The chapter Money and Credit is an essential part of Class 10 Economics, helping students understand how money works in the economy and how credit plays a crucial role in financial activities.
Money and Credit Class 10 MCQ
1. Mr. X has taken credit to make candles during the festive season. Choose the correct options that defines the importance of credit from the given options:
- i. it plays a vital and positive role in meeting his target and accelerating his income
- ii. the credit helps him to meet the ongoing expenses of production
- iii. the credit helps him complete the production on time
- iv. it helps him in exercising restraint and get into the habit of taking more credit
a. Only 4
b. 3 and 4
c. 1, 2 and 3
d. Only 2
2. Read the information given below and select the correct option.
Rohan has taken a loan of Rs.5 lakhs from the bank to purchase a house on 12% rate of interest.
He has to submit papers of new house and salary record to the bank. What is this process called as?
A. Interest Rate
B. Collateral
C. Principal Amount
D. Instalments
3. Rahul has a sack of cotton but he is in need of wheat and Anush has a sack of wheat and is in need of cotton, under this situation both will be able to exchange their goods. In case of absence of such coincidence of wants, they may not exchange their goods.
Which one of the following would be the best option that describes the mutual exchange of goods and eliminate the exchange of goods?
Options:
a. Double coincidence of want, Exchanging commodity for commodity.
b. Double Coincidence of want, Credit on Commodity
c. Double coincidence of want, Loan on commodity.
d. Double coincidence of want, Money
4. Why does it become difficult for farmers in rural areas to take loans from government banks? Read the following reasons and choose the most appropriate option:
I. Lack of collateral
II. Complicated procedure
III. Higher cost of borrowing
IV. Lack of awareness
Options:
(A) Only I, II and III are correct.
(B) Only II, III and IV are correct.
(C) Only I, II and IV are correct.
(D) Only I, III and IV are correct.
5. Which of the following groups in urban India depend on informal sources to meet their credit needs?
(A) Poor households
(B) Households with few assets
(C) Both poor households and households with few assets
(D) Both well-off households and households with few assets
6. Read the information given below and choose the correct option:
Rahul wants to buy a car but does not have sufficient money. He needs ₹1,00,000 for it.
Which of the following would be most appropriate for Rahul to take a loan from?
(A) Commercial Bank
(B) Moneylender
(C) Relatives
(D) Trader
7. Why do lenders often require collateral before lending loan? Choose the most suitable option from the following.
(a) To lower interest rates for borrowers.
(b) To establish personal relations.
(c) To increase their profit margins.
(d) To mitigate the risk of loan default.
8. Which one of the following is the main source of a bank’s income?
(A) Money obtained from Reserve Bank
(B) Money received from demand deposit
(C) Money obtained as interest on loan from the borrower
(D) Money received from the property of a defaulting borrower
9. Which one of the following sources meets the needs of loan of rural households in India to the maximum extent?
(A) Commercial Bank
(B) Cooperative Societies
(C) Moneylender
(D) Businessman
10. Why are poor households still dependent on informal sources of credit?
(a) Due to the absence of collateral security
(b) Due to the low interest rates
(c) Due to inaccessibility of rural people to banks
(d) Due to banks being at far-off places
11. Which one of the following is a formal source of credit?
(A) Relative
(B) Trader
(C) Money lender
(D) Cooperative Society
12. Which one of the following is the modern form of currency?
(a) Paper notes
(b) Gold coins
(c) Silver coins
(d) Copper coins
13. Which one of the following categories of urban households take the highest percentage of loan from the formal sector?
(a) Poor households
(b) Households with few assets
(c) Well-off households
(d) Rich households
14. Why the money is known as medium of exchange?
a. Because it has intrinsic value like gold
b. Because it eliminates double coincidence of wants
c. Because it is always made of precious metals
d. Because barter is more efficient
15. Which of the following institution issues currency notes in India?
a. Ministry of Finance
b. Reserve Bank of India
c. State Bank of India
d. Commercial Banks
Explanation: The RBI issues currency notes on behalf of the central government.
16. Why the demand deposits is known as money?
a. Because they are kept in lockers
b. Because they can be withdrawn anytime and used for payments
c. Because they are only used for savings
d. Because they are not accepted widely
Explanation: Demand deposits can be withdrawn easly on demand and used for cheue payments.
17. How much cash deposit bank keep in the bank to meet the withdrawal needs?
a. 100%
b. 50%
c. About 5%
d. None
Explanation: Banks in India keep about 5% of deposits as cash to meet withdrawal needs.
18. What do you mean by collateral in loan agreements?
a. Extra interest charged by banks
b. An asset pledged by the borrower as security
c. A document showing employment records
d. A cheue issued by the borrower
19. Why in Sonpur village everyone can get bank loans easily?
a. Banks do not lend to farmers
b. Banks demand collateral which small farmers and landless labourers cannot provide
c. Traders offer cheaper loans
d. Banks charge higher interest than moneylenders
20. Which of the following is a formal source of credit?
a. Moneylenders
b. Traders
c. Cooperative banks
d. Employers
Explanation: Banks and Cooperatives come in formal source and supervised by RBI. In the informal sources come moneylenders, traders and employers.
21. Which of the following department supervises the function of formal credit sources in India?
a. Ministry of Finance
b. State Bank of India
c. Reserve Bank of India
d. Commercial Banks
Explanation: The RBI ensures banks maintain cash reserves, lend to small borrowers, and submit reports on lending practices.
22. Why loans from informal lenders considered risky?
a. They are always interest-free
b. They charge very high interest rates and use unfair means
c. They are supervised by RBI
d. They are available only to rich households
Explanation: Informal lenders charge high interest, keep no records, and may harass borrowers. This often leads to debt traps.
23. Which households depend on informal credit sources?
a. Rich households
b. Poor households
c. Middle-class households
d. Government employees
Explanation: Poor households often lack collateral and documents, so they rely on informal lenders. Rich households access cheaper formal loans.
24. What is the main advantage of Self-Help Groups (SHGs) for poor borrowers?
a. They provide loans without collateral
b. They charge higher interest than moneylenders
c. They are only for men
d. They are supervised by landlords
Explanation: SHGs provide small loans at reasonable rates, and later access bank loans without collateral.
25. Which country’s Grameen Bank is a success story in providing credit to poor women?
a. India
b. Nepal
c. Bangladesh
d. Sri Lanka
Explanation: The Grameen Bank of Bangladesh, founded by Muhammad Yunus, provides affordable loans to poor women, enabling small businesses and self-employment.
26. What is the biggest problem with India’s formal sector credit distribution?
a. Only rich households get most of the formal loans
b. RBI does not supervise banks
c. Banks charge higher interest than moneylenders
d. SHGs are not allowed to borrow
Explanation: Rich households dominate formal credit access, while poor households remain dependent on costly informal sources.
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