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SAI International School
                                                 Session- 2025-2026

                                                Home Assignment -5
                                     Subject- Economics Ch- 3- MONEY AND CREDIT

       Q                                               Question                                              Marks
       no

       1    Q.   A person is said to be in a debt trap when ____.                                            1
            (a)   They take credit from the informal sector
            (b)   They cannot get credit from the formal sector
            (c)   The loan amount is less than their requirement
            (d)   The loan repayment amount exceeds their income
       2    1.Which one of the following is a formal source of credit?                                       1
            a) Traders
            b) Cooperative societies
            c) Moneylenders
            d) Friends and relatives
       3    ________________or__________________ refers to an agreement in which the lender supplies the     1
            borrower with money, goods or services in return for the promise of future payment.
       4    Interest rate, collateral and documentation requirement, and the mode of repayment together      1
            comprise what is called the ___________________.
       5    _______________________ is an asset that the borrower owns (such as land, building, vehicle,     1
            live stocks, deposits with banks) and uses this as a guarantee to a lender until the loan is repaid.
       6    Assertion (A): Collateral is an asset that the borrower owns (such as land, building, vehicle,   1
            livestock, deposits with banks) and uses this as a guarantee to a lender until the loan is repaid.
            Reason (R): Collateral is given as the lender can sell the collateral to recover the loan amount if
            the borrower fails to repay the loan.
            Options:
            a) Both A and R are true and R is the correct explanation of A.
            b) Both A and R are true but R is not the correct explanation of A.
            c) A is true but R is false.
            d) A is false but R is true.
       7    Assertion (A): In rural areas, the main demand for credit is for crop production.                1
            Reason (R): Farmers usually take crop loans at the beginning of the season and repay the
            loan after harvest.
            A.  Both A and R are true and R is the correct explanation of A.
            B.  Both A and R are true but R is not the correct explanation of A.
            C.  A is correct but R is wrong.
            D.  A is wrong but R is correct.

       8    Apart from the banks who else give cheap loans to the farmers and traders at cheap rate of       2
            Interest.
       9    Why do lenders ask for collateral while lending?                                                 2

       10   What do you mean by ‘Terms of Credit’? Explain its each component with examples.                 3
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