SEBA Class 9 Political Science and Economics Chapter 2 Introduction to Financial Literacy

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SEBA Class 9 Political Science and Economics Chapter 2 Introduction to Financial Literacy

Also, you can read the NCERT book online in these sections Solutions by Expert Teachers as per Central Board of Secondary Education (CBSE) Book guidelines. SEBA Class 9 Political Science and Economics Part – 3 (Economics) Notes are part of All Subject Solutions. Here we have given SEBA Class 9th Political Science and Economics Solutions in English for All Chapters, You can practice these here.

Introduction to Financial Literacy

Chapter: 1

ECONOMICS

EXERCISE – 1

Very Short Answer Questions:

1. What is money?

Ans: That by which we can purchase goods and services is money. But from an economic perspective, money is defined in different ways. For example, according to Professor Walker, “Money is what money does”. However, the most acceptable definition of money was given by Professor Crowther. According to him, “Money is a universally acceptable medium of exchange and at the same time it acts as a measure and a store of value.”

2. Give an example of non-legal tender money.

Ans: An example of non-legal tender money (unauthorized money) is – Cheque money.

3. Which definition of money is the most acceptable?

Ans: Professor Crowther’s definition is the most acceptable.

4. What is the fifth stage in the evolution of money?

Ans: The fifth stage in the evolution of money is – Paper Money.

5. Give examples of two apps for UPI transactions.

Ans: Examples of two apps for UPI transactions are – Google-Pay and PhonePe.

6. Which is the standard money of India?

Ans: The standard money of India is the Rupee.

7. Refusal of which money implies a violation of the law?

Ans: Refusing Legal Tender Money implies a violation of the law.

Short Answer Questions:

1. What are the characteristics of money?

Ans: Money has two important characteristics. First, it functions as money, and second, it must be universally acceptable by every member of the country.

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

Ans: In the barter system, exchange is impossible without a mutual matching of desires between both parties. For example, if a person has a goat and wants a hen, but the owner of the hen does not want a goat, then no exchange will take place between them.

3. What is money of account (conceptual money) and actual money?

Ans: Money of account or ‘conceptual money’ is merely a concept; its form does not change. On the other hand, ‘actual money’ is that which changes its form from time to time (e.g., metallic money, paper money).

4. What is meant by a store of value?

Ans: Saving money for future payments and receipts is called a store or preserver of value. Saving money is easier than storing physical goods.

5. Why is money known as a common unit of measure for the value of goods and services?

Ans: All economic goods have a value, and the value expressed in terms of money in exchange for goods is called price. Therefore, money is a common unit of measurement.

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

Ans: The difference between limited and unlimited legal tender money is:

Limited Legal Tender Money	Unlimited Legal Tender Money
Limited legal tender money is acceptable only up to a certain specified limit for transactions (e.g., small coins).	On the other hand, unlimited legal tender money can be used as a medium of exchange for transactions of any large amount (e.g., 10 lakh or 1 crore rupees).

7. What are plastic money and digital money?

Ans: Money transacted through credit or debit cards is called plastic money. On the other hand, transactions completed through electronic methods are called digital money, which is not physically visible and is conducted through online systems.

Long Answer Questions:

1. Explain the types of money.

Ans: In a broad sense, money can be mainly divided into two types— one is ‘conceptual money’ (which is merely a concept or abstract idea) and the other is ‘actual money’ (which changes its form from time to time).

Based on the evolution, legal validity, and usage of money, it is classified into various types as follows:

(i) Legal Tender Money: The money which is granted general acceptability as a medium of exchange with the support of law is called legal tender money.

It is of two types:

(a) Limited legal tender money: Which is acceptable only for a certain specified limit of transactions (e.g., small coins).

(b) Unlimited legal tender money: The money which can be used for transactions of any amount.

(ii) Non-legal Tender Money: The money which has general acceptability but lacks any legal support is non-legal tender money. Refusing to accept it is not a violation of the law. For example – cheque money.

(iii) Fiat Money: Money backed by state power or government order is called fiat money. It works as both ‘actual money’ and ‘abstract money’.

(iv) Token Money: The money whose face value (written value) is greater than its metallic or intrinsic value is called token money. For example, the face value of paper money is much more than its actual value, hence all the money we use today are examples of token money.

(v) Standard Money: Standard money is a specific unit of money. In India, the ‘Rupee’ is the standard money.

(vi) Black Money: Money generated through economic crimes or tax evasion is considered black money. For example, the income hidden by a person to evade income tax is black money.

(vii) High Power Money: The portion of the total money supply of the country that is under the control of the central bank is high power money. Through this, the central bank can increase or decrease the money supply in the country.

(viii) Plastic Money: The money system transacted through credit cards and debit cards is called plastic money. These cards are mainly made of plastic or metal.

(ix) Digital Money: When the method of transaction is completed through electronic media or online systems, it is called digital money. It is not visible like a dollar note or ordinary money. Card payments, UPI, etc., are included in it.

(x) Historical Money: In the evolutionary stages of money, various types of money were used in the past. Such as commodity money (barter system), animal money, metallic money (gold, silver), and later paper money.

2. Is a cheque money? Give reasons for your answer.

Ans: In a general or true sense, a cheque is not considered full-fledged or Legal Tender Money. Instead, a cheque is considered as ‘Non-legal Tender Money’ and ‘Near Money’.

The main reasons why a cheque is not called complete money are discussed in detail below:

(i) Lack of universal acceptability: Although a cheque works as money, it is not universally acceptable by everyone. The most important characteristic of money is its universal acceptability, which is not seen in the case of a cheque. Therefore, a cheque is generally called ‘near money’.

(ii) Lack of legal backing: According to the classification of money, a cheque is included in the ‘Non-legal Tender Money’ category. When any money acting as a medium of exchange lacks legal backing for general acceptability, it is called non-legal tender money. Unlike paper notes or coins, a cheque has no government or legal support.

(iii) No legal obligation to accept: Since a cheque has no legal validity or support, a person can refuse to accept a cheque for a transaction. If someone does not accept a cheque, it is not a violation of the law, nor can they be legally forced to do so.

EXERCISE – 2

Very Short Answer Questions:

1. Write the meaning of the following:

(a) Financial Literacy.

Ans: The ability of a person to make the best or most optimal financial decisions in their daily life is called financial literacy.

(b) Income.

Ans: The money that a person regularly earns from various sources such as salary, wages, house rent, etc., is called income.

(c) Expenditure.

Ans: The money spent by a person to purchase various goods and services for their needs or consumption is called an expense or expenditure.

(d) Savings.

Ans: After all the expenses of a person, the remaining portion of the income that is left over or preserved for the future is called savings.

(e) Investment.

Ans: The act of allocating money in financial or non-financial assets with the goal of earning more income in the future or generating a profit within a specified period is called investment.

(f) Financial Goals.

Ans: Financial goals are the economic aspirations that a person wants to fulfill in the future, which they aim to achieve within a specific time using their earned money.

2. What percentage of the population in India is financially literate?

Ans: According to the 2019 data from the National Centre for Financial Education, only 27% of the population in India is financially literate.

3. Define financial fraud.

Ans: Financial fraud is a situation where someone harms our money or our financial situation through manipulation, deceit, or other illegal activities. For example— it includes identity theft or fraud in the name of investment.

4. Give an example of a person’s wants.

Ans: A person’s wants can be primarily divided into two categories— ‘Needs’ and ‘Wants’.

Examples of these are given below:

(i) Examples of Needs or primary wants: Essential primary goods required for human survival. For example— food, clothing, and shelter.

(ii) Examples of Wants or desires that improve the quality of life: The goods and services that enhance the quality of human life fall under a person’s wants. For example— designer jewelry, foreign travel, etc.

5. Write the full form of SMART.

Ans: The full form of the word SMART is-

S : Specific.

M : Measurable.

A : Achievable.

R : Realistic. T : Timely.

6. Mention two investment options.

Ans: Two notable options for investment are-

(i) Bank Fixed Deposit.

(ii) Mutual Fund.

7. Write the full form of SEBI.

Ans: The full form of SEBI is the Securities and Exchange Board of India.

Short Answer Questions:

1. What is the importance of financial literacy?

Ans: The main points highlighting the importance of financial literacy are discussed below:

(a) Help in financial decision making: Financial literacy helps a person acquire the skills to make correct financial decisions. It strengthens financial discipline and ensures financial stability for a long time.

(b) Achieving financial well-being: Financially literate individuals understand their financial condition well, as a result of which they can reach a stable and strong financial position and live a fulfilling life.

(c) Preventing financial mistakes: Persons without financial knowledge often make wrong financial decisions, which have a terrible impact on their personal financial condition. Financial literacy helps to prevent such wrong economic steps or mistakes from the very beginning.

(d) Achieving financial goals: It helps citizens to determine their financial aspirations and goals (such as— buying land, building a house, etc.).

(e) Preparation for economic emergencies: Keeping in mind the uncertainties of human life, financial literacy helps to keep oneself ready through prior planning for unexpected financial hazards like medical expenses or unemployment.

(f) Knowledge of expenses, savings, and investments: Financial literacy helps a person to spend money properly as well as to understand the various methods of saving and investment.