Very short answer question:
1) What is the exchange practice?
Answer: Exchange is the direct exchange of goods for goods।
2) What is currency?
Answer: Any commodity that has general acceptance as a medium of exchange and also serves as a measure of commodity value and a store of value।
3. State one of the main functions of currency।
Answer: Currency is used as a medium of exchange।
4. Give an example of unregulated currency।
Answer: Czech currency।
5. What is a representative paper currency?
Answer: Earlier, paper currency of Rs. 100 was converted into gold or silver worth Rs. 100. Such paper currency is called representative (representative of gold or silver) or convertible paper currency।
6) What is a bank?
Answer: A bank is an economic institution. which deals in loans. Banks collect savings from savings and pass on the collected savings to the borrowers।
7. In which year was the Reserve Bank of India established?
Answer: In।
8) What is running deposit?
Answer: A savings system. Where the depositor can withdraw his savings by check at any time।
Short answer questions:
1) How does inconsistent lack cause problems in exchange practices?
Answer: It is difficult to carry out exchange if there is no correspondence between deficiencies. For example, 'A' and 'B' are two persons. A produces potatoes and wants paddy; B produces paddy and wants potatoes. In this case, there is a correspondence of lack between A and B and therefore exchange is possible between them. If there is no correspondence of lack, there will be no exchange between the two।
2. What is meant by a store of value?
Answer: In a monetary system, currency can be stored and the stored currency can be used to purchase goods as required. Therefore, currency can be considered as a store of value of goods।
3. Which is the most important feature of currency and why?
Answer: The most important characteristic of currency is its general acceptability. Currency is widely accepted as a medium of exchange. It is well known and everyone knows how to use it।
4) What is the liquidity property of currency?
Answer: The liquidity of currency is that it is converted immediately and directly into commodities of equivalent value।
5. "Common Criteria for Prices of Monetary Assets" one Explain।
Answer: There are two types of materials available around us. One is free and the other is financial. The free materials are sunlight, water, and air. For which we do not have to pay any price. Financial products, on the other hand, have value. which are sold in the market. The value of all financial products is expressed in terms of currency. Therefore, currency is called a common measure of the price of goods।
6. What is the difference between a finite prescribed currency and an infinite prescribed currency?
Answer: The differences between finite prescribed currency and infinite prescribed currency are as follows:
A prescribed currency with which only a limited amount of transactions can be carried out is a finite prescribed currency. Without this currency, transactions are difficult. For example, a person has bought a piece of land. The land is worth Rs. 10 lakh. If the buyer of the land pays Rs. 10 lakh in less currency, the seller will be in trouble. Therefore, low value paper or metal currency will be the limited or limited prescribed currency in this case.
On the other hand, the higher value currency will be the infinite prescribed currency. This currency can be used to perform transactions of higher value।
7. What are the functions of Regional Rural Banks?
Answer: The functions of Regional Rural Banks are one
Ø Relieves poor villagers by providing loans at very low interest rates to villagers who have taken loans from merchants and mahajans at high interest rates।
Ø Collecting rural savings and spending those savings on various productive activities।
8. In what sense are non-bank institutions different from banks?
Answer:-
Banking Institutions
non-bank institutions
Checks are used
Checks are not used
Insurance is available
There is no insurance scheme
There is security of savings
Savings are not secured
Long answer questions:
1. Explain the four disadvantages of the barter system।
Answer: The four disadvantages of the exchange system are mentioned below one
(a) Inconsistent deficiencies:- If there is no consistency between deficiencies, it is difficult to perform the exchange functionǀ for example, two persons 'A' and 'B' A produces potatoes and wants paddy; B produces paddy and wants potatoes. In this case, there is a correspondence of lack between A and B and therefore exchange is possible between them. If there is no correspondence of lack, there will be no exchange between the two।
(b) Lack of Common Unit of Accounting:- The number of exchangeable items in the barter system is large. The price of each product must be expressed through other products. For example, 1 mango equals 3 melons. However, there is no guarantee that the exchange rate will be the same. There must be a rate of exchange against as many commodities as there are in the market. A person going out to the market must keep all those exchange rates in mind. That's impossible।
(c) Lack of divisibility:- There are some materials which cannot be divided into small groups. In the exchange practice, these items make it difficult to carry out the process. For example, a man has a goat and he needs one kilogram of rice. In such cases, it is not possible to divide the goat into small pieces and exchange it for rice।
(d) Lack of reserves of value:- In the exchange system, reserves of goods had to be stored in the form of value. The products cannot be stored for long and perish।
2. Explain any four major characteristics of currency।
Answer: Any of the four main characteristics of currency are one
1. Currency must have general acceptability or it cannot be a medium of exchange।
2) The currency must be easy to identify. it must be different from all other materials. If the currency is not easy to identify, there will be complications when buying and selling goods।
3. Coins cannot be perishable commodities. None of fish, eggs, milk, etc. can be currency. This is because these products do not last long।
4. Currency must have liquidity. Any currency is liquid if it is immediately and directly converted into commodities of equivalent value।
3. Explain the four main functions performed by currency।
Answer: There are four main functions performed by currency one
(a) Means of exchange:- Barter practices involved direct exchange of goods for goods. In a monetary system, there is an indirect exchange of goods for goods. A rice grower earns money by selling rice in the market and can use that money to buy his necessities।
(b) Common criteria of prices of goods:- Currency is the common measure of the value of goods. This is because the value of all financial products is expressed in terms of currency।
(c) Criteria for deferred payments:- Some goods are not paid immediately when they are sold. In the case of a loan, the borrower takes time to repay the loan. In such cases, the recovery process is not immediate, the process is suspended. The value of all deferred liabilities is expressed in currency।
(d) Reserves of value:- In a monetary system, currency can be stored and the stored currency can be used to purchase goods as needed. In other words, currency can be considered as a store of value of goods।
4) Is a check a currency? Argue in favor of your answer।
Answer: A check cannot be currency. It's a command. Checks do not have general acceptance. For example, a person buys a sack of rice from the store. Now in payment of the price or price, if he writes the price to the shopkeeper and hands over a check to the shopkeeper, the shopkeeper may not accept the cheque. The check is usually called a near currency ie, a deposit. The money comes only after it is paid to the bank।
5. Explain the four major disadvantages that currency can cause।
Answer: There are any four major disadvantages that currency can create one
(a) Problems arise when there is no stability in the value of the currency. When the value of the currency continuously depreciates, people suffer. This is because you have to spend increasingly, more to buy the same products।
(b) Currency can be a means of consolidating economic wealth and income. This can increase economic inequality in society।
(c) Weakness towards currency can also degrade social values. Currency can lead to corruption, irregularities and injustice in society।
(d) Black currency is created from currency. Black money is actually an economic crime. Black currency is the irregular accumulation of money or property by individuals or institutions।
6. Explain the four main functions of the Central Bank।
Answer: There are four main functions of the Central Bank one
(i) Printing of paper currency:- No bank other than the Central Bank has the authority to print paper currency. The central bank prints paper currency according to the needs of the country।
(ii) Regulation of Deposit Money or Loan Money:- The Central Bank regulates deposit money or loan currency. This currency is a large part of the total currency of the country. The amount of deposit or loan currency depends on the lending capacity of commercial banks. The central bank can control the lending capacity of commercial banks by adopting credit control measures।
(iii) Banks of Banks:- The Central Bank audits the accounts of other banks. The central bank is a friend of danger to other banks. The central bank is the last refuge for banks in times of financial crisis।
(iv) Provider of Finance to the Government:- The Central Government obtains financial assistance from the Central Bank to overcome budget deficits. The central bank provides this assistance by creating new currency. It is also an advisor to the government. The central bank advises on government income, policies, revenue policies, and trade policies. As a representative of the government, it keeps track of all government income and expenditure।
7. Explain the two main functions performed by commercial banks.
Answer: (a) Commercial banks collect savings. There are three types of this savings।
(i) Current deposits, (ii) Fixed deposits, (iii) Savings deposits।
A current deposit is a savings arrangement in which the depositor or depositor can withdraw his savings by check at any time.
Fixed deposit is a savings arrangement in which the depositor must notify the bank authorities in advance in order to withdraw his savings. A savings deposit is a savings arrangement in which the depositor or depositor can withdraw part of the savings at his/her discretion and the bank authorities must be notified in advance to withdraw the other part।
(b) Commercial banks provide credit. The bank provides loans to various sections of the society including farmers, industrialists, artisans, pushers, rickshaw drivers etc।
8. Briefly explain the functions of the following institutions।
(a) IDBI
(b) Regional Rural Banks
(c) National Bank for Agriculture and Rural Development
(d) Small Industries Development Bank of India
Answer:- (a) IDBI:- The functions of IDBI or Industrial Development Bank of India are as follows one
(i) Provides financial assistance to industrial establishments।
(ii) To facilitate the expansion of institutions involved in industrial development. This bank provides direct financial assistance to industries in the form of loans etc. The bank also provides indirect loans to industries. such as one The bank provides financial assistance to State Finance Corporation, Industrial Development Corporation, Commercial Banks. These institutions provide financial assistance to the industrial sector of the State।
(iii) Provides concessional interest hand loans to industries in economically backward areas।
(iv) The Bank takes the lead in promoting industrial enterprise in de-industrialized districts through training।
(b) Regional Rural Banks:- The functions of Regional Rural Banks are ―
(i) Relieves the poor villagers by providing loans at very low interest rates to the villagers who have taken loans from merchants and mahajans at high interest rates।
(ii) Collecting rural savings and spending those savings on various productive activities।
(c) National Bank for Agriculture and Rural Development:- The main functions of National Bank for Agriculture and Rural Development or NABARD are ㅡ
(i) NABARD is the top financing institution for all the institutions involved in investment and production in rural areas।
(ii) NABARD takes measures to strengthen the lending process, review and review of schemes, training etc।
(iii) NABARD liaises with all financial institutions like Government of India, State Governments, Reserve Bank etc।
(d) Small Industries Development Bank of India:- The functions of the Small Industries Development Bank of India are one
(i) Provision of advanced technology and modernization for small scale industries।
(ii) To provide market facilities for the products produced in the small scale industry sector।
(iii) To prevent population outflow from villages and semi urban areas to cities by providing more employment in small scale industries in semi urban areas।
(iv) Provision of financial assistance to State Finance Corporations, Industrial Corporations, Commercial Banks, Cooperative Banks and Regional Rural Banks and assistance to small scale industries through these institutions।
Additional and Questions Bank Q. Answer
1. There are two consequences of currency?
Answer: There are two disadvantages of currency:
1. Depreciation of currency (inflation)
2. Theft and counterfeiting problems
2. What is the commodity exchange practice? Mention two disadvantages of the barter system।
Answer: A barter system is a system in which goods are exchanged between people, ie, one thing is given for another।
There are two disadvantages to the commodity exchange system:
Lack of visibility: It is difficult to agree on the price of the product।
Lack of Bidders: When there may be no bidders for the item that you are asking for।
3. Write down the two main functions of Regional Rural Banks।[HSLC'17
Answer:- The two main functions of Regional Rural Banks are:
Provision of credit for farmers: Providing loans to meet the cost of production of farmers।
Financial Assistance: Provide financial assistance for rural development and agriculture related projects।
4. Write down two disadvantages of the exchange system। [HSLC '17]
Answer: There are two disadvantages of the exchange system:
Property Valuation Difficulty: It is difficult to compare the value of separate items।
Lack of savings: There is no currency in the exchange system, so it is not possible to save।
5. Write down two disadvantages associated with currency।
Answer:- There are two disadvantages associated with the currency:
Currency Depreciation: Currency values are likely to depreciate over time, which may result in losses।
Currency counterfeiting: Currency counterfeiting or the use of counterfeit currency is difficult to overcome, leading to instability in the economy।
6. Write down two main functions of National Bank for Agriculture and Rural Development (NABARD).।
Answer:- The two main functions of the National Bank for Agriculture and Rural Development (NABARD) are:
Financing of Agriculture and Rural Development Projects: NABARD provides loans and financing for various projects related to agriculture and rural development।
Support to Rural Development Programs and Innovative Industries: NABARD Rural Areas supports the promotion and realization of innovative industries and development programmes।
7. What are the disadvantages of the exchange system? [HSLC '18]
Answer:The disadvantages of the exchange system are:
Binary price problem: It is difficult to fix the price during the exchange of goods, as each commodity has to determine its own price।
Matching of two commodities: There is a guarantee of simultaneous presence of the commodities required for two parties to the exchange at the same time, which is called "double coindance"।
Problems of product specificity and fragmentation: Products may vary in type and quantity, making exchange difficult।
Lack of long-term contracts: Exchange practices have few opportunities to establish long-term trade relations।
Lack of currency and exchange: Lack of currency makes exchange difficult।
8. Discuss the main functions of the Reserve Bank of India.।[HSLC'19]
Answer: The main functions of the Reserve Bank of India (RBI) are:
Monetary Policy Formulation: RBI formulates policies for the distribution and reserve of currency in India, through which the economic stability of the country is maintained।
Regulation of Banking System: RBI regulates the functions and operations of banks in the country to ensure transparency and safety of banks।
Crisis Countermeasures: RBI takes special measures in times of crisis to ensure the financial security of the country।
Foreign Exchange and Demand: RBI establishes regulations for foreign investment and currency savings, to ensure proper management of foreign exchange।
Currency Production and Distribution: RBI produces and distributes new currency, which ensures the monetary management of India।
Editing By:- Lipi Medhi
