Page 81 - Understanding Economics for Class 10

Next, classify the people into two groups based on whom you think might get a bank loan and those
who might not. What is the criterion that you have used for classification?

Ans. Occupations Reason for needing a Loan
 Construction worker He needs loan to meet his day-to-day
Goyal Brothers Prakashan
expenses. He might need it for an unforeseen
contingencies like illness.
 Graduate student who is computer literate He/she needs loan for further studies or to
buy a computer of his/her own.
 A person employed in government service He might need it to build his own house or
for marriage purpose.
 Migrant labourer in Delhi He might need it to buy a house.
 Household maid She needs either to meet her daily expenses, if
marriage comes in her family or if somebody
falls ill in the family.
 Small trader He may need it to expand his business, wants
to buy new machinery or to keep his on-going
business runs smoothly.
 Autorickshaw driver Loan is required to buy autorickshaw of his
own. He might need it for his child’s marriage
 A worker whose factory has closed down He needs it to buy his basic needs since he has
no work due to shutting down of the factory.
Classification on the basis of who might get loan from bank
Who might get a loan from Bank Who might not get a loan from Bank

 Graduate student who is computer literate Construction worker
 A person employed in government service Migrant labourer in Delhi
 Small trader Household maid
 Autorickshaw driver A worker whose factory has closed down

Classification is done on the basis of the following:
 Whether the person has the repaying capacity or not. If the person has a job security or if the
person is educated and there is a hope that he or she will be able to get a good job in the
near future, bank gives them loan.
 Whether the person has any collateral to offer. Those who cannot offer any collateral bank
doesn’t prefer them to give loan.

ADDITIONAL QUESTIONS

i. Multiple choice Questions
1. Identify the incorrect option from the statement given below:
(a) Credit refers to an agreement in which the borrower supplies the lender with money,
goods or services in return for the promise of future payment.
(b) In rural areas, the main demand for credit is for crop production
(c) Interest rate, collateral and documentation requirement and the mode of repayment is
called the terms of credit.
(d) The credit helps to meet the ongoing expenses of production, complete production on time, etc.
Ans. (a) Credit refers to an agreement in which the borrower supplies the lender with money,
goods or services in return for the promise of future payment.

E-72 Economics Class X