CLASS 10 ECONOMICS · CHAPTER 3 · STUDY NOTES
Money and Credit
See how money connects buyers and sellers, follow a bank payment, and compare when borrowing helps or creates difficulties.
EXPLORE
Money as a medium of exchange
A potter wants a haircut, but the barber does not want a pot. Money lets the potter sell to someone else, then pay the barber.SEE THE IDEA
No matching wants? Money makes a bridge.
Sell a pot
To a buyer who wants it
Receive money
An accepted intermediary
Buy a haircut
From the barber
Choose a step and explore the reason.
- Medium of exchange
- An accepted intermediary used to buy and sell goods and services.
Take a moment. What do you think?
PAUSE & TRY · think first, then check with a free account
Question
A baker wants a bicycle repair. The repairer does not want bread. What problem does money solve here?
Sign in to see the answer
Write your own answer and compare it with ours. It’s free.
Sign inNew here? Sign up freeNCERT reference: chapter PDF pages 2, 3.
EXPLORE
Currency and demand deposits
Cash in a wallet and demand deposits in a bank account are two modern forms of money. A cheque or payment app is a way of using money, rather than the account balance itself.SEE THE IDEA
The money and the tool are different things.
Currency
Cash held by the public
MONEYDemand deposits
Balances available on demand
MONEYPayment tool
Lets you use the balance
TOOLChoose a step and explore the reason.
- Demand deposit
- Money in a bank account that can be withdrawn on demand and used to settle payments.
PAUSE & TRY · think first, then check with a free account
Question
A person has ₹500 in an account and opens a payment app. Has opening the app created another ₹500?
Sign in to see the answer
Write your own answer and compare it with ours. It’s free.
Sign inNew here? Sign up freeNCERT reference: chapter PDF pages 3, 4.
EXPLORE
Follow a cheque payment
In our example, a customer pays ₹500 from a ₹2,000 deposit to a repairer with ₹800. After successful processing, the balances become ₹1,500 and ₹1,300.SEE THE IDEA
₹500 moves; it does not multiply.
Payer
Before: ₹2,000
After: ₹1,500Bank processes the instruction
Recipient
Before: ₹800
After: ₹1,300₹2,000 + ₹800 = ₹1,500 + ₹1,300 = ₹2,800
Choose a step and explore the reason.
- Cheque
- A written instruction to a bank to pay a stated sum from the payer’s account to the named recipient.
PAUSE & TRY · think first, then check with a free account
Question
In the example, why does the recipient’s deposit rise while the payer’s falls?
Sign in to see the answer
Write your own answer and compare it with ours. It’s free.
Sign inNew here? Sign up freeNCERT reference: chapter PDF page 4.
EXPLORE
Banks connect savings and borrowing
Banks accept deposits, keep funds available for withdrawals and lend to borrowers. Borrowers repay with interest; depositors may earn interest under their account terms.SEE THE IDEA
Two sides of banking.
Depositors
Deposit funds →
← Withdrawals and deposit interest
Bank
Keeps funds for withdrawals
Extends loans
Borrowers
← Receive loans
Repay principal + interest →
Interest received − interest paid contributes to bank income.
Costs and losses still matter.
Choose a step and explore the reason.
- Credit
- An agreement to receive money, goods or services now in return for promised future payment.
PAUSE & TRY · think first, then check with a free account
Question
Why would a diagram showing the bank lending all deposits immediately be misleading?
Sign in to see the answer
Write your own answer and compare it with ours. It’s free.
Sign inNew here? Sign up freeNCERT reference: chapter PDF page 5.
EXPLORE
The same loan can lead to different outcomes
A loan can fund work that earns enough to repay. If the activity fails or terms are too costly, the borrower may need another loan or sell assets. Borrowing alone does not guarantee progress.SEE THE IDEA
Credit opens an opportunity—and carries a risk.
Loan pays for inputs now
Income is expected later.
Production and sales succeed
Income can cover repayment.
Opportunity to improve earningsLoss disrupts expected income
Repayment remains due.
Risk of further debt or asset lossChoose a step and explore the reason.
- Debt trap
- A situation in which repayment difficulties and further borrowing make escaping debt increasingly difficult.
PAUSE & TRY · think first, then check with a free account
Question
A grower borrows for seedlings, but a flood destroys the crop. Explain why the debt can become harder to repay.
Sign in to see the answer
Write your own answer and compare it with ours. It’s free.
Sign inNew here? Sign up freeNCERT reference: chapter PDF pages 6, 7.