Question 1

Q1: 1. What is financial infrastructure? How does it complement physical infrastructure?

Accepted Answer

Financial infrastructure is the network of institutions, systems, and markets that facilitate financial transactions and the flow of money in an economy. According to the chapter, it comprises banks, payment systems, stock markets, and other financial institutions. Financial infrastructure complemen...

Question 2

Q2: 2. How does having a bank account help people? Should everyone be required to have a bank account?

Accepted Answer

Having a bank account helps people in several important ways as mentioned in the chapter:    Safety and Savings: It provides a safe place to keep money instead of holding cash at home. Banks also encourage saving by paying interest on deposits, which helps money grow over time through compounding....

Question 3

Q3: 3. What could be the possible advantages and disadvantages of compound interest for savers and borrowers?

Accepted Answer

Compound interest is the process of earning interest on the original principal amount as well as on the accumulated interest from previous periods. It has different effects on savers and borrowers. For Savers:    Advantage: The primary advantage for savers is that compound interest helps their money...

Question 4

Q4: 4. How does financial infrastructure enable the flow of money between households and businesses? Can you think of how the government can facilitate th...

Accepted Answer

Financial infrastructure creates a system for money to flow efficiently between households and businesses. How the flow works:    From Households to Businesses: Households deposit their savings into banks. Banks then act as intermediaries, lending this collective pool of money to businesses. Busines...

Question 5

Q5: 5. What could be the reason for the higher interest rate earned on fixed deposits as compared to a savings account?

Accepted Answer

The reason for the higher interest rate on a fixed deposit (FD) account compared to a savings account lies in the commitment of time and the certainty it provides to the bank.    Fixed Period: In a fixed deposit, the depositor agrees to keep their money in the bank for a fixed period, such as 3 or 5...

Question 6

Q6: 6. Sahil received ₹ 10,000 as a prize in a poster-making competition. His father promises to pay him 12 per cent interest per year if he does not spen...

Accepted Answer

This problem can be solved by calculating the compound interest year by year, as shown in the chapter. Principal Amount: ₹ 10,000 Interest Rate: 12% per year End of Year 1:    Interest earned = 12% of ₹ 10,000 = (12 / 100) × 10,000 = ₹ 1,200    Total amount = ₹ 10,000 + ₹ 1,200 = ₹ 11,200 End of Yea...

Question 7

Q7: 7. How does the stock market help mobilise the savings of individuals? In what ways do companies benefit by issuing shares to people?

Accepted Answer

The stock market plays a crucial role in connecting individuals' savings with the financial needs of companies. How the stock market mobilises savings:    The stock market provides a platform where individuals can invest their savings by buying shares of different companies. A share represents a par...

Question 8

Q8: 8. How can we balance the convenience of digital payments with the risk of cyber fraud?

Accepted Answer

Digital payments offer great convenience, but they come with the risk of fraud. We can balance these by adopting safe practices while using digital payment systems. The chapter suggests several ways to protect oneself:    Protect Personal Information: Never share sensitive details like your bank acc...

Question 9

Q9: 9. Ask your family members or neighbours about- → how they save money? → whether they use UPI, ATM or cheques, the kinds of transactions they perform...

Accepted Answer

This is an activity-based question. To complete it, you should interview your family members or neighbours and then present your findings. Here is a sample structure for your report. Report on Financial Habits in My Neighbourhood Introduction: I interviewed [Number] people/families to understand the...

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