Notes prepared by Shahid sir

Class: 9th Sub: Economics

Chapter no. 1
Money and Banking.
A. Fill in the blanks:
I, RBI
ii, Deposits
iii, Collateral
iv,Saving account
v, Chaque
vi, Demand draft

B. One Word Answers:

I, RBI
ii,SBI
iii, Jammu and kashmir bank
iv, Post office Monthly Income Scheme.
v, National Bank for Agriculture and Rural
Development ( NABARD).

C. Very short/ short Answer Type Questions.

1. What is double coincidence of wants? Explain
with an example of your own.
Ans: The occurrence when the wants of buyers and
sellers both get fulfilled simultaneously in the
process of exchange of mutually possessed goods is
known as double coincidence of wants. Both
parties, the seller and buyers have to agree to sell
and buy each others commodities.
2. Can you think of some examples of goods/
services being exchanged or wages being paid
through barter?
Ans: Shoes maker exchanging a pair of shoes with
some quantity of wheat or rice from rice grower is
an example of barter system. In the same way when
a doctor is paid with a cock or hen for his services or
when a carpenter is paid with some fruits, are some
of the examples of barter system. Barter system
prevails when
there is double coincidence of wants. Barter system
fails if there is lack of double coincidence of wants.
3. Why is money called a medium of exchange?
Ans:Money is called a medium of exchange because
it acts as an intermediary in the exchange process of
different goods and services. Money as a medium
plays an important and crucial intermediate step
which in turn eliminates the need for double
coincidence of wants.
4. What are the different forms of modern
currency?
Ans: The different forms of modern currency are
metallic money, paper money and plastic money.
5. Who is authorized to issue currency in India?
Ans: Reserve Bank of India issue currency in India on
behalf of the central government.
6. Why can no one refuse to accept payment in
rupees?
Ans: In Indian currency notes and coins are issued
by the RBI on behalf of the central govt. No person
or organisation is allowed to issue
currency,moreover no person in India can legally
refuse a payment made in rupees. In other words,
the rupee is a universally accepted medium of
exchange in India. Thus the law legalizes the use of
rupee as a medium of payment so no one can
refuse to accept payment in rupees.
7. Why are the deposits in the bank account called
deposits?
Ans: Deposits in the bank account are called
deposits because People have the provision to
withdraw the money as and when they require.Also
bank pays some interest on the deposits and also
keep our money safe.Since the deposits in the bank
accounts can be withdrawn on demand, these
deposits are called demand deposits.
8. How do banks mediate between those who have
surplus money and those who need money?
Ans:Banks use the major portion of the deposits as
loan because there is a huge demand of loans for
various economic activities. In this way, banks
mediate between those who have surplus money
(Deposits) and those who are in need of this money
(Loan). Banks charge a higher interest rate on loans
than what they offer on deposits. The difference
between what charged to borrowers and what is
paid to depositors is their main source of income.
Thus by accepting deposits and by advancing loans
banks mediate between those who have surplus
money and those who need money.
9. Define a Cheque.
Ans: A cheque is a paper instructing the bank to pay
a specific amount from the person’s account to the
person in whose name the cheque has been issued.
10.Define a Loan.

Ans) It refers to an agreement in which the lender

supplies the borrower with money, goods or
services in return for the promise of future
payment.
11. Why do lenders ask for Collateral while lending?
Ans: Collateral is an asset that the borrower owns
and is kept with the lender/Bank as a guarantee till
the loan is repaid in full.If the borrower fails to
repay the loan, the lender has the right to sell the
collateral to obtain payment.

D. Long Answer Type Questions.

1. What are the various forms of modern money?
Ans: The modern forms of money are Currency
(paper notes and coins), Deposits with banks and
Plastic money.

(i) Currency: Currency includes coins and paper

money. In India currency notes and coins are issued
by RBI on behalf of the central govt. No person or
organisation is allowed to issue currency. Moreover,
no person in India can legally refuse a payment
made in rupees. Hence the rupee is universally
accepted medium of exchange in India.

(ii) Deposits with Banks:- The money which is kept

away from home some where safe that is in
banks.Deposited form of currency can be had from
any time in the time of need.
iii) Plastic Money:- Every country has their own
printed currency however paper money can easily
be spoiled and has no durability. Therefore the use
of plastic money has started and found world wide
acceptance. Plastic refers to the hand plastic cards
which we use everyday in place of actual bank note.
They can come in different forms like Cash Cards,
Credit Cards, Debit Cards, Prepaid Cash Cards and
Store Cards.
2.What is the procedure of opening a Saving Bank
account?
Ans: Following points should be considered for
opening a Saving bank account.

i) Choose a bank in which you want to open an

account: This step involves choosing or selecting a
bank with which a person wants to open an
account.

ii) Fill up the prescribed form:- Every bank has a

prescribed application form to be filled up for
opening an account. The application involves
information regarding name, residence and space
for fixing a photograph etc.

iii) Submit the filled up application form: The filled

up application form is to be submitted to the bank
officer. It must be kept in mind that the bank may
ask for necessary relevant documents like proof of
residence, proof of identity. After scrutiny of the
same the bank may issue an account number.

iv) Receive necessary documents from the bank:

After completion and successful submission of the
form, the bank issues an account number. Bank also
provides a small book known as pass book which
contains particulars of the account holder. The bank
may also issue Debit Card Commonly called ATM
Card.
3. How can you withdraw money from a Saving
Bank account?
Ans: The money can be withdrawn by two
procedures.

I) By visiting the branch.

(a) By filling withdrawal form: The Account holder

has to present himself/herself personally and fill up
the withdrawal form. The bank official after
identifying the person through
passbook,photograph and signature on withdrawl
form, hands over the money demanded.

(b) By Cheque: The cheque can be signed and issued

by the account holder on the concerned bank. The
cheque can be drawn by account holder or by some
other person in whose favour the cheque has been
issued.
II) By using ATM: ATM is a machine controlled
procedure. A person on opening an account is
provided with a card which can be used to withdraw
cash by inserting PIN to proceed. After that the
machine will ask for options like amount to be
drawn etc. At the end of transaction the machine
will provide slip showing amount withdrawn and
balance remaining with the bank.
4. What are the various forms of plastic money?
Ans: The various forms of plastic money are:

i) Debit Card: A debit card also known as a bank

card is a plastic card that provides the cardholder,
electronic access to his or her bank account. The
card, where accepted, can be used instead of cash
when making purchases.

ii) Credit Card: A credit card allows the cardholder

to pay for goods and services based on the holder’s
promise to pay for them. The issuer of the card
(Bank) creates a revolving account and grants a limit
of credit to the consumer from which the user can
borrow money for payment to a seller as a cash
advance to the user.