Page 86 - Understanding Economics for Class 10
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6. Why is money accepted as a medium of exchange?
Ans. It is accepted as a medium of exchange because the currency is authorised by the government
of the country.
Goyal Brothers Prakashan
7. What are called demand deposits?
Ans. People deposit their money in the bank as it earns interest. The deposits in the bank accounts
can be withdrawn on demand. Hence, these deposits are called demand deposits.
8. What do banks do with the money we deposit there?
Ans. Banks keep a small proportion of their deposits as cash with themselves and use the major
portion to extend loans.
9. What is called debt trap?
Ans. It is a situation where one is forced to take another lone to pay the existing loans for
principal as well as interest.
10. What are the terms of credit?
Ans. Interest rate, collateral and documentation requirement, and the mode of repayment together
are called the terms of credit.
11. What are the two benefits of deposits with the banks?
Ans. People’s money is safe with the banks and it earns an amount as interest.
People also have the provision to withdraw the money as and when they require.
12. How does the facility of cheques against demand deposits help one?
Ans. The facility of cheques against demand deposits makes it possible to directly settle payments
without the use of cash.
13. What do you mean by ‘easy terms of credit’?
Ans. Easy terms of credit include low interest rate, easy conditions for repayment and less
collateral and documentation requirements.
14. Highlight the inherent problem in double coincidence of wants.
Ans. The inherent problem in double coincidence of wants is that both parties have to agree to
sell and buy each other’s commodities.
15. Which metals were used for making coins in India in later stages?
Ans. Gold, Copper, Silver coins were used in later stages for making coins in India.
16. Does modern currency have any use of its own?
Ans. Unlike the things that were used as money earlier, modern currency is not made of precious
metal such as gold, silver and copper. And unlike grain and cattle, they are neither of
everyday use. The modern currency is without any use of its own.
Economics Class X E-77
