All About Money and Credit

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Introduction about Money and Credit

Money, in its rudimentary understanding, relates to the currency that we use. It can be either in the form of paper notes or coins. However, the scope of the concept of money is much broader as it includes a whole host of instruments within it. 

Credit, as it is understood in the common parlance means borrowing, but technically, it also falls within the ambit of money. 

Read on to know more about money and credit. 

Main Functions of Money 

Money and credit notes would mention the following as the role of money within the present-day economy in relation to -

  • Production 

For deciding, planning, executing, and managing activities of production.

  • Distribution 

Allocation of reward across various production factors in the form of rent, wages, interest, etc. 

  • Consumption  

Payment by consumers for goods or services 

  • Capital Formation 

Savings may be mobilized for investment into profitable ventures.

  • External Trade 

Foreign currencies in external trade are taken as receipts.

  • Public Finance  

Government receives taxes as a way of income and subsequently makes an expenditure for administrative and development processes.

Various Functions of Credit 

The main functions of credit to be presented in money and credit ppt are –

  • There is elimination or minimization of the inconveniences or risks that are present in a cash transaction.

  • Remittance of funds becomes much easier with credit instruments.

  • Large scale production is facilitated by the credit system.

  • Short-term credit is crucial for industries.

Different Forms of Money 

For the money and credit class 10 project, you may have to mention the various forms of money. The different forms of money are –

  1. Paper Money  

It includes notes of various denominations, made out of paper and issued by the Central bank. 

  1. Metallic Money  

Metallic money includes both token money and coins. The coins represent metallic money and mainly issued in the denominations of Rs. 1, 2, 5, and 10. 

  1. Legal Money  

It indicates the money that is accepted as a valid means for payment in discharging a debt. All coins and notes issued by the Reserve Bank of India or the government fall within this category. 

  1. Bank Money  

Forms of bank money include cheques, drafts, and bills of exchange. 

  1. Near Money 

Any type of instrument which is easily convertible to money is called near money. Examples – government bonds, deposits, etc. 

  1. Plastic Money 

Smart cards, credit cards, etc. are termed as plastic money. 

How is Credit Extended?

The main two form of availing credit are – (1) Bank loan, and (2) Credit card. For money and credit extra questions, an elucidation may be required on this point. 

Banks hold on to cash deposits, which are termed as cash reserve ratio. This fund is generated from the money that is deposited by the customers of the bank. A portion of such deposit is lent out as a credit, at an interest rate. This interest corpus then acts as the income of the bank. 

Credit cards, as another way for availing credit, will find an explanation in the money and credit project pdf.  Credit cards are used to pay for purchased services or products without having to pay cash. The payment is undertaken electronically. The debt owed to the credit card company will have to be repaid at the end of the billing cycle. 

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FAQ (Frequently Asked Questions)

1. What are the Different Forms of Credit?

Ans. The main forms of credit, as elucidated in money and credit class 10 notes, are given through banks or by way of a credit card.

The credit process through banks involves loans approved by such financial institutions. The credit extended by banks can be both secured and unsecured. Secured credit is backed by collateral, whereas unsecured credit is not asset-backed.

On the contrary, a credit card extends a line of credit for making purchases, or payment for services or goods without having to pay cash. The credit card holder has to pay back the loan amount at the end of the billing cycle. One can understand that the concept of money and credit are inter-related even within different forms of credit.

2. What is Understood By Money and Credit?

Ans. Money relates to such an object which is accepted as payment for any services or goods. The primary function of money is that of a medium of exchange. The underlying meaning of credit is the borrowing of money, and the same has to be repaid at a deferred date. In the case of credit, the repayment amount becomes more than the borrowed amount, owing to a charge of interest. Both money and credit circulate within an economy, and understanding of the same is important for further improvement of an economy.  

3. What are the Main Forms of Money?

Ans. The main forms of money that may be mentioned in a project on money and credit include – (1) paper money, (2) metallic money, (3) legal money, (4) bank money, (5) near the money, and (6) plastic money. 

No matter the form of money involved, its value will always be connected to its exchange value. There is no other independent value attached.