KSEEB Class 10 SSLC Economics Chapter 3 Money and Credit Notes

KSEEB Class 10 SSLC Economics Chapter 3 Money and Credit Notes Importance, Evolution, and Functions of Money

Barter System: The barter system was used before the advent of money. People used to exchange one thing for another in this system. Money is a medium of exchange. It acts as a unit of account, can store value and be used for repayment of debt.

Functions of money

Primary Functions

Medium of Exchange: People can buy or sell goods and services with the help of money.
Measure of Value: Serves as a unit of account or common measure of value. The value of a good is determined by multiplying its price with quantity sold in the market.
Secondary Functions
Store of Value: Money also acts as a store of value.
Making Payments in Future: Money will always be acceptable at a future date as it has stored value.
Transfer of Value: The ease of transferring purchasing power from person to person and place too has expanded trade and commerce.

“KSEEB Class 10 Economics Money and Credit notes”

Types of money:

Commodity money: Commodity with a prescribed size and weight was adopted as money and everything else was measured in terms of that standard commodity.
Metallic money: Precious metals like Gold, Silver, Bronze, etc., began to be used as money for different denominations.
Paper currency: Written documents issued by well-known financiers which were not actual money, but were accepted and exchanged for money. Later governments started printing notes that had the guarantee of thegovernment.
Bank money: Cheques, drafts, deposit (credit) receipts, etc., are used as money.
Plastic money: Credit and debit cards.

KSEEB Class 10 SSLC Economics Chapter 3 Money And Credit Notes

KSEEB Class 10 SSLC Economics Chapter 3 Money and Credit Notes Banks

The major function of a bank is to give loans, particularly to businessmen and entrepreneurs and thereby earn interest.
Banks get money for providing loans by accepting the deposits from people.
Deposits are the lifeline of a bank. These are of two types: time deposits and demand deposits. Time deposits can be withdrawn only after a specified period of time. Demand deposits in the bank can be withdrawn on demand by issuing cheques.

Credit (i.e. giving loans) refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payments with interest.
Credit plays a vital and positive role in the society.

“SSLC Economics Chapter 3 Money and Credit explained”

Reserve Bank of India and its Functions And Concept of Money Supply and its Measurement

The Reserve Bank of India (RBI) supervises the functioning of formal sources of the loan.
In India, four measures of money supply are used to measure the monetary stock-M1, M2, M3, and M4.
M1 = currency notes and coins + net demand deposits held in commercial banks;
M2 – M1 + Savings deposits with Post Office savings banks;
M3 = M1 + Net time deposits of commercial banks; and
M4 = M3 + Total deposits with Post Office savings banks

Credit Control Measures Adopted By The RBI

Terms of credit include interest rate, collateral and documentation requirements and the mode of repayment.
The terms of credit may vary depending on the nature of the lender and the borrower.
Collateral is an asset that the borrower owns (such as land, building, vehicles, livestock etc.) and uses this as a guarantee to the lender until the loan is repaid.

Formal credit is generally available with the banks and cooperatives. They charge lesser rates of interest than informal institutions.

“KSEEB SSLC Money and Credit chapter summary”

Informal lenders include moneylenders, traders, employers, relatives, and friends etc. They charge much higher interest on loans. There is no one to stop them from using unfair means to get their money back
Credit control measures are broadly classified into two types, namely
quantitative control measures, and
qualitative or selective control measures.