MONEY AND BANKING

1. What is barter?

Answer: The direct exchange of commodities is called barter.

2. What is money?

Answer: According to the English economist Geoffrey Crowther, "Anything that is generally accepted as a medium of exchange is money."

3. Mention an important function of money?

Answer: Money serves as a measure of the value of goods.

4. Give one example of non-legal tender money?

Answer: Cheque.

5. What is representative paper money?

Answer: The symbolic money exchanged for gold or silver of equivalent value is called the representative paper money.

6. What is a bank?

Answer: A bank is a type of financial institution that accepts deposits and grants loans.

7. In which year was the Reserve Bank of India set up?

Answer: 1935.

8. What is the current deposit?

Answer: The deposit that the saver can withdraw at any time is called the current deposit.

9. Name the world's oldest central bank. (H. S. L. C. 2018)

Answer: Riksbank of Sweden.

10. Which bank was set up in India in 1770? (H. S. L. C. 2017)

Answer: Bank of Hindustan.

11. What is the name of the central bank of India? (H. S. L. C. 2015)

Answer: Reserve Bank of India.

12. How does the lack of double coincidence of wants create problem in the barter system?

Answer: The lack of double coincidence of wants refers to the situation where the mutual wants of the buyer and seller are less likely to be fulfilled simultaneously. It means the wants of two people need to complement each other for the barter system to be effective. For example, one person wants cloth in exchange for rice, and another person wants rice in exchange for cloth. In this case, there is a double coincidence of wants. However, if the person bringing the cloth wants oil instead of rice, then it will be considered as lack of double coincidence. This lack of double coincidence is a huge problem in the barter system.

13. What is meant by store of value?

Answer: Money is called the store of value of goods. It refers to that function of money which enables it to be stored and retrieved at a later period.

14. Which characteristic of money is the most important one and why?

Answer: The most important characteristic of money is its general acceptability. Without this characteristic, money can not be the medium of exchange.

15. What is the liquidity of money?

Answer: The ability to convert the money instantly and directly into equivalent goods is called the liquidity of money.

16. 'Money is a common unit of measurement of the value of goods and services.' Explain.

Answer: Money serves as a common unit of measure of value. Money is used to determine the value of all goods and services. The amount of money paid to buy an item is called the price of the item.

17. What is the difference between limited and unlimited legal tender?

Answer: The legal tender money with which we can carry out a limited value transaction is called the limited legal tender money.

On the other hand, the form of legal tender money, which is accepted as an unlimited value transaction is called the unlimited legal tender money, such as cheque.

18. What are the functions of the Regional Rural Banks?

Answer: The two functions performed by the Regional Rural Bank are -

1. Granting loans and advances to the villagers at a low-interest rate and thus relieving them from the exorbitant interest rates charged by the private money lenders.

2. To collect rural savings and spend it on various productive activities.

19. How are the Non-Banking Financial Institutions different from the banks?

Answer: Non-bank financial institutions cannot transact by check. Also, non-banking institutions do not provide any scheme for covering the risks of the depositor.