Money and Credit Test - 2

A medium of exchange is something that buyers will exchange with a seller when they want to purchase goods or services from the seller. While many things could be used as a medium of exchange in an economy, money is the most common and useful medium of exchange in our society.

Unlike the things that were used as money earlier, modern currency is not made of precious metal such as gold, silver and copper.Modern forms of money include currency : paper notes and coins.

Akbar

Banks keep only a small proportion of their
deposits as cash with themselves. For example, banks in India these days hold about 15 per cent of their deposits as cash. This is kept as provision to pay the depositors who might come to withdraw money from the bank on any given day.

Bank

In rural areas, the main demand for credit is for crop production. Crop production involves considerable costs on seeds, fertilisers, pesticides, water, electricity, repair of equipment,etc. 

A 'Debt-Trap’ is situation where a person is unable to repay his loans and falls into a trap from which recovery is difficult. Agricultural sector is more prone to Debt-Traps as it is subject to more risks like crop failure, exploitation by money lender. 

Formal sector includes loans from banks and cooperatives. The informal lenders include moneylenders, traders, employers, relatives and friends, etc. 

The informal lenders include moneylenders, traders, employers, relatives and friends, etc. 

At present, it is the richer households who receive credit from formal sources whereas the poor have to depend on the informal sources.