Money
EXERCISE
Q. 1. Complete the correlation:
1. Primary function of money: Medium of exchange :: Secondary function of money: Transfer of value
Explanation: The primary function of money is to act as a medium of exchange, while transfer of value is a secondary function, as it enables the movement of value from one person or place to another.
2. Contingent function of money: Basis of credit :: Secondary function of money: Standard of deferred payments
Explanation: The basis of credit is a contingent function, as it supports the creation of credit money by banks, while the standard of deferred payments is a secondary function, facilitating future payments.
3. Commodity money: Shells :: Plastic money: Credit card
Explanation: Shells were used as commodity money in the past, while credit cards represent plastic money in modern times.
4. Divisibility: Smaller denomination :: Portability: Easy to carry from one place to another
Explanation: Divisibility refers to money being divisible into smaller units, while portability refers to the ease of carrying money.
5. Barter system: Goods :: Modern economy: Money
Explanation: The barter system relies on the exchange of goods, whereas the modern economy uses money as a medium of exchange.
Q. 2. Give economic terms:
- The act of exchanging goods for goods: Barter System
- Provision for making payments in future: Deferred Payments
- System that makes use of currency for facilitating payments: Monetary System
- Credit instrument through which bank deposits are transferable: Cheque
- Monetary value stored and transferred electronically by means of computer hard drive or servers: Electronic Money
- Money not accounted for in the bank and not disclosed to the government: Black Money
Q. 3. Choose the correct option:
1. Arrange in the order of evolution of money:
a) Metallic money
b) Animal money
c) Metallic coins
d) Commodity money
Correct Option: 2) b, d, a, c
Explanation: The evolution of money began with animal money (e.g., cows), followed by commodity money (e.g., shells), then metallic money (e.g., gold, silver), and finally metallic coins with standardized value.
2. Arrange in the order of evolution of money:
a) Plastic money
b) Paper money
c) Electronic money
d) Credit money
Correct Option: 1) b, d, a, c
Explanation: The evolution progressed from paper money (currency notes), to credit money (bank deposits and cheques), then plastic money (debit/credit cards), and finally electronic money (digital transactions).
Q. 4. Identify and explain the concepts from the given illustrations:
1. Vasantsheth provides coal from his shop to farmers in exchange for foodgrains.
Concept: Barter System
Explanation: This illustrates the barter system, where goods (coal) are directly exchanged for other goods (foodgrains) without using money as a medium of exchange.
2. Babanrao deposits his money in a nationalized bank.
Concept: Bank Money/Credit Money
Explanation: Depositing money in a bank creates bank money, which can be used as credit money through transferable instruments like cheques or demand drafts.
3. Charu used her debit card to purchase a shirt for her younger brother.
Concept: Plastic Money
Explanation: A debit card is a form of plastic money, used for cashless transactions, allowing direct payment from the user’s bank account.
4. Malathi purchased a house through an agent. The agent accepted the commission amount in cash but did not issue a receipt to her.
Concept: Black Money
Explanation: The cash payment without a receipt suggests unaccounted income, which is not reported to the government, constituting black money.
5. To prevent misuse/fraudulent use of the national currency, a note ban is imposed on its use at certain times.
Concept: Demonetization
Explanation: Demonetization involves banning certain currency notes to curb misuse, fraud, or black money, as seen in measures like note bans.
Q. 5. State with reasons whether you agree or disagree with the following statements:
1. There are no difficulties in barter system.
Disagree
Reason: The barter system has several difficulties, such as the problem of double coincidence of wants, lack of a common measure of value, difficulties in storing perishable goods, indivisibility of certain goods, and challenges in making deferred payments.
2. There are many good qualities found in modern currency.
Agree
Reason: Modern currency possesses qualities like general acceptability, divisibility, durability, cognizability, portability, homogeneity, and stability, making it an effective medium of exchange and store of value.
3. Many tasks are accomplished by money.
Agree
Reason: Money serves multiple functions, including acting as a medium of exchange, measure of value, standard of deferred payments, store of value, transfer of value, and facilitating credit creation, national income measurement, and liquidity.
4. Money can be sent anywhere through electronic means.
Agree
Reason: Electronic money, such as digital wallets and online banking, allows monetary value to be transferred globally via devices like mobile phones, computers, or smart cards, enabling fast and convenient transactions.
Q. 6. Answer the following questions on the basis of the following information:
Information: Ganesh travelled to the mall by bus. He gave the conductor a ₹10 coin for the ticket. He purchased many commodities from the mall. At the billing counter, he gave his credit card for payment, but the billing clerk informed him that only debit cards were accepted. Since Ganesh had forgotten his debit card at home, he offered to make payment by cash.
1. Identify the types of money used in the information:
- Token Coin: The ₹10 coin used for the bus ticket.
- Plastic Money: The credit card and debit card mentioned for payment at the mall.
- Paper Money/Cash: The cash offered for payment at the billing counter.
2. Explain any two of them:
Token Coin: Token coins are coins whose face value (e.g., ₹10) is higher than their intrinsic value (the value of the metal they are made from, like aluminum or nickel). They are used for small transactions, such as paying for a bus ticket, and are widely accepted as legal tender in India.
Plastic Money: Plastic money includes debit and credit cards, which facilitate cashless transactions. Debit cards allow payments directly from a bank account, while credit cards enable borrowing for payments. In the scenario, the mall accepted only debit cards, indicating their use in modern transactions.
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