, 1 (b) 3, 4, 2, 1 provide informal credit source.
(c) 4, 2, 1, 3 (d) 4, 3, 2, 1 Ans : Foreign 2009
Ans : Foreign 2007
(a) It is supervised by the Reserve Bank of
(c) 4, 2, 1, 3 India.
33. All the banks act as mediator between .......... 37. Arrange the following Sources of Credit (per
and .......... . Rs 1000) of Rural Households in India in
(a) rural people, urban people 2012 according to their share percentage:
(b) literates, illiterates 1. Commercial Bank
(c) people, government 2. Money Lender
(d) depositors, borrowers 3. Government
Ans : SQP 2015
4. Relatives and Friends
Options :
(d) depositors, borrowers (a) 2, 4, 3, 1 (b) 3, 4, 2, 1
34. Assertion : The terms of deposit are same for (c) 3, 4, 2, 1 (d) 2, 1, 4, 3
all credit arrangements. Ans : OD 2010
Reason : Credit arrangements are very (d) 2, 1, 4, 3
complex process so to remove the complexities
same terms of deposits are used. 38. A trader provides farm inputs on credit on
(a) Both assertion and reason are true, the condition that farmers will sell their crop
and reason is the correct explanation of produce to him at .......... prices so that he
assertion. could sell them at .......... prices in the market.
(b) Both assertion and reason are true, but (a) high, medium (b) low, high
reason is not the correct explanation of (c) medium, high (d) high, low
assertion. Ans : Foreign 2008
(d) Both assertion and reason are false. (b) low, high
Ans : OD 2013
PAGE 545
(c) Assertion is true, but reason is false. (2) People could grow crops, so business, set
(d) Both assertion and reason are false. up small-scale industries etc.
Ans : Foreign 2011
(3) It is important to save and reduce the
dependence an informal sources of credit.
64. How do the Demand Deposits offer facilities?
61. Arrange the following in the correct sequence
1. Applied for tractor loan by a farmer Ans : Comp 2019
2. Sanctioned loan by the cooperative bank The demand deposits in the bank can be used
3. Collateral security demanded by the bank as a medium of exchange and it is accepted
4. Terms of credit told to the farmer. by all. For example, payments can be made
Options : by cheques instead of cash. This facility of
(a) 2, 4, 3, 1 (b) 3, 4, 2, 1 cheques against demand deposits makes it
(c) 4, 3, 2, 1 (d) 1, 4, 3, 2 possible to settle payments directly without
Ans : OD 2006
using cash. Demand deposits are widely
accepted as a means of payment.
(d) 1, 4, 3, 2
65. Describe the bad effects of informal sources
of credit on borrowers.
VERY SHORT QUESTION Ans : Delhi 2019
Following are the bad effects of informal

62. “The use of money spans a very large part sources of credit :
of our everyday life.” Support the statement. (1) They are not subordinate to any
government organisation like RBI, thus
Ans : Comp 2021
there is no official backing or monitoring
Money is used in everyday life. There are agency.
several transactions involving money in any (2) Absence of a fixed interest rate increases
single day. the scope of exploitation.
(1) In many of these transactions, goods are (3) Increases the probability of scope of using
bought and sold with the use of money. unfair means to get back their payment.
In some other transactions, services are (4) Higher interest rates, with no official
exchanged with money. For some, there records, often lead to debt traps.
might not be any actual transfer of money
taking place now but, a promise to pay
money later.
(2) For example, we purchase books, pencils,
chocolates from money. We give doctor’s
fee and school fee in money. My father 66. Why are formal sources of credit preferred
receives a monthly salary in money. over the informal source of credit? Give three
reasons.
63. Why do banks and cooperative societies need
Ans : SQP 2019
to lend more ? Explain.
Formal sources of credit preferred over
Ans : SQP 2020
Informal sources of credit because :
Banks and cooperative societies need to lend (1) Formal sources have low cost of borrowing.
more because : (2) Higher Income through cheap borrowing.
(1) This would lead to higher incomes and (3) No exploitation and debt trap.
many people could then borrow cheaply (4) Any other relevant point.
for a variety of needs.

67. What is a cheque ? How and why do we issue 70. Amrita is a government employee and
cheque ? belongs to a rich urban household whereas
Ans : OD 2017
Rani works as a helper on a construction site
and comes from a poor rural household. Both
(1) A cheque is a paper instructing the bank have a crisis at home and wish to take loan.
to pay a specific amount from the person’s Create a list of arguments explaining who
account to the person in whose name the between the two would successfully be able
cheque has been made. to get the loan from a formal source.
(2) For payment through cheque, the payer
who has an account with the bank, makes Ans : SQP 2018
out a cheque for a specific amount. Amrita would successfully get the loan from
(3) The facility of cheques, i.e., we issue a formal source because:
cheques against demand deposits, (1) Amrita because of her background is
which make it possible to directly settle literate and will be able to complete the
payments without the use of cash. documentation and fulfil the formalities
required by the banks, whereas it would
68. Explain collateral. Give some common be difficult for Rani to do this.
examples of collateral used for borrowing. (2) Amrita can easily arrange for collateral
Ans : Foreign 2011, 2009 or guarantee for her loan whereas Rani
(1) Collateral is an asset that borrower owns will have difficulty in finding a guarantor.
and uses this as a guarantee to a lender (3) Amrita is from a well-to do family and the
until the loan is repaid. If the borrower banks will feel safer as far as repayment of
fails to repay the loan, the lender has loan is concerned as she can do so through
the right to sell the asset or collateral to EMIs from her salary. Whereas the bank
obtain payment. may not feel safe in case of Rani as she
(2) The asset such as : Land, buildings, does not have a regular source of income.
vehicles, live stocks are some common 71. Explain any three loan activities of banks in
examples of collateral used for borrowing. India.
69. Why is cheap and affordable credit important Ans : OD 2017
for the country’s development? Explain any Activities of banks in India who are involved
three reasons. in providing loan :
Ans : OD 2018 (1) Banks provide loans for various economic
Cheap and affordable credit plays a crucial activities.
role for the country’s development. Reasons (2) Banks intermediate between those who
are : have surplus funds and those who are in
(1) Credit helps people to meet the on going need of these funds.
expenses of production and thereby (3) Banks offer very less interest on deposits
develop their business in agricultural and than what they demand on loans.
industrial areas. 72. What are the reasons why the banks might
(2) For middle class people, loans help a lot not be willing to lend to certain borrowers ?
in constructing their houses and to get
rid of monthly rents. Ans : SQP 2012
(3) It raises the standard of living and social (1) Bank loans require proper documents and
status of the common man by enabling collateral. Most of the ‘poor people don’t
them to buy automobiles, electronic possess anything to collateral.
items etc. (2) The formal sources provide loan only
for productive purposes, whereas the
PAGE 547
poor people may demand loan for non- 77. Give two reasons, why the supervision of RBI
productive purposes like marriages, etc. over other banks is necessary ?
Ans : OD 2013
73. Why money is referred to as a medium of
exchange, give two reason ? The supervision of RBI is necessary due to
Ans : Comp 2009
the following reasons :
(1) It ensures safety to the bank deposits of
Money is accepted as medium of exchange people.
because ; (2) It helps in collection of economic data all
(1) it can be easily exchanged for any over the country.
commodity or service. (3) It contains corrupt practices that may
(2) it eliminates the need for double creep within banks.
coincidence of wants.
(3) it acts as an intermediate in the exchange 78. State which requirement a borrower has to
process. fulfil before taking a housing loan ?
Ans : Foreign 2010
74. Name two formal and two informal sources of
rural credit in India ? (1) First of all, borrower seed a certificate of
Ans : Foreign 2006
source of income.
(2) Documents in sustainable economic records.
Formal sources of rural credit in India : (3) Then all the papers of the purchased
(1) Cooperative Societies property handed over to the banks as
(2) Regular Commercial Banks collateral security.
Two informal sources of rural credit in India (4) If not fully satisfied, the bank can ask
are : for one/two sureties of borrower who
(1) Relatives and friends are ready to repay the loan, in case the
(2) Local moneylenders borrower fails to repay his loan.
75. State any two advantages of formal sources 79. How is the facility of cheque useful ?
of credit ?
Ans : Delhi 2020, 2017
Ans : OD 2016
(1) The cheques or demand deposits have the
Advantages of formal source of credit are: essential features of money.
(1) These sources work under the supervision (2) They make it possible to directly settle
of Reserve Bank of India. The policy is payments without the use of cash.
transparent and open to all. There is (3) Since cheques/demand drafts are widely
least chance of dishonesty while dealing accepted as a means of payment along
with the rural customers. with currency, they constitute money in
(2) The rate of interest of formal source of credit the modern economy.
is always lower than the informal ones.
80. Mention any three limitations of the barter
76. What are functions of money ? system.
Ans : Comp 2015
Ans : OD 2012
Functions of Money : (1) Two people with different types of needs
(A) Primary Functions : (a) Medium of and goods must be these to satisfy each
Exchange, (b) Measure of Value. other’s needs.
(B) Secondary Functions : (a) Store of Value, (2) There are many products which cannot
(b) Standard for Deferred Payments, (c) be divided.
Transfer of value. (3) Valuation of goods is very difficult.

Ans : Comp 2012, 2009

(c) Reduce- as amount equivalent to his
(b) Grameen Bank Of Bangladesh. salary is being counted as monthly
repayment.
45. Arrange the following in the correct sequence: (d) Be totally repaid- as he is repaying the
1. Barter system debt in the form of physical labour.
2. Legal currency
3. Banking system Ans : SQP 2021
4. Medium of exchange in transactions (a) Increase- because of increasing interest

Options : and non-payment of monthly amount.
(a) 2, 4, 3, 1 (b) 3, 4, 2, 1
(c) 1, 2, 4, 3 (d) 4, 3, 2, 1 48. Assertion : Credit would be useful or not
depends on the risk involved in a situation.
Ans : OD 2014
Reason : The chance of benefitting from
(c) 1, 2, 4, 3 credit is highest in agriculture sector.
46. Study the picture and answer the question and reason is the correct explanation of
that follows: assertion.
assertion.
Ans : OD 2018

Which of the following aspect best signifies 49. Most of the agricultural labourers like Mohan
the above image? depend upon loans from informal sector.
(a) Bank Cheque Which of the following statements about this
(b) Bank Draft sector is correct:
(c) Terms of Credit (a) There are govt. bodies to supervise
(d) Letters of Payment informal sector
Ans : Foreign 2012 (b) Money lenders ask for a reasonable rate
(a) Bank Cheque of interest
(c) Cost of informal loans to the borrower is
47. Read the information given below and select quite high
the correct option: (d) Money lenders use fair means to get their
Mohan is an agricultural labourer. There money back
are several months in a year when he has Ans : OD 2015
no work and needs credit to meet his daily
expenses. He depends upon his employer, the (c) Cost of informal loans to the borrower is
landowner for credit who charges an interest quite high
rate of 5 per cent per month. Mohan repays
the money by working physically for the
landowner on his farmland. Over the years
his debt will:
(a) Increase- because of increasing interest
and non-payment of monthly amount.
(b) Remain constant- as he is working for the
employer but is repaying less.
PAGE 549
88. Explain money and its modern forms. Classify borrower into a situation from which
it in different kinds. Before the introduction recovery is very painful.
of coins, what objects were used as money ? (ii) Instead of improvement in earnings,
Ans : SQP 2011
the borrower is much worse off than
before. Farmers have to sell part of
(1) Money is a medium of exchange and store land to repay the loan.
of value.
(2) The modern forms of money include 91. What is meant by term credit ? What does
currency and deposits, i.e., it can be it include?
classified into : Ans : Delhi 2017
(i) Coins; (1) Credit loan refers to an agreement in
(ii) Paper notes; and which the lender supplies the borrower
(iii)Credit money or deposits with banks. with money, goods or services in return
(3) Before the introduction of coins, a variety for the promise of future payment.
of objects such as grains and cattle in (2) Credit includes the following elements :
the early ages and metallic coins like (i) Interest rate which the borrower
gold, silver, and copper coins till the last must pay to the lender along with the
century were used as money. repayment of the principal.
89. State modern forms of money. Why do (ii) Collaterals such as land titles,
demand deposits constitute money in the deposits with banks, livestock, etc.
modern economy ? and documentation required.
(iii)Mode of payment.
Ans : Comp 2010
(1) The modern forms of money are currency

and deposits with banks. That is, money
can be classified into :
(i) Coins;
(ii) Paper notes; and
(iii)Demand deposits or credit money.
(2) Since demand deposits are accepted 92. How is money used in everyday life ? Explain
widely as a means of payment along with with examples.
currency, they constitute money in the
Ans : SQP 2009
modern economy.
They are closely linked to the working of the (1) The use of money spans a very large part
modern banking system. of our everyday life. There are several
transactions involving money in any
90. State any two positive and two negative role single day.
of credit. (2) In many of these transactions, goods are
Ans : OD 2017 bought and sold with the use of money.
In some other transactions, services are
(1) Positive role :
exchanged with money. For some, there
(i) Credit helps to meet the working
might not be any actual transfer of money
capital needs of production.
taking place now but, a promise to pay
(ii) It helps in setting up new industries,
money later.
or trade in goods.
(3) For example, we purchase books, pencils,
(2) Negative role :
chocolates from money. We give doctor’s
(i) In the case of high risk, credit pushes
fee and school fee in money. My father
the borrower into a debt-trap. That
receives monthly salary in money. Hence,
is, credit in this case pushes the
money is used in everyday life.

(c) Proof of the present house 58. Assertion : In India, no individual can refuse
(d) All of these to accept a payment made in rupees.
Ans : SQP 2018
Reason : Rupee is the legal tender in India.
(b) Employment records and salary and reason is the correct explanation of
56. Mohan produces ice creams and wants to assertion.
sell it to people. He also requires sugar to (b) Both assertion and reason are true, but
make ice cream, so he wishes to buy sugar. reason is not the correct explanation of
Now, Mohan is unable to find a person who assertion.
will exchange sugar for ice cream. Which of (c) Assertion is true, but reason is false.
the following terms explain the problem that (d) Both assertion and reason are false.
Mohan is facing? Ans : Comp 2005
(a) Lack of trade expertise (a) Both assertion and reason are true, and
(b) Double coincidence of wants reason is the correct explanation of assertion.
(c) Irrational consumer behavior
(d) Future expectations 59. Study the picture and answer the question
Ans : Foreign 2014
that follows:
(b) Double coincidence of wants
57. Study the paragraph and fill up the table:

Megha has taken a loan of < 5 lakhs from
the bank to purchase a house. The annual
interest rate on the loan is 12 percent and the
loan is to be repaid in 10 years in monthly
instalments. Megha had to submit to the
bank, documents showing her employment
records and salary before the bank agreed Which of the following aspect best signifies
to give her the loan. The bank retained as above image?
collateral the papers of the new house, which (a) Medium of exchange
will be returned to Megha only when she (b) Cheque Payments
repays the entire loan with interest. (c) Loan Certificate
(d) None of the above
Loan amount (in <) ?
Ans : OD 2015, 2011
Documents required ?
(a) Medium of exchange
Interest rate ?
Collateral ? 60. Assertion : Rohan took credit in the form
of advance payment from a buyer and he
Ans : Delhi 2013 delivered the goods to the buyer on time and
also earned profit. The credit made Rohan
Loan amount (in <) 5 lakhs better off in this situation.
Documents required employment records Reason : Credit can never push a person into
and salary a debt trap.
Interest rate 12 per cent
Collateral papers of the new assertion.
house (b) Both assertion and reason are true, but
assertion.
PAGE 551
98. “Credit sometimes pushes the borrower into a There is no written agreement between
situation from which recovery is very painful.” the lender and the borrower. There is no legal
Support the statement with examples. recourse in case of informal sources of credit.
Ans : Comp 2022
100. Why are service conditions of formal sector
Bank usually referred as a formal source of loans better than informal sector? Explain.
credit and in some situations the borrower Ans : OD 2019
would not able to repay loan. This pushes
them in the situation of debt trap. Example: Formal sector :
(1) In case of rural areas if crop fails due to (1) This sector is mainly supervised by the
natural factors it will be difficult for the RBI.
farmers to pay loan. (2) It includes banks and cooperatives, thus
(2) In case of failure of a business. It will be every clause is in writing and clear to
difficult for the businessman to repay the comprehend.
credit. (3) In this sector of credit, collateral is
(3) In case of informal sector, rate of interest required. It provides loans comparatively
is very high. If due to crop failure previous at lower rates.
loan is not repaid interest rate further (3) It doesn’t lead to a debt trap.
mounts. Informal sector :
(4) In case of high risk activities failure (1) No external organisation supervises this
without some support can push borrower sector.
in painful situation. (2) The lenders are mainly moneylenders,
(5) In many cases people has to sell their friends, relatives, traders and landowners
land and fixed assets to repay loan. etc.
(3) Collateral is not required, thus it involves
99. Why is it necessary to increase a large number risk.
of banks mainly in rural areas? Explain. (4) This sector charges higher interest rates
Ans : OD 2019
without any rules or regulation.
(5) This could lead to a debt trap.
It is important to open more banks in the
rural areas as formal sector of credit is 101. How is money used in everyday life? Explain
missing. The practise of borrowing from the with examples.
informal sector that currently exists in rural Ans : SQP 2016, 2017
areas, for example local moneylenders, has a
number of disadvantages. Money is that thing through which we can
(1) The informal sector charges a higher rate make our transactions easily in society,
of interest. Informal sector make loans country and abroad. We use it in our daily
very expensive as there are no external life in the following way:
organizations controlling the credit (1) It helps us in purchasing the commodity
activities of lenders. from market and else where easily
(2) Informal sector involves high degree of (2) We can value the things with the help of
risk as there are no proper set of rules money.
for repayment and there is a lot of (3) It can be used at any time at everywhere
exploitation of poor farmers. according to requirements.
(3) Lenders may exploit the borrowers, they (4) It can be saved in banks for future. We
may engage in threats and intimidation can withdraw it according to the need.
to ensure repayment of lo (5) It provides prestige and status among the
members of the society.

81. Write any three advantages of money. to find a person who wants your horse and at
Ans : Comp 2018
the same time possesses a cow that you want
to buy. Accordingly, under the barter system,
(1) Money is used as a medium of exchange. exchange remained extremely limited.
(2) Money offers economic freedom to the
people. 85. What are demand deposits ? For what reasons
(3) Money is used for purchasing goods and they are considered as money ?
services. It is also easy to store money. Ans : OD 2014
82. “The credit activities of the informal Demand Deposits : The deposit in the bank
sector should be discouraged.” Support the accounts which can be withdrawn on demand
statement with arguments. at any time are called demand deposits.
Ans : Foreign 2014
They are considered as money because they
can be withdrawn against demand deposits
In the rural areas the poor households have makes it possible to settle pa9lhents without
to pay a large amount for borrowing. Because the use of money. Since, the (Demand
only the half credit needs are met from deposits) are accepted widely as a means of
informal sources. Most loans from informal payment, along with currency they constitute
lenders carry a high interest rali. They do little money in the current economy.
to increase the income of the barrowers. so,
it is necessary that banks and co-operatives 86. For what reasons Reserve Bank of India
increase their lending particularly in the rural supervise the functioning of the bank ?
areas, which may reduce the dependence on Ans : Foreign 2018
informal sources of credit.
RBI (Reserve bank of India) supervise
83. The rupee is widely accepted as a medium of the functioning of the bank on account of
exchange, Explain. following reasons :
Ans : SQP 2008
(1) To supervises whether the bank has
maintain minimum cash balance out of
(1) It is authorised by the government of the the deposits they receive.
country. (2) To monitors that the banks actually
(2) Its demand and supply can be controlled mountain the cash balance.
by the central bank of the country. (3) To supervises that the small cultivators,
(3) In India, the law legalises the use of rupee small scale industries, small borrowers,
as a medium of payment that cannot be etc. has got sufficient share of credit or
refused in settling transactions in India. not.
(4) In India, the value of each good or services
is measured in rupee. 87. Evaluate the role loans with reference to
India ?
84. Using an example explain the problem of lack
of double coincidence of wants in a barter Ans : OD 2013
economy. Role of Loans in India.

Ans : Delhi 2007, 2002
(1) If a lender change a high rate of interests,
it leads to create a situation of debt trap.
Problem of lack of double coincidence of wants (2) High cost of borrowing leads to a major
in a barter economy: Double coincidence of share of profits to be paid as interest.
wants is a precondition for the barter system (3) More Loans are given (provided) by
of exchange. Double coincidence of wants banks and cooperative.
implies that goods in possession of the two (4) At times, higher ratio lead to higher.
different individuals are needed by each interest than the principal amount.
other. But it is not so simple. It is difficult
PAGE 553
106. Why is it necessary for the banks and co- 108. What are the two categories of sources of
operative societies to increase their lending credit ? Mention four features of each.
facilities in rural areas ? Explain. Ans : OD 2011
Ans : OD 2008, 2005
Two categories of sources of credit are:
It is necessary for the banks and co-operative (1) Formal sources of credit
societies to increase their lending activities in (2) Informal sources of credit
rural areas due to following : (3) Formal credit sector is known as organised
(1) Most of the informal lenders charge a sector. This sector provides loan at low
much higher rate of interest on loans. The rate of interest. This sector includes
moneylenders in the village sometimes banks, co-operative societies. The rate of
charge 5% per month i.e., 60% per annum. interest is usually very low in sources of
(2) As a result of it, larger part of the earnings this sector. In formal sector of loans there
of the borrowers is used to repay the loan is no exploitation as in the case with the
in some cases, the amount to be repaid informal sector of loans.
becomes greater than the income of the (4) The informal credit sector includes
borrower. This leads to debt-trap. moneylenders, traders, employers,
(3) These reasons make it necessary to relatives and friends. In the case of
expand the formal sources of credit i.e., informal sector of loans, the rate of
banks and co-operatives which make interest is quite high. In the informal
available cheap and affordable credit to sector the traders would desire to buy
the people. the produce of the farmers at a low price
but a bank would never resort to such an
107. Explain with examples, how people are exploitation.
involved with the banks.
Ans : Comp 2020
109. How does the use of money make exchange of
things easier ? Explain with examples.
Bank is that institution which is the friend in
real sense. Bank is associated with the people Ans : Delhi 2010
in the following ways : Uses of money as the medium of exchange :

(1) Source of loan : Bank provides loan to (1) People exchange goods and services
public at their needs. It receives nominal through the medium of money. In this way
rate of interest from the borrowers. It money acts as a medium of payments.
does not give any pressure to the borrower (2) A person holding money can easily
to return loan. It gives loan as much as exchange it for any commodity (goods)
anyone requires. or service that he or she might desire.
(2) Opening the Account : Any body can open (3) Money acts as an intermediary in the
his account in the bank to save money process of exchange. Money can be spirited
for future. He can deposit his money and in smallest unit or can be combined in
take back at any time in working day higher unit of currency. In this way the
(3) It gives interest on the deposit money. purchase of smallest commodity or the
Thus a person earns interest on his biggest commodity becomes easier for the
deposit. purchaser or seller.
(4) Bank is honest and functions as a good For Example : Exchange of animal against
friend with the businessmen. It helps in money or exchange of services of teacher
issuing true picture of income and sale to or doctor or an engineer by any person is
the income tax and sales tax department acceptable between mutual certain.
on which they have faith.

SHORT ANSWER QUESTION (5) The group charges interest on these

loans but this is still less than what the
moneylender charges.
93. ‘Formal sector of credit better than informal
96. Describe the importance of formal sources of
sector.’ Give arguments in support of your
credit in the economic development.
answer.
Ans : Delhi 2019 , 2010
Ans : OD 2024
Importance of formal sources of credit in
Formal sector of credit is better as -
economic development are as follows :
(1) It provides regular repayment options.
(1) It is monitored by the Reserve Bank of
(2) The rate of interest is lower as compared
India or regulated by the Government of
to the informal system of credit.
India and thus helps in bringing order to
(3) It is regulated by Reserve Bank of India
the system of lending and borrowing in
whereas informal system of credit is
the country.
unregulated.
(2) Provides fixed interest rate to all sections
(4) There are lesser chances of falling into
of society.
debt trap as compared to the informal
(3) Limits the scope of using unfair means to
sector.
repay the payment.
94. Distinguish between formal and informal (4) Less interest rate and accessible to all,
sources of credit. rich or poor.
Ans : OD 2023
Formal credit is generally available with

banks and cooperatives. They charge lesser
rates of interest than informal institutions. 97. Explain the role of Self Help Groups in the
The Reserve Bank of India (RBI) supervises rural economy.
the functioning of the formal sources of loans. Ans : OD 2020
Informal lenders include moneylenders,
Self-Help Groups consist of certain members
traders, employers, relatives and friends, etc.
who pool their savings and constitute a fund
They charge much higher interest on loans.
which is further used in making finance and
There is no one to stop them from using
advances to other members. A typical Self-
unfair means to get their money back.
Help Group has 15 to 20 members. The
95. Imagine yourself to be XYZ, a member of a members pool their savings and after some
women Self- Help Group. Analyse the ways time, it becomes a large amount which is
through which your group provides loan to used to give loans to the needy ones at a very
the members. nominal rate of interest. This helps to reduce
the functioning of informal sectors of credit.
Ans : SQP 2021
(1) They help borrowers overcome the
(1) Self Help Groups pool their savings. problem of lack of collateral.
(2) A typical SHG has 15-20 members, (2) They can get timely loans for variety of
usually belonging to one neighbourhood, purposes and at a reasonable interest
who meet and save regularly. rate. They are building blocks of the
(3) Saving per member varies from Rs. 25 to organisation of the rural poor.
Rs. 100 or more, depending on the ability (3) It helps women to become self-reliant.
of the people to save. The regular meetings of the group provide
(4) Members can take small loans from the a platform to discuss and act on various
group itself to meet their needs. social issues.
PAGE 555
(6) When commercial bank fails to get 115. Why do the rural borrowers depend on the
financial accommodation from any informal sector of credit ? What steps can be
where, it approaches Reserve Bank of taken to encourage them to take loans from
India as a last resort. Reserve Bank of the formal sources ? Explain any two.
India advances loan to such banks against Ans : Delhi 2012, 2009
approved securities. It ensure that the
the banking system of the country does The rural borrowers depend on informal
not suffer from any setback and money sector of credit because :
market remains stable. (1) There is no need for collateral
(7) It acts as a banker to the government and and complicated paper work. The
is the custodian of the foreign exchange moneylenders and landowners continue
reserves of the economy. to extend loans at high interest rates to
defaulters even if previous loan is unpaid.
(2) They are hesitant and unsure about the
functioning of the bank.
(3) They may not have access to banks in
114. Why do we need to expand formal sources of their village.
credit in India ? Explain. Steps to encourage to take loans from formal
sources :
Ans : SQP 2020
(1) Set up more banks in the rural areas to
The formal sources of credit need to be save them from the moneylenders’ high
expanded in India because of the following rate of interest and debt trap.
reasons : (2) Cheap and easily available credit should
(1) Compared to the formal lenders, most be provided for self-employment like
of the informal lenders change a much small-scale industries or business.
higher interest on loan. Thus, the cost to (3) Setting up of cooperatives and encourage
the borrower of informal loans is much Self-Help Groups.
higher.
(2) Higher cost of borrowing means a larger 116. What are the commercial banks ? Mention
part of the earnings of the borrowers any four of their functions.
is used to repay the loan. Hence, the Ans : Foreign 2010
borrowers have less income left for (1) Commercial bank or a bank is a profit-
themselves. It sometimes means, the making institution that accepts the
amount to be repaid is greater than the deposits, pays an amount as interest on
income of the borrower. This can lead the deposits and extends loans to the
to increasing debt and debt trap. People needy people.
who may wish to start an enterprise may (2) The following are the functions of a
not do so because of the high cost of commercial bank :
borrowing. (i) Commercial banks accept the deposits
(3) People will be protected from coercion, from those who have surplus money.
humiliation and persecution that (ii) They pay an amount as interest on
generally inflicted by formal sources like, the deposits.
moneylenders, landlords, etc. (iii)Banks in India hold about 15% of
(4) This would also lead to higher incomes their deposits as cash as provision to
and many people could then borrow pay the depositors who might come
cheaply for a variety of needs. to withdraw money from the bank
(5) Cheap and affordable credit is crucial for on any given day and use the major
the country’s development.

110. Explain the role of credit for economic LONG ANSWER QUESTION
development.
Ans : OD 2020
112. “Credit pushes the borrower into situations
The roles of credit for economic development from which recovery is very painful.” Support
are given below : the statement.
(1) It helps in increasing economic activities
Ans : Comp 2021
of the country; thus, helps in its
development. Bank usually referred as a formal source of
(2) Credit availability at cheaper rates of credit and in some situations the borrower
interest encourages the business or firms would not able to repay loan. This pushes
to borrow more. Borrowing more money them in the situation of debt trap. Example :
will facilitate the growth of business or (1) In case of rural areas if crop fails due to
increase in production in the economy. natural factors it will be difficult for the
(3) It also needs to be manipulated and kept farmers to pay loan.
under an administrative hold because (2) In case of failure of a business. It will be
loans from the informal sector include difficult for the businessman to repay the
high interest rates that may be more credit.
harmful than good. For this reason, (3) In case of informal sector, rate of interest
it is important that the formal sector is very high. If due to crop failure previous
gives out more loans so that borrowers loan is not repaid interest rate further
are not duped by moneylenders, and mounts.
can ultimately contribute to national (4) In case of high risk activities failure
development. So, credit supply is the key without some support can push borrower
factor for economic development. in painful situation.
(5) In many cases people has to sell their
111. “Bank plays an important role in the economic land and fixed assets to repay loan.
development of the country.” Support the
statement with examples. 113. Describe the significance of the Reserve Bank
of India.
Ans : Delhi 2020
Ans : OD 2020, 2018
Bank plays an important role in the economic
development of the country in many ways : The significances of the Reserve Bank of
(1) Bank provides loan in rural area for crop India are discussed below :
production ultimately resulting in the (1) It issues currency notes on behalf of the
development of many places. central government.
(2) Bank provides loan to create fixed (2) It supervises the functioning of formal
assets that will create employment source of loan.
opportunities. (3) It monitors the banks and ensure that
(3) It acts as a link between savers and they maintain minimum reserves as per
investors. the guidelines of Central Bank.
(4) Banks accepts the deposit and pay an (4) It also sees that banks give loans not just
amount as interest on the deposit which for profit making to traders but also to
mobilises savings. small borrowers, small cultivators etc.
(6) Bank uses major portion of these deposits (5) Periodically banks have to submit
to extend loan for various profitable information to RBI on how much they
events. are lending, to whom, at what interest
rate, etc.
PAGE 557
assets like sewing machine, handlooms, (3) These moneylenders, traders and rich
cattle, etc. landlords continue to extend loans to
(5) The group charges interest on these loans defaulters even if the previous loan is
but this is still less than what the money- unpaid.
lenders charge. (4) They are hesitant and unsure about the
functioning of the banks.
120. Self-Help Groups enjoy a lot of freedom in (5) They may not have access to banks in
their functioning. Explain. their villages.
Ans : Foreign 2009
(6) The procedure of giving credit is often
very simple.
(1) In Self-Help Groups, there is no provision
of certain number of members or certain 122. Why are credit arrangements not fair for
amount to deposit. Members are free to all sections of society ? Give three reasons.
their number and amount to deposit in Suggest two remedies for the problem.
the group. or
(2) Most of the important decision regarding Why is the share of formal sector credit
the savings and loan activities are taken higher for the richer households compared
by the group members. to the poorer households? Give any three
(3) The group decides as regards the loans reasons responsible for this.
to be granted — the purpose, amount, Ans : OD 2006
interest to be charged, repayment
schedule, etc. (1) Undoubtedly, credit arrangements are
(4) Also, it is the group which is responsible not very fair for all sections of society.
for the repayment of the loan. In any case The share of formal sector credit is higher
of non-repayment of loan by anyone, the for the richer households as compared
member is followed up seriously by other to the poorer housesholds. This has the
members in the group. following reasons :
(5) The SHGs help borrowers overcome (i) Poverty affects poor households’
the problem of lack of collateral and capacity to borrow. Formal sector
documentation requirement. Besides, the credit requires proper documents and
regular meetings of the group provide a collateral as security against loans.
platform to discuss and act on a variety Collateral is an asset. So, poor people
of social issues such as health, nutrition, lack in providing such things which
domestic violence, etc. affect their capacity to borrow.
(ii) The poor people do not repay loan on
121. Why are informal sources of credit preferred time because of the various day-to-
in rural areas ? Give five reasons. day needs.
Ans : Comp 2019
(iii)The people in villages may not have
access to banks in their village. Also,
Informal sources of credit are preferred in they are hesitant and unsure about
rural areas for the following reasons : the functioning of the banks.
(1) There is no need for collateral such as (2) (i) More credit facilities should be made
land, building, vehicles, deposits with available in rural areas by opening
banks. The rural poor people are unable more banks there.
to provide collateral. (ii) The procedure of giving loans should
(2) Also, there is no need for complicated be made easier and simpler.
paper work which the rural poor are not
capable of providing.

102. Describe any two sources each of formal and or

informal credit in India. How does the use of money eliminate the
Ans : Comp 2021 condition of double coincidence of wants ?
Formal Credit Sector : Explain with an example.
(1) Commercial Banks : Banks accept Ans : Foreign 2009
deposits from the public. Banks maintain (1) When there was barter system, exchanging
a minimum cash balance out of the of goods was difficult. Demand of two
deposits they receive. The balance of cash persons for each other’s commodity should
is used by banks to lend loans. have raised at the same time, otherwise
(2) Cooperative Societies : This is another exchange was not possible. This is called
form of formal source of credit in India. double coincidence of wants.
They accept deposits from their members (2) Money by providing the crucial
and provide loans to them. intermediate step, eliminates the need for
Informal Credit Sector : double coincidence of wants.
(1) Informal credit sectors in India include (3) For example, it would not be necessary for
credit given by unorganised sectors. These the farmer to look for cloth manufacturer
sectors meet the credit needs of poor who will buy his grains and at the same
households. No organisation supervises time, sell him cloth. Thus, money has
and controls the lending activities of solved this problem because now people
informal sector. do not have to search for one who will
(2) The main informal credit sources are — be ready to exchange his goods. This is
local money lenders, traders, relatives because, now money acts as a medium of
and friends. exchange.
103. Define credit. What role does credit play in 105. How do banks mediate between those who
modern business ? have surplus money and those who need
Ans : OD 2013
money ?
(1) Credit or loan refers to an agreement in Ans : Delhi 2010
which the sender supplies the borrower
with money, goods or services in return Banks mediate between those who have
for the promise of future payment. surplus money and those who need money in
(2) (i) Credit plays a vital role in modern the following ways :
business. A large number of transaction (1) Banks take deposits from those who have
in our day-to-day activities involve surplus money.
credit in some form or the other. (2) Banks keep only a small proportion of
(ii) The credit helps the entrepreneur deposits as cash with themselves. This is
to meet the ongoing expenses of kept as provision to pay the depositors
production, complete production who might come to withdraw money from
on time, and thereby increase his the bank on any given day.
earnings. (3) Since on any particular day, only some of
(iii)The credit helps in establishing new its depositors come to withdraw cash, the
industries or trade in goods. bank is able to manage with this cash.
(4) Banks use the major portion of the
104. How does money solve the problem of double deposits to extend loans. Banks charge
coincidence of wants ? Explain with an example. a higher interest rate on loans than what
or they offer on deposits. The difference
What is meant by double coincidence of between these two interest rates is their
wants ? Explain with an example. main source of income.
PAGE 559
Only then, Manav would select the formal 2. In the above case/source, which is the
or informal source the most facilitating and most favourable term of credit/loan
suitable to his capacity of repayment. borrowed by Arun for land cultivation?
3. State the merits of formal sector of credit.
Ans :
CASE BASED QUESTION 1. When Mahesh was borrowing from a
local agricultural trader in the village, he
126. Read the given extract and answer questions paid a lesser interest rate because a part
that follow. of credit was to be paid in kind and other
in cash.
Mahesh tells us that every season he needs 2. The most favourable terms of credit/loan
loans for cultivation on his 1.5 acres of land. borrowed by Arun for land cultivation
Till a few years back, he would borrow money are specified rate of interest and fixed
from the village moneylender at an interest time period.
rate of five per cent per month (60% per 3. The merits of formal sector of credit are
annum). For the last few years, Mahesh has (a) It provides loans at a fixed rate and
been borrowing from an agricultural trader in terms.
the village at an interest rate of three per cent (b) It gives loans not just for profit-
per month. At the beginning of the cropping making businesses and traders but
season, the trader supplies the farm inputs on also to small cultivators, small-scale
credit, which is to be repaid when the crops industries and small borrowers, etc.
are ready for harvest.
127. Study the sources given below and answer
Besides the interest charge on the loan, the
the questions that follow:
trader also makes the farmers promise to sell
the crop to him. This way the trader can ensure The various types of loans can be conveniently
that the money is repaid promptly. Also, since grouped as formal sector loans and informal
the crop prices are low after the harvest, the sector loans. Among the former are loans from
trader is able to make a profit from buying the banks and cooperatives. The informal lenders
crop at a low price from the farmers and then include moneylenders, traders, employers,
selling it later when the price has risen. relatives and friends, etc.
We next meet Arun who is supervising the The people are divided into four groups, from
work of one farm labourer. Arun has seven poor to rich. 85 per cent of the loans taken by
acres of land. He is one of the few persons in poor households in the urban areas are from
Sonpur to receive a bank loan for cultivation. informal sources. Compare this with the rich
urban households. Only 10 per cent of their
The interest rate on the loan is 8.5 per cent
loans are from informal sources, while 90
per annum, and can be repaid anytime in the
per cent are from formal sources. A similar
next three years. Arun plans to repay the loan
pattern is also found in rural areas. The rich
after harvest by selling a part of the crop. He
households are availing cheap credit from
then intends to store the rest of the potatoes
formal lenders whereas the poor households
in a cold storage and apply for a fresh loan
have to pay a heavy price for borrowing! What
from the bank against the cold storage receipt.
does all this suggest? First, the formal sector
The bank offers this facility to farmers who
still meets only about half of the total credit
have taken crop loans from them.
needs of the rural people. The remaining credit
Questions :
needs are met from informal sources.
1. When Mahesh was borrowing from a
local agricultural trader, he paid a lesser Most loans from informal lenders carry a very
interest rate. Why? high interest rate and do little to increase the

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CH 17 : SECTORS OF THE INDIAN ECONOMY CBSE CHAPTERWISE PYQ CLASS 10 SOCIAL SCIENCE

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3. Targeted employment generation 4. Working hours are No limitation on

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country are working in the primary Provisions under NREGA are :

actually unemployed. To increase income and employment of

5. Cheap credit should be provided so that 1. Farmers need to be supported through

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114. Is it necessary to have the public sector ? 1. Loan facility :

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Tertiary sector has becomes the largest

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irrigation facilities will be helpful in and communication technology have become

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126. Read the extract and answer the questions

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Worker in Different Sectors (in Millions)

SUMMARY 12. Monetary System : A system of exchange in

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Ans : OD 2024 Ans : SQP 2021

Ans : OD 2024 7. Which one of the following mediums of

sector is correct – (b) The Reserve Bank of India

Ans : SQP 2021 (c) Bank

(d) Asset as guarantee for loan (b) Demand Deposit

(d) Demand deposit facility is like cheque. Ans : OD 2015

(b) Double coincidence of wants

(b) Terms of credit

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(a) Both assertion and reason are true, Options :

Ans : Delhi 2018

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(a) Informal sector credit (a) Self Help groups

39. Assertion : Banks charge a higher interest rate

Ans : Comp 2013 (d) both (a) and (b)

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failure, repayment becomes impossible. (1) A Self-Help Group is an organisation of

53. Assertion : The Reserve Bank of India

Options : (d) < 7000

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(d) Both assertion and reason are false.

Following are the bad effects of informal

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Ans : Comp 2012, 2009

4. Medium of exchange in transactions (a) Increase- because of increasing interest

(c) Assertion is true, but reason is false.

(1) The modern forms of money are currency

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(b) Double coincidence of wants

57. Study the paragraph and fill up the table:

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economy. Role of Loans in India.

in the following ways : Uses of money as the medium of exchange :

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SHORT ANSWER QUESTION (5) The group charges interest on these

Formal credit is generally available with

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102. Describe any two sources each of formal and or

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