CBSE Class 10 Economics • Chapter 3

Money and Credit Class 10 MCQs with Answers

Practise 120 NCERT-based multiple choice questions covering money, barter, banks, credit, terms of credit, formal and informal sources, debt traps and Self-Help Groups.

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Money and Credit Class 10 MCQs with Answers - CBSE Economics Chapter 3 featured image

Money and Credit Class 10 MCQs with Answers • NCERT Class 10 Economics

Complete Money and Credit Revision

Use the Q&A post for written-answer preparation, then return here for MCQ practice. Both resources connect to the Class 10 Important Questions hub.

Read Money & Credit Q&A → Important Questions Hub ← Chapter 2 MCQs Topper's Social Science Home

How to Practise

Attempt every question before checking the answer. Mark the questions you miss, revise the related concept in the Q&A resource, and then attempt the MCQ again.

Revision rule: Do not memorise the option letter alone. Remember the concept behind the correct answer.

120 Money and Credit MCQs

1. Money is mainly used as a:

A. Medium of exchange

B. Natural resource

C. Production factor

D. Type of collateral

✓ Correct answer: A. Medium of exchange

2. Direct exchange of goods for goods is called:

A. Credit

B. Barter

C. Deposit

D. Investment

✓ Correct answer: B. Barter

3. The problem in which both parties must want what the other has is called:

A. Cash reserve

B. Double coincidence of wants

C. Collateral

D. Credit creation

✓ Correct answer: B. Double coincidence of wants

4. Money removes the need for:

A. Production

B. Double coincidence of wants

C. Banking

D. Saving

✓ Correct answer: B. Double coincidence of wants

5. Which is a modern form of money?

A. Cattle

B. Salt

C. Currency

D. Grain

✓ Correct answer: C. Currency

6. Demand deposits can be used for payments through:

A. Cheques

B. Land titles

C. Crop receipts only

D. Barter

✓ Correct answer: A. Cheques

7. Demand deposits are withdrawable:

A. Only after ten years

B. On demand

C. Only by the RBI

D. Only in coins

✓ Correct answer: B. On demand

8. A bank accepts deposits mainly from people who have:

A. Surplus funds

B. No income

C. No savings

D. No accounts

✓ Correct answer: A. Surplus funds

9. Banks use a major portion of deposits to:

A. Provide loans

B. Destroy currency

C. Buy crops for free

D. Avoid lending

✓ Correct answer: A. Provide loans

10. The difference between the interest charged on loans and paid on deposits is an important source of:

A. Bank income

B. Barter

C. Collateral

D. Currency

✓ Correct answer: A. Bank income

11. Credit means an agreement involving:

A. Future payment

B. Only barter

C. Free goods

D. No obligation

✓ Correct answer: A. Future payment

12. Credit can be beneficial when it:

A. Helps generate income

B. Always increases debt

C. Requires no repayment

D. Stops production

✓ Correct answer: A. Helps generate income

13. A situation in which debt becomes difficult to repay is a:

A. Deposit cycle

B. Debt trap

C. Barter cycle

D. Savings plan

✓ Correct answer: B. Debt trap

14. Which can push a farmer into a debt trap?

A. Successful harvest

B. Crop failure

C. Higher productivity

D. Lower input costs

✓ Correct answer: B. Crop failure

15. Which is a term of credit?

A. Interest rate

B. Weather

C. Population

D. Literacy

✓ Correct answer: A. Interest rate

16. Which of the following is also a term of credit?

A. Collateral

B. Climate

C. Soil

D. Rainfall

✓ Correct answer: A. Collateral

17. Collateral is:

A. An asset pledged as security

B. A type of currency

C. A bank employee

D. A deposit slip

✓ Correct answer: A. An asset pledged as security

18. Which can serve as collateral?

A. Land

B. A school timetable

C. A textbook

D. A weather report

✓ Correct answer: A. Land

19. Formal sources of credit include:

A. Banks and cooperatives

B. Moneylenders only

C. Relatives only

D. Traders only

✓ Correct answer: A. Banks and cooperatives

20. Informal sources of credit include:

A. Moneylenders

B. Commercial banks

C. Cooperatives

D. RBI

✓ Correct answer: A. Moneylenders

21. The RBI supervises the functioning of:

A. Formal banking sources

B. All informal lenders directly

C. Barter markets

D. Farmers' markets

✓ Correct answer: A. Formal banking sources

22. Which is NOT an informal source of credit?

A. Moneylender

B. Trader

C. Bank

D. Relative

✓ Correct answer: C. Bank

23. A major problem with informal credit is:

A. Very high interest rates

B. Always free loans

C. No repayment

D. Guaranteed profit

✓ Correct answer: A. Very high interest rates

24. Cheap and affordable credit is important because it can:

A. Support productive activities

B. Stop investment

C. Increase barter

D. Remove savings

✓ Correct answer: A. Support productive activities

25. Formal credit should be expanded especially in:

A. Rural areas

B. Only airports

C. Only schools

D. Only markets

✓ Correct answer: A. Rural areas

26. Poor households may depend on informal credit because they often lack:

A. Collateral

B. Food

C. Labour

D. Needs

✓ Correct answer: A. Collateral

27. Documentation is commonly required for:

A. Formal bank loans

B. Barter only

C. Free gifts

D. Cash purchases

✓ Correct answer: A. Formal bank loans

28. An SHG generally encourages members to:

A. Save regularly

B. Avoid all saving

C. Stop lending

D. Use only moneylenders

✓ Correct answer: A. Save regularly

29. SHGs are especially associated with organising:

A. Poor rural people, particularly women

B. Only large companies

C. Only exporters

D. Only government officers

✓ Correct answer: A. Poor rural people, particularly women

30. Members of an SHG pool their:

A. Savings

B. Land records only

C. School certificates

D. Tax notices

✓ Correct answer: A. Savings

31. SHGs can provide small loans to:

A. Their members

B. Only foreign banks

C. Only governments

D. No one

✓ Correct answer: A. Their members

32. A major advantage of SHGs is:

A. Improved access to credit

B. Higher dependence on moneylenders

C. No saving

D. No collective decision-making

✓ Correct answer: A. Improved access to credit

33. SHGs can contribute to women's:

A. Economic empowerment

B. Exclusion from finance

C. Dependence on barter

D. Loss of savings

✓ Correct answer: A. Economic empowerment

34. After regular savings, an SHG may become eligible for:

A. Bank credit

B. Free land

C. Currency printing

D. RBI membership

✓ Correct answer: A. Bank credit

35. The main function of money highlighted in this chapter is:

A. Medium of exchange

B. Weather forecasting

C. Crop storage

D. Land measurement

✓ Correct answer: A. Medium of exchange

36. A shoe manufacturer selling shoes for money before buying wheat illustrates:

A. Money as medium of exchange

B. Collateral

C. Informal credit

D. Debt trap

✓ Correct answer: A. Money as medium of exchange

37. Currency is accepted because it is:

A. Widely accepted as payment

B. A form of land

C. A type of collateral only

D. A commodity used only in villages

✓ Correct answer: A. Widely accepted as payment

38. A cheque is connected with:

A. Demand deposits

B. Barter

C. Collateral only

D. Crop failure

✓ Correct answer: A. Demand deposits

39. Banks keep a portion of deposits as cash mainly to:

A. Meet withdrawal needs

B. Avoid customers

C. Stop lending

D. Create barter

✓ Correct answer: A. Meet withdrawal needs

40. People who deposit money in banks may receive:

A. Interest on deposits

B. Land titles

C. Free loans forever

D. Barter goods

✓ Correct answer: A. Interest on deposits

41. Borrowers generally pay banks:

A. Interest on loans

B. No interest

C. Only taxes

D. Only deposits

✓ Correct answer: A. Interest on loans

42. A productive loan can be used to:

A. Buy inputs for production

B. Destroy output

C. Avoid work

D. Eliminate markets

✓ Correct answer: A. Buy inputs for production

43. If income from an activity is insufficient to repay a loan, the borrower may:

A. Fall into a debt trap

B. Automatically get a grant

C. Avoid repayment forever

D. Receive free credit

✓ Correct answer: A. Fall into a debt trap

44. Interest rate, collateral, documentation and repayment together describe:

A. Terms of credit

B. Barter system

C. Money supply only

D. National income

✓ Correct answer: A. Terms of credit

45. The requirement that can prevent poor borrowers from obtaining formal loans is often:

A. Collateral

B. Demand deposits

C. Currency

D. Cheques

✓ Correct answer: A. Collateral

46. A moneylender is generally part of the:

A. Informal sector

B. Formal sector

C. Central bank

D. Cooperative bank

✓ Correct answer: A. Informal sector

47. A cooperative society is part of the:

A. Formal credit system

B. Informal credit system

C. Barter system

D. Cashless barter

✓ Correct answer: A. Formal credit system

48. A major aim of expanding formal credit is to:

A. Reduce dependence on informal lenders

B. Increase moneylender rates

C. Reduce productive investment

D. Stop bank lending

✓ Correct answer: A. Reduce dependence on informal lenders

49. Informal lenders are not supervised in the same way as:

A. Formal financial institutions

B. Households

C. Farmers

D. Workers

✓ Correct answer: A. Formal financial institutions

50. The formal sector generally has:

A. Institutional rules and supervision

B. No records

C. No documents

D. Only verbal agreements

✓ Correct answer: A. Institutional rules and supervision

51. An SHG loan is generally based on:

A. Collective savings and group arrangements

B. Foreign currency only

C. Gold coins only

D. Barter

✓ Correct answer: A. Collective savings and group arrangements

52. SHGs can help members obtain credit without the same:

A. Collateral barriers faced in bank lending

B. Need to save

C. Need to repay

D. Need to work

✓ Correct answer: A. Collateral barriers faced in bank lending

53. Which is a social benefit associated with SHGs?

A. A platform to discuss social issues

B. Ending all employment

C. Replacing schools

D. Stopping savings

✓ Correct answer: A. A platform to discuss social issues

54. The poorest borrowers often pay more for credit because they:

A. Depend more on informal sources

B. Always use banks

C. Have excess collateral

D. Receive subsidies from all lenders

✓ Correct answer: A. Depend more on informal sources

55. Formal credit is generally considered preferable when it offers:

A. Reasonable and transparent terms

B. Unlimited high interest

C. No records

D. No repayment

✓ Correct answer: A. Reasonable and transparent terms

56. Money allows a person to:

A. Sell one thing and buy another using a common medium

B. Exchange only identical goods

C. Avoid all markets

D. Borrow without repayment

✓ Correct answer: A. Sell one thing and buy another using a common medium

57. A person who has surplus funds may place them in:

A. A bank deposit

B. A debt trap

C. A barter exchange only

D. Collateral account only

✓ Correct answer: A. A bank deposit

58. Banks connect:

A. Depositors and borrowers

B. Only traders and farmers

C. Only governments

D. Only moneylenders

✓ Correct answer: A. Depositors and borrowers

59. The use of deposits for lending helps banks:

A. Provide credit to borrowers

B. End all savings

C. Remove money from circulation completely

D. Prevent investment

✓ Correct answer: A. Provide credit to borrowers

60. A borrower who uses credit to increase production is using credit for:

A. A productive purpose

B. A barter purpose

C. A currency issue

D. A reserve requirement

✓ Correct answer: A. A productive purpose

61. Credit is not automatically beneficial because:

A. Its effect depends on terms and the borrower's ability to repay

B. All loans are free

C. All borrowers become richer

D. No loan carries interest

✓ Correct answer: A. Its effect depends on terms and the borrower's ability to repay

62. The amount paid in addition to the principal on a loan is:

A. Interest

B. Collateral

C. Deposit

D. Currency

✓ Correct answer: A. Interest

63. An asset used as security for a loan is:

A. Collateral

B. Demand deposit

C. Cheque

D. Currency note

✓ Correct answer: A. Collateral

64. The way a borrower must repay a loan is called:

A. Mode of repayment

B. Double coincidence

C. Demand deposit

D. Barter

✓ Correct answer: A. Mode of repayment

65. The documents required by a lender are part of:

A. Terms of credit

B. Money supply

C. Barter exchange

D. SHG savings only

✓ Correct answer: A. Terms of credit

66. A loan may be repaid in:

A. Different agreed modes

B. Only gold

C. Only cattle

D. Never

✓ Correct answer: A. Different agreed modes

67. The chapter links affordable credit with:

A. Economic development

B. Only population growth

C. Only weather

D. Only barter

✓ Correct answer: A. Economic development

68. A rural borrower may prefer a moneylender because the lender may:

A. Offer easier access without formal collateral requirements

B. Always charge zero interest

C. Be supervised by RBI

D. Give grants

✓ Correct answer: A. Offer easier access without formal collateral requirements

69. The same easy access can be harmful if the moneylender:

A. Charges very high interest

B. Provides records

C. Uses reasonable rates

D. Supports savings

✓ Correct answer: A. Charges very high interest

70. A major reason formal credit is not equally available is:

A. Poor households may lack collateral and documents

B. Banks never lend

C. Money has no value

D. Cooperatives do not exist

✓ Correct answer: A. Poor households may lack collateral and documents

71. Demand deposits are part of money because they:

A. Can be used for payments

B. Cannot be withdrawn

C. Are always fixed deposits

D. Are physical goods

✓ Correct answer: A. Can be used for payments

72. A cheque is best described as:

A. An instruction to a bank to make payment from an account

B. A commodity

C. A collateral asset

D. A moneylender's contract

✓ Correct answer: A. An instruction to a bank to make payment from an account

73. The bank's lending activity can help:

A. Economic activities that need funds

B. Only barter

C. Only currency printing

D. Only tax collection

✓ Correct answer: A. Economic activities that need funds

74. The RBI's supervision aims partly to ensure banks:

A. Follow required lending and banking norms

B. Lend only to rich traders

C. Avoid all borrowers

D. Charge unlimited interest

✓ Correct answer: A. Follow required lending and banking norms

75. Formal credit can help poor borrowers when:

A. Access is widened and terms are affordable

B. Collateral is made impossible

C. Interest is increased sharply

D. Banks stop rural lending

✓ Correct answer: A. Access is widened and terms are affordable

76. A key concern in informal credit is:

A. Lack of regulation and high interest

B. Too much RBI supervision

C. No demand for loans

D. Excessive bank documentation

✓ Correct answer: A. Lack of regulation and high interest

77. SHGs reduce dependence on:

A. Informal moneylenders

B. All banks

C. All savings

D. All production

✓ Correct answer: A. Informal moneylenders

78. Regular saving by SHG members helps create:

A. A common pool of funds

B. A new currency

C. A central bank

D. A barter market

✓ Correct answer: A. A common pool of funds

79. SHG decisions about savings and lending are generally made by:

A. Members of the group

B. Foreign banks

C. Only moneylenders

D. Only RBI

✓ Correct answer: A. Members of the group

80. The chapter's examples show that credit can have:

A. Positive and negative outcomes

B. Only positive outcomes

C. Only negative outcomes

D. No economic effect

✓ Correct answer: A. Positive and negative outcomes

81. A successful productive loan can:

A. Increase earnings and improve repayment ability

B. Always create a debt trap

C. Remove the need for markets

D. Stop production

✓ Correct answer: A. Increase earnings and improve repayment ability

82. A failed productive activity can:

A. Make repayment difficult

B. Guarantee profit

C. Remove interest

D. Create free credit

✓ Correct answer: A. Make repayment difficult

83. A loan's interest rate is important because it affects:

A. The total repayment burden

B. The colour of currency

C. The number of banks

D. The existence of barter

✓ Correct answer: A. The total repayment burden

84. Collateral reduces lender risk by:

A. Providing security against default

B. Eliminating interest

C. Creating currency

D. Removing repayment

✓ Correct answer: A. Providing security against default

85. People with no collateral may find formal credit:

A. Harder to access

B. Always free

C. Automatically available

D. Unnecessary

✓ Correct answer: A. Harder to access

86. The purpose of expanding formal credit is not merely to:

A. Increase lending to wealthy borrowers

B. Improve access

C. Support productive activity

D. Reduce dependence on costly informal credit

✓ Correct answer: A. Increase lending to wealthy borrowers

87. A bank deposit is money-like when it is:

A. Withdrawable on demand and usable for payments

B. Locked permanently

C. A physical asset

D. Used only as collateral

✓ Correct answer: A. Withdrawable on demand and usable for payments

88. Which statement best describes barter?

A. Goods are exchanged directly for goods

B. Money is used in every transaction

C. Banks create deposits

D. Loans are supervised by RBI

✓ Correct answer: A. Goods are exchanged directly for goods

89. Which statement best describes money?

A. A commonly accepted medium of exchange

B. Only a store of grain

C. A loan agreement

D. A collateral document

✓ Correct answer: A. A commonly accepted medium of exchange

90. Which statement best describes formal credit?

A. Credit from banks and cooperatives

B. Credit from friends only

C. Credit from traders only

D. Credit from moneylenders only

✓ Correct answer: A. Credit from banks and cooperatives

91. Which statement best describes informal credit?

A. Credit from moneylenders, traders, employers, relatives or friends

B. Only RBI loans

C. Only cooperative loans

D. Only bank deposits

✓ Correct answer: A. Credit from moneylenders, traders, employers, relatives or friends

92. Which statement best describes an SHG?

A. A small group that pools savings and provides credit to members

B. A central bank

C. A money-printing agency

D. A commercial company

✓ Correct answer: A. A small group that pools savings and provides credit to members

93. The best way to judge a loan is to consider:

A. Its terms, purpose and repayment ability

B. Only the amount borrowed

C. Only the lender's name

D. Only the collateral

✓ Correct answer: A. Its terms, purpose and repayment ability

94. Affordable credit can contribute to:

A. Higher income and economic development

B. Greater dependence on moneylenders

C. More debt traps by definition

D. Less production

✓ Correct answer: A. Higher income and economic development

95. The chapter recommends wider access to formal credit particularly for:

A. Poor and rural borrowers

B. Only large corporations

C. Only foreign investors

D. Only moneylenders

✓ Correct answer: A. Poor and rural borrowers

96. Which concept is central to the barter-to-money transition?

A. Double coincidence of wants

B. Collateral

C. Debt trap

D. SHG

✓ Correct answer: A. Double coincidence of wants

97. Which concept is central to loan conditions?

A. Terms of credit

B. Barter

C. Currency issue

D. Demand deposits

✓ Correct answer: A. Terms of credit

98. Which concept describes excessive borrowing and repayment difficulty?

A. Debt trap

B. Demand deposit

C. Collateral

D. Barter

✓ Correct answer: A. Debt trap

99. Which concept improves collective access to small loans?

A. Self-Help Group

B. Moneylender

C. Barter

D. Currency issue

✓ Correct answer: A. Self-Help Group

100. The overall goal of a sound credit system is to:

A. Make affordable credit available for productive needs

B. Increase dependence on informal lenders

C. Prevent saving

D. Replace money with barter

✓ Correct answer: A. Make affordable credit available for productive needs

101. A person can avoid barter's direct matching problem by using:

A. Money

B. Collateral

C. A crop failure

D. An SHG loan only

✓ Correct answer: A. Money

102. A bank deposit can be transferred using:

A. A cheque

B. A land deed

C. A tractor

D. A crop

✓ Correct answer: A. A cheque

103. A lender may require collateral to:

A. Secure the loan

B. Eliminate the borrower

C. Issue currency

D. Create barter

✓ Correct answer: A. Secure the loan

104. A borrower should compare loans using their:

A. Terms of credit

B. Colour of currency

C. Size of bank building

D. Location of market

✓ Correct answer: A. Terms of credit

105. The formal sector's lower-cost credit can help borrowers avoid:

A. Costly informal borrowing

B. All saving

C. All production

D. Demand deposits

✓ Correct answer: A. Costly informal borrowing

106. The chapter encourages banks to lend more to:

A. Small borrowers and productive activities

B. Only moneylenders

C. Only people with no needs

D. Only barter traders

✓ Correct answer: A. Small borrowers and productive activities

107. A cooperative can be classified as a:

A. Formal source of credit

B. Informal lender

C. Barter market

D. Currency issuer

✓ Correct answer: A. Formal source of credit

108. A relative giving a loan is generally an:

A. Informal source

B. Formal bank

C. RBI source

D. Cooperative source

✓ Correct answer: A. Informal source

109. A trader giving an advance to a producer is an example of:

A. Informal credit

B. Formal bank credit

C. Demand deposit

D. Currency issue

✓ Correct answer: A. Informal credit

110. An employer lending to a worker is an example of:

A. Informal credit

B. Formal credit

C. RBI supervision

D. Bank deposit

✓ Correct answer: A. Informal credit

111. The absence of collateral can make it difficult to obtain:

A. Formal bank credit

B. Barter goods

C. Currency as payment

D. An SHG membership

✓ Correct answer: A. Formal bank credit

112. SHGs are useful because they combine:

A. Saving and small-scale credit

B. Currency printing and taxation

C. Barter and exports

D. Bank supervision and money creation

✓ Correct answer: A. Saving and small-scale credit

113. A group loan can strengthen:

A. Collective responsibility

B. Debt traps by definition

C. Barter dependence

D. Currency shortage

✓ Correct answer: A. Collective responsibility

114. The chapter's focus on women in SHGs highlights:

A. Financial inclusion and empowerment

B. Currency printing

C. Informal taxation

D. Barter trade

✓ Correct answer: A. Financial inclusion and empowerment

115. If a loan generates sufficient income for repayment, credit may:

A. Improve the borrower's economic position

B. Automatically create a debt trap

C. Remove the need for production

D. End banking

✓ Correct answer: A. Improve the borrower's economic position

116. If interest is very high and income is uncertain, credit may:

A. Increase repayment pressure

B. Guarantee savings

C. Reduce the loan burden

D. Eliminate collateral

✓ Correct answer: A. Increase repayment pressure

117. The medium of exchange function of money helps:

A. Facilitate transactions

B. Prevent all borrowing

C. Remove all banks

D. Eliminate production

✓ Correct answer: A. Facilitate transactions

118. A person accepts money because it can be:

A. Used to buy other goods and services

B. Used only as collateral

C. Exchanged only for wheat

D. Kept only by banks

✓ Correct answer: A. Used to buy other goods and services

119. The use of cheques reduces the need to make every payment with:

A. Cash

B. Collateral

C. Land

D. Barter goods

✓ Correct answer: A. Cash

120. A bank's deposits provide a source for:

A. Lending

B. Barter

C. Crop harvesting

D. Tax exemption

✓ Correct answer: A. Lending

Quick Revision Checklist

Barter and double coincidence of wants
Money as a medium of exchange
Currency and demand deposits
Bank deposits and lending
Credit situations and debt traps
Terms of credit: interest, collateral, documentation and repayment
Formal and informal credit sources
Need for affordable formal credit
Self-Help Groups and women's empowerment

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