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NIOS Class 10 Economics Chapter 14 Money and its Role
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Money and its Role
Chapter: 14
MODULE 5: MONEY, BANKING AND INSURANCE
TEXTBOOK QUESTIONS (SOLVED)
INTEXT QUESTIONS 14.1
Q.1. Define barter systems?
Ans. Exchange of goods for goods is called barter system.
Q.2. Give two example of barter system.
Ans. Two examples of barter system are as below:
(i) 8 kg. of wheat for 3 kg. of sugar.
(ii) 8 kg. of rice for a pair of shoes.
INTEXT QUESTIONS 14.2
Q.1. Define coincidence of wants.
Ans. Coincidence of wants refers to the situation in which one person wants to exchange some good with another, then the latter must also be willing to exchange his good with the first person.
Q.2. Give two difficulties associated with barter system.
Ans.(i) Lack of double coincidence of wants.
(ii) Lack of store of value.
INTEXT QUESTIONS 14.3
Q.1. Define medium of exchange.
Ans. Medium of exchange may be defined as anything which is generally accepted for buying and selling goods and services.
Q.2. Give the meaning of value of goods.
Ans. Value of good = Price of the good × Quantity of good
INTEXT QUESTIONS 14.4
Q.1. Give the meaning of currency note.
Ans. Currency note is a type of money.
ACTIVITY
Q.1. Mark a list giving names of the currencies of France, Germany, China, and Brazil.
Ans.
| Name of Country | Currency |
| 1. France | Franc |
| 2. Germany | Deutsche Mark |
| 3. China | Yuan |
| 4. Brazil | Real |
TERMINAL EXERCISE
Q.1. Explain the working of barter system.
Ans. Working of Barter System: A man having surplus of wheat wanted rice. He was in search of man who had surplus rice and was in need of wheat. When he succeeded in the search of him, then there was exchange of goods.
Q.2. What are main demerits of barter system?
Ans. Demerits of Barter System: Following are main demerits of system:
(i) Lack of Double Coincidence of Wants: The lack of double coincidence of wants is the major drawback. It is very rare when the owner of same good or service could find someone who wanted his good or service and possessed that good or service that the first person wanted. No exchange is possible if the double coincidence is not there.
(ii) Absence of a Common Unit of Measurement: The second main drawback of barter system is the absence of a common unit of measurement in which the value of goods and services can be measured. In the absence of a common unit proper accounting system is not possible.
(iii) Lack of any satisfactory unit: Thirdly, the barter system lacks any satisfactory unit to engage in contracts involving future payments. In a barter economy future payments would have to be stated in specific goods or services which may involve disagreement over the quality of goods or even on the commodity used for repayment.
(iv) Does not provide for any method of storing good: Fourthly, the barter system does not provide for any method of storing/ purchasing power. It can be stored only in terms of commodities which is subject to storage cost, increase and decrease in the value of goods.
Q.3. Define money and state three of its functions.
Ans. Money can be defined as anything that is generally accepted as a means of exchange and at the same time acts as a measure and as a store of value.
Functions of Money: Following are three functions of money:
(i) Medium of exchange.
(ii) Measure of value.
(iii) Store of value.
Q.4. Write a short note on currency notes in India.
Ans. Currency Notes in India: In India, we have money in the form of paper notes and coins which are easy to carry. We have paper notes in the denomination of 1, 2, 5, 10, 20, 50, 500 and 1000. For smaller denominations, we have coins called “Paisa” such as 50 Paisa which is half of one rupee. Now coins upto Rs. 10 denominations are circulated in India. The currency notes and the notes which are in circulation are guaranteed by the Government of India.
SOME IMPORTANT QUESTIONS FOR EXAMINATIONS
VERY SHORT ANSWER TYPE QUESTIONS
Q.1. Before money was invented, people used to exchange goods for goods. What name is given to this system?
Ans. Barter System.
Q.2. State any two problems of barter system.
Ans. (i) Absence of a common measure of value.
(ii) Lack of double coincidence.
Q.3. Which is commonly accepted medium of exchange these days?
Ans. Money.
Q.4. What does double coincidence of wants mean?
Ans. Double coincidence of wants means if one wants to exchange some good with another person, then the latter must also be willing to exchange his goods with the first person.
Q.5. Give an example of double coincidence of wants.
Ans. Suppose a person wants clothes and has rice with him to offer in return. Then he can exchange rice for cloth with another person who has cloth and who also wants rice.
Q.6. When does barter system work?
Ans. Barter system works when there is double coincidence of wants.
Q.7. Write down one related problem of barter system.
Ans. One related problem of barter system was that one had to spend a lot of time in searching for the person who was ready to exchange.
Q.8. What does medium of exchange as the primary function of money mean?
Ans. Medium of exchange as primary function of money means that people can buy or sell goods and services with the help of money. Money is received by the person who sells the goods/services and paid by the buyers who buy the goods from sellers.
Q.9. Give an example of medium of exchange as a function of money.
Ans. You pay ₹ 10 for a pen. The seller gets ₹ 10 from you by selling a pen. So pen is exchanged for ₹ 10.
Q.10. In what form do people keep money now?
Ans. Now people keep money in the form of paper notes and coins.
Q.11. Why do people keep money in the form of paper notes and coins?
Ans. Because it is easy to carry money in the form of paper notes and coins.
Q.12. What is the symbol of Indian rupee?
Ans. Symbol of rupee is ₹.
Q.13. In what denominations do we have paper notes?
Ans. We have paper notes in the denominations of 1, 2, 5, 10, 50, 100, 500 and 1000.
Q.14. 50 paisa is equal to what?
Ans. 50 paisa is equal to half of one rupee.
Q.15. By whom the currency notes and coins which are in circulation India are guaranteed?
Ans. Currency notes and coins which are in circulation are guaranteed by Government of India.
Q.16. Are currency notes and coins which are in circulation in India valid in other countries?
Ans. No, every country has its own currency.
Q. 17. What is paper money?
Ans. Money made of paper is paper money.
SHORT TYPE QUESTIONS ANSWER
Q.1. Explain the “store of value” as a function of money.
Ans. Store of Value: Though wealth can be stored in the form other than money, the most economic and convenient way in which the wealth can be stored is money. It can be used in future as and when needed due to its liquidation and purchasing power. Liquidity of money ensures that goods and services can be purchased by money at any time in future without delay and loss of value. Money can be stored without loss in value. This was very difficult under the barter system of exchange, since goods could only be stored at substantial storage cost or at the cost of loss of their value due to deterioration.
Q.2. State the problems due to which the barter system could not continue for long. Explain any one of those problems.
Ans. Due to following problems, the barter system could not continue for long:
(i) Lack of double coincidence of wants.
(ii) Lack of division of goods.
(iii) Lack of common unit of measurement.
(iv) Lack of storing wealth.
(v) Lack of standard deferred payments.
Lack of Common Unit of Measurement: Under barter system, it was difficult to equate the values of different goods which were traded because of lack of consumer unit of measurement.
Q.3. How does money also act as a store of value?
Ans. Store of Value: Money also acts as a store of value. Money can be stored without less in value. This function of money enables people to save a part of their current income and store it for future use.
Q.4. How is it possible to make payment in future through money?
Ans. With the help of money we can indulge in lending and borrowing activities. For example, you request your friend to give you a loan of ₹ 300 to purchase a book. You promise to pay back the money after a week. He gives you the money. In this case you will be called borrower and your friend will be called lender. After a week, you return the money to your friend. Like you, there are many persons who want to borrow money today to satisfy their present needs with the borrowed money. They borrow money with the condition that they will return that money in future.
LONG ANSWER TYPE QUESTIONS
Q.1. Give the features or characteristics of money.
Ans. The main features of money are as under:
(i) Medium of Exchange: Money is a thing that acts as medium of exchange for the sale and purchase of goods and services.
(ii) Money is a means and not an end: Money is a means not an end in itself. It is only a means to satisfy our wants. Hence, money provides no direct satisfaction.
(iii) Durability: Money also possess the characteristics of durability. Currency notes and coins are used repeatedly and shall continue in use for years together.
(iv) Government control: The supply of money is controlled by the government.
(v) General acceptability: It should be accepted freely in exchange for goods and services.
(vi) Liquid Assets: Money is the most liquid form of wealth. It can be easily converted into goods and services as and when required.
(vii) Measure of value: It also acts as a measure of value.
Q.2. Explain the lack of double coincidence of wants as the limitation of barter system.
Ans. Lack of Double Coincidence of Wants: Double coincidence of wants means that if one wants to exchange some good with another person then the latter must also be willing to exchange his goods with the first person. Take for example, a person wants cloth and he has rice with him to offer in return then he can exchange rice for cloth with another person who has cloth and who also wants rice. In practical life such situation may or may not arise. If the person who has cloth does not want then exchange of rice for cloth will never take place and both the individuals cannot satisfy their wants. This is an example of lack double coincidence of wants. So barter system will work, when there is double coincidence of wants, otherwise it will not work.
Moreover in barter system one has to spend a lot of time in searching for the person who is ready to exchange. In the early period of human civilization, this was a very difficult task as there was no proper facility with regard to transport and communication.
OBJECTIVE TYPE QUESTIONS
Q.1. Fill in the blanks:
(a)When one good is exchange for another good without use of money, we call it trade through ________ system
Ans. Barter.
(b) In the past traders from Europe used to trades goods such as fur and crafts in return for perfumes and silk from the ________ part of the world.
Ans. Eastern.
(c) In many tribal societies in India, families used to exchange labour services in return for ________.
Ans. Goods.
(d) A common problem with the barter system is the ________ of double coincidence of wants.
Ans. Lack.
