GOODS AND SERVICES
Q1. What is a good in economics?
A1. A good is an object that we can use or consume, such as food, books, clothes, CDs, or a car. Goods are physical items that satisfy people’s needs and wants.
Q2. What is a service?
A2. A service is something that someone does for us, such as giving a haircut, serving food at a restaurant, or teaching in a classroom. A service is not a solid object, but it still fulfills a person’s need.
How are goods and services different from each other?
A3. Goods are tangible — you can see and touch them, like clothes or food.
Services are intangible — you cannot touch them, but they are actions that help or benefit you, like a teacher explaining a lesson or a waiter serving food.
Why is money mostly spent on goods and services in an economy?
A4. Because goods and services fulfill people’s needs, wants, and desires
How do goods and services satisfy human wants and needs?
A5. Goods satisfy wants and needs by providing usable items like food or clothes.
Services satisfy them through useful actions like medical care, education, or transport.
Who provides goods and services in an economy?
A4. Both the public sector (government) and the private sector (individuals or companies)
Q5. What happens when there is a lack of supply from the public sector?
A5. When the public sector cannot meet all the needs, the private sector steps in to provide goods and services to fulfill that demand.
Q6. What are public goods? Give examples.
A6. Public goods are goods provided by the government for everyone’s use.
Examples: roads, bridges, and dams.
Q7. What are private goods? Give examples.
A7. Private goods are goods made by private businesses and sold for profit.
Examples: clothes, cosmetics, and electronics.
Q8. What are public services? Give examples.
A8. Public services are services provided by the government for the welfare of citizens.
Examples: telephone, electricity, gas, and water supply.
Q9. What are private services? Give examples.
A9. Private services are services offered by individuals or private companies for a fee.
Examples: dentist, barber, lawyer, mechanic.
What does the public or government sector do?
A1. The public sector provides goods and services on a large scale for the welfare of citizens.
What is the aim of the private sector?
A3. The private sector aims to earn profit by providing goods and services .
6. What do businesses do?
A6. Businesses:
- Produce and sell goods and services to households.
- Buy inputs (like labor and materials) from households.
Q7. What do households do ?
A7. Households:
- Buy goods and services from firms.
- Provide inputs such as labor, capital, land, and entrepreneurship to firms.
Q8. What are the main factors of production?
A8. The main factors of production are Entrepreneurship, Labour, Capital, and Land.
How does money flow between households and businesses?
A9. Businesses pay households for their inputs (like wages for labor), and households use that money to buy goods and services from businesses.
CONSUMERS AND PRODUCERS
Q1. Who are consumers?
A1. Consumers are people who buy or use goods and services made by others to satisfy their needs and wants.
Q2. Who are producers?
A2. Producers are people or companies who make goods and provide services for consumers.
Q3. How is a society’s wealth connected to consumers and producers?
A3. A society’s wealth depends on the buying and selling of goods and services
Q4. What kinds of goods are produced for consumers?
A4. Goods used in daily life such as soap, meat, vegetables, and frozen food are produced for consumers.
Q5. How do consumers get money to buy goods and services?
A5. Consumers earn money through jobs or other sources of income
Q7. How do consumers help businesses?
A7. Consumers help businesses by buying their products or using their services,
Q8. What is meant by “consumers are also producers”?
A8. Many people act as both consumers and producers. For example, a teacher produces education services but also buys food, clothes, or transport as a consumer.
Q10. Give an example of how producers and consumers depend on each other.
A10. A farmer (producer) grows vegetables and sells them in the market.
A family (consumer) buys those vegetables to eat.
The farmer earns money, and the family gets food — both depend on each other.
INFLATION
Q1. What is inflation?
A1. Inflation means a continuous increase in the prices of goods and services over time.
Q2. What happens during inflation?
A2. During inflation, the general price level rises, so everyday items such as groceries, petrol, and other goods become more expensive.
Q3. How does inflation affect purchasing power?
A3. Inflation reduces the purchasing power of money, meaning that the same amount of money cannot buy as many goods or services as it could earlier.
Q4. Why is inflation directly related to buying and selling?
A4. Inflation affects both buyers and sellers because it changes the price of goods and services.
Q5. What causes inflation according to economics?
A5. Inflation is caused by an increase in the amount of money in circulation.
Q6. What happens when there is more money but fewer goods in the market?
A6. Prices automatically increase because there are more buyers competing to purchase the limited goods available. This creates inflation.
Q7. What is scarcity?
A7. Scarcity means a shortage or lack of goods when production cannot meet people’s needs or wants.
Q8. What can cause scarcity?
A8.
- People hoarding products and leaving less for others.
- Bad weather or lack of rain that destroys crops.
- Shortage of gas or electricity that stops factories from producing goods.
Q9. How can black marketing cause inflation?
A9. Black marketing creates artificial scarcity by hiding or illegally selling goods at very high prices, leading to a rise in prices in the market.
Q10. Why do governments sometimes print more money?
A10. In emergencies like wars, governments print more money to manage expenses, but this can cause inflation if the number of goods stays the same while money supply increases.
Q11. What is the relationship between inflation and value of money?
A11. As inflation increases, the value or purchasing power of money decreases.
Q12. How does scarcity lead to higher prices?
A12. When goods are scarce, supply is low but demand remains high, so sellers increase prices for the limited goods available.
Causes of Inflation
Q1. What are the two common causes of inflation in an economy?
A1. The two common causes of inflation are:
- Demand-Pull Inflation
- Cost-Push Inflation
Q2. What is demand-pull inflation?
A2. Demand-pull inflation occurs when the demand for goods and services increases but there is not enough supply to meet that demand. As a result, suppliers raise prices, leading to inflation.
Q3. What is cost-push inflation?
A3. Cost-push inflation happens when the cost of producing goods increases due to a shortage of raw materials or other resources.
For example, a decrease in oil supply raises oil prices, which increases the cost of goods made using oil.
Q4. How does cost-push inflation affect wages and buying power?
A4. During cost-push inflation, wages may not rise as fast as prices, so people’s buying power decreases.
Q5. What is the difference between demand-pull and cost-push inflation?
A5.
- Demand-pull inflation is caused by too much demand and not enough supply.
- Cost-push inflation is caused by a rise in production costs and shortage of resources.
Types of Inflation
Q6. How are types of inflation classified?
A6. Types of inflation are classified based on their speed of increase in prices.
Q7. What are the four main types of inflation?
A7. The four main types are:
- Creeping Inflation
- Walking Inflation
- Galloping Inflation
- Hyperinflation
Q8. What is creeping inflation?
A8. Creeping inflation (also called mild inflation) happens when prices rise slowly over time — usually by 2 to 3 percent per year or less.
Q9. How does creeping inflation affect the economy?
A9. Mild or creeping inflation can be beneficial because it encourages economic growth.
Consumers buy more goods now to avoid paying higher prices later, which increases demand and boosts production.
Q10. Why do consumers tend to buy more during creeping inflation?
A10. Consumers expect prices to continue rising, so they purchase goods quickly to avoid paying more in the future.
Walking Inflation
Q1. What is walking inflation?
A1. Walking inflation, also called moderate inflation, occurs when the rate of inflation is less than 10 percent, usually between 3 to 10 percent per year.
Q2. Is walking inflation always harmful?
A2. At first, walking inflation may not be a big problem, but it becomes harmful in the long run if prices rise too quickly and the economy grows too fast.
Q3. Why do people buy more during walking inflation?
A3. People buy more because they expect prices to rise further in the future. They want to avoid paying higher prices later.
Q4. What happens when people start buying more than they need?
A4. Increased buying causes higher demand, and suppliers cannot keep up. This makes prices go up even more, adding to inflation.
Q5. How does walking inflation affect salaries and wages?
A5. During walking inflation, salaries and wages do not rise as fast as prices, so people lose buying power, and common goods become too expensive for many.
Galloping Inflation
Q6. What is galloping inflation?
A6. Galloping inflation happens when prices rise very quickly at a significant rate, usually between 10 and 20 percent, or even up to 100 percent or more in extreme cases.
Q7. Why is galloping inflation harmful to the economy?
A7. Galloping inflation makes the economy unstable because money loses its value rapidly, costs rise sharply, and businesses and workers cannot keep up.
Q8. How does galloping inflation affect foreign investment?
A8. Foreign investors avoid investing in countries with galloping inflation because it creates uncertainty and makes business risky.
Q9. What could happen if galloping inflation is not controlled?
A9. If not controlled in time, galloping inflation can lead to further disruption in the economy and may turn into hyperinflation.
Q10. What is the usual rate range for galloping inflation?
A10. It generally ranges between 10 percent and 20 percent, but in severe situations, it can reach 100 percent or even 1000 percent per year.
Here are clear and complete conceptual questions and answers based on the two images — Hyperinflation and Why Pay Taxes / Taxes Support the Government.
Conceptual Questions and Answers
Hyperinflation
Q1. What is hyperinflation?
A1. Hyperinflation is an extreme form of inflation where prices rise very fast, usually more than 50 percent a month or even over 1000 percent a year.
Q2. How often does hyperinflation occur?
A2. Hyperinflation is very rare, but when it happens, it causes severe problems in the economy.
Q3. What causes hyperinflation?
A3. It usually occurs when governments print too much money to pay for expenses such as wars or debts. This increases the amount of money in circulation, causing prices to rise sharply.
Q4. What happens to the value of money during hyperinflation?
A4. The value of money falls rapidly, meaning people need a large amount of money to buy even basic goods. Prices may change daily.
Q5. Why is hyperinflation harmful to people?
A5. Because prices rise so fast that people cannot afford basic goods, and savings lose value quickly. Money becomes almost worthless.
Why Pay Taxes
Q6. What are taxes?
A6. Taxes are compulsory payments that the government collects from citizens and businesses to pay for public services and national expenses.
Q7. Why do citizens pay taxes?
A7. Citizens pay taxes so the government can provide essential services like roads, schools, hospitals, police, electricity, water, and public transport.
Q8. What happens if people do not pay taxes?
A8. If citizens avoid paying taxes, the government must borrow money from other sources to pay for public services, which can increase national debt and reduce funds for important areas like education and healthcare.
Types of Taxes
Q9. What are property taxes?
A9. Property taxes are paid to the government based on the value of land, buildings, or homes owned by a person.
Q10. What are income taxes?
A10. Income taxes are paid by employees or businesses based on the money they earn. It is subtracted from their total income.
Q11. What are sales taxes?
A11. Sales taxes are added to the price of goods and services when people buy them in stores.
Q12. What are excise taxes?
A12. Excise taxes are charged on specific goods or activities, such as tobacco or fuel. Sometimes they are used to discourage people from buying harmful products.
Q13. How do taxes help the government?
A13. Taxes provide the money needed for the government to run the country, build infrastructure, and offer public facilities like libraries, schools, roads, bridges, police, and armed forces.
Q14. What happens to a country’s budget when taxes are not paid properly?
A14. When tax collection is low, the government’s income decreases, forcing it to take loans and cut spending on important public services.
TRADE
Here are clear and complete conceptual questions and answers based on both images — Trade, Exports, Imports, and International Trade (with Pakistan’s economy focus).
Conceptual Questions and Answers
Understanding Trade, Exports, and Imports
Q1. What is trade?
A1. Trade is the buying and selling of goods and services in exchange for money between individuals, communities, and countries.
Q2. What are exports?
A2. Exports are goods or services produced in one country and sold to another country.
Q3. What are imports?
A3. Imports are goods or services bought from another country because they are not available or are cheaper than local products.
International Trade
Q4. What is international trade?
A4. International trade is the exchange of goods and services between countries. It allows countries to sell what they produce and buy what they do not have.
Q5. Why is international trade important?
A5. It is important because it expands markets, creates jobs, increases income, and helps countries get goods that are not available locally.
Q6. What is foreign exchange?
A6. Foreign exchange is the conversion of one country’s currency into another. It is used to pay for imports and receive payments for exports.
Pakistan and International Trade
Q7. How is Pakistan’s economy linked to international trade?
A7. Pakistan’s economy depends heavily on exports and imports. Exports bring in money (foreign exchange), while imports help meet needs for goods not produced locally.
Q8. Why are exports important for Pakistan?
A8. Exports help Pakistan to:
- Earn foreign exchange.
- Create jobs and increase production.
- Strengthen the economy and make local industries more competitive.
Q9. What happens when imports are greater than exports?
A9. If imports exceed exports, Pakistan spends more foreign exchange than it earns. This weakens the economy and reduces foreign reserves.
Q10. Why should Pakistan export more than it imports?
A10. Exporting more helps Pakistan become economically stronger and self-reliant, while too many imports make the country dependent on others.
Q11. What problems occur when a country imports too much?
A11.
- It causes a trade deficit (spending more on imports than earned from exports).
- The country may need to borrow money from others to pay for imports.
- It reduces foreign reserves and makes the economy weaker.
Q12. What are the benefits of importing less and exporting more?
A12.
- The country earns more money from foreign trade.
- It creates economic stability and growth.
- It reduces dependence on other nations for essential goods like food and fuel.
Q13. Why can too much dependence on imports be dangerous for a country?
A13. Because it makes the country reliant on foreign powers, which can become a threat to economic independence and freedom.
Q14. What is a trade deficit?
A14. A trade deficit happens when the value of imports is greater than the value of exports. It means the country is losing more money than it earns from trade.
Q15. What does international trade bring to a developing country like Pakistan?
A15. It brings foreign income, economic opportunities, and access to modern goods and technologies, helping the country to grow and compete globally.
TRANSPORTATION
Introduction to Transportation
Q1. What is transportation?
A1. Transportation is the movement of goods and people from one place to another. It includes all the different ways by which goods and passengers are moved.
Q2. Why is transportation important for the economy?
A2. Transportation is important because it helps in the buying and selling of goods, connects markets, and supports economic growth by moving goods within and between countries.
Q3. What are the main types of transport used in the world?
A3. The main types of transport are land transport, sea transport, and air transport.
Q4. How are goods transported in Pakistan?
A4. In Pakistan, goods are transported by road, railway, and air cargo. For short distances, rickshaws and motorcycles are used, while for longer distances, trucks and lorries carry goods.
In small towns, tonga carts drawn by horses are still used.
Road Transport
Q5. What is road transport?
A5. Road transport uses motor vehicles such as cars, buses, lorries, and trucks to move people and goods from one place to another.
Q6. What are the advantages of road transport?
A6.
- It is cheap and fast compared to other transport methods.
- It is flexible and can go almost anywhere.
- It can carry goods over long and short distances easily.
Q7. Why is road transport important in Pakistan?
A7. Because it connects cities, towns, and villages, and helps in moving goods quickly to markets across the country.
Railway Transport
Q8. What is railway transport?
A8. Railway transport carries goods and passengers over short and long distances using trains running on railway tracks.
Q9. What are the advantages of railway transport?
A9.
- It is safe, cheaper, and more reliable for long-distance tr
Sea Transport
Q11. How has sea transport been used since ancient times?
A11. Ships and boats have been used for transporting goods across the seas for thousands of years.
Q12. What is sea transport mainly used for today?
A12. Sea transport is used for carrying large shipments of goods in cargo ships between countries across oceans.
Q13. What are the benefits of sea transport?
A13.
- It is useful for bulk goods like oil, coal, or machinery.
- It connects countries and continents through international trade.
- Boats and ships are also used to move goods along rivers within a country.
Air Transport
Q14. Why has air transport become important today?
A14. Air transport is a fast and efficient way to carry goods and passengers, especially perishable items like fruits, vegetables, or medicines.
Q15. What are the main features of air transport?
A15.
- It is expensive but very quick.
- It is used for urgent deliveries like mail, parcels, and valuable goods.
- Companies like UPS and other logistics firms use air transport for worldwide delivery.
Q16. How does air transport help industries and businesses?
A16. Air transport supports industries by reducing delivery time, ensuring quick transport of goods, and allowing businesses to operate globally.
Entrepreneurship
Q1. What is entrepreneurship?
A1. Entrepreneurship is the process of designing, launching, and running a new business at a low cost, often with a small team of people.
Q2. Why is entrepreneurship important for developing countries?
A2. In developing countries, it helps people create their own jobs when it is difficult to find employment. It allows individuals to earn a living without depending on the government.
Q3. How can small businesses help people?
A3. Small businesses help people support themselves financially using the money they have saved or have access to. It gives them independence and a chance to improve their standard of living.
Who is an Entrepreneur?
Q4. Who is an entrepreneur?
A4. An entrepreneur is a person who starts and runs a business using limited funds. They often introduce a new product or service or improve an existing one.
Q5. What motivates entrepreneurs to start a business?
A5. Entrepreneurs believe it is better to take risks and try new ideas rather than depend on others for jobs. They aim to earn independently and enjoy the rewards of their hard work.
Q6. What kind of business ideas do entrepreneurs usually have?
A6. Entrepreneurs often come up with new, useful, and creative ideas that meet people’s needs or make life easier, sometimes through products, sometimes through services.
Types of Entrepreneurs
1. Innovative Entrepreneurs
Q7. Who are innovative entrepreneurs?
A7. Innovative entrepreneurs are risk-takers who create new and original business ideas. They bring something unique and experimental to the market.
Q8. What are the main qualities of innovative entrepreneurs?
A8. They are creative, courageous, and passionate about their ideas, even if there is a chance of losing money. They are ready to go ahead despite risks.
2. Imitative Entrepreneurs
Q9. Who are imitative entrepreneurs?
A9. Imitative entrepreneurs follow or copy ideas from others but improve or modify them for their own business. They take the risk of producing and selling the product successfully.
Q10. What is the main difference between innovative and imitative entrepreneurs?
A10.
- Innovative entrepreneurs create new ideas or products.
- Imitative entrepreneurs adopt existing ideas but make them suitable for a new market or need.
3. Social Entrepreneurs
Q11. Who are social entrepreneurs?
A11. Social entrepreneurs are people who start projects to help others rather than to make a profit. Their main goal is social welfare and community support.
Q12. How are social entrepreneurs different from business entrepreneurs?
A12. Business entrepreneurs work mainly for profit, while social entrepreneurs focus on solving social problems like health, education, or poverty.
Q13. Give an example of social entrepreneurship from Pakistan.
A13. A good example is Sehat Kahani, started by Dr. Sara Saeed and Dr. Iffat Zafar. It is an online platform providing virtual healthcare to patients across Pakistan.
They began with 300,000 rupees, and their project now operates successfully through a mobile application.
Q14. What does the success of Sehat Kahani show about entrepreneurship?
A14. It shows that innovative and socially responsible ideas can help solve national problems, create jobs, and improve the quality of life for many people.
Q1. How do entrepreneurs contribute to the economy of a country?
A1. Entrepreneurs help the economy grow by creating new businesses, providing jobs, and introducing new products and ideas that improve industries and services.
Q2. Why are entrepreneurs considered a driving force in the economy?
A2. Because their success and creativity inspire others to start their own businesses, which leads to more innovation and employment in the country.
Q3. What qualities of entrepreneurs help make new businesses successful?
A3. Their persistence, passion, and risk-taking ability help them start and manage new ventures successfully.
Q4. How does risk-taking by entrepreneurs help the economy?
A4. Risk-taking encourages innovation and helps introduce new ways of doing business, which improves productivity and brings progress to the economy.
Q5. Why do entrepreneurs prefer to start new ventures instead of managing existing ones?
A5. Entrepreneurs enjoy the thrill of creating something new. They prefer taking bold decisions and building new products or services instead of managing already established businesses.
Q6. What happens when an entrepreneur starts a new business venture?
A6. Starting a new venture creates employment, increases production, and contributes to the economic growth of the country.
Q7. How do entrepreneurs inspire others in society?
A7. Successful entrepreneurs inspire others by showing that hard work, creativity, and courage can lead to success, motivating more people to start their own businesses.
Q8. Why is entrepreneurship important for developing countries?
A8. It helps reduce unemployment, promotes innovation, and encourages people to become self-reliant, which strengthens the national economy.
EVOLUTION OF MONEY
Early Use of Coins
Q1. When did the making and use of silver coins begin in the subcontinent?
A1. Around 6 BC, the use of silver coins began in the subcontinent by nations such as the Iranis, Turks, and Arabs.
Q2. What were the features of the earliest coins?
A2. The earliest coins were punch-marked, irregular in shape, and had various symbols depending on the rulers who issued them.
Q3. How were coins used in ancient times?
A3. Coins were used as a medium of exchange for buying and selling goods and merchandise.
Coins under Muslim and Hindu Dynasties
Q4. What materials were used to make coins during the Muslim and Hindu dynasties?
A4. Coins were made from gold, silver, and copper by sultans, nawabs, and kings who ruled different parts of India.
Q5. What was written on the coins of the Muslim Turkish Sultans of India (1206–1526)?
A5. The Kalma was written on one side, and the name and title of the emperor, king, or sultan on the other side. These coins showed the authority and loyalty of the ruler.
Q6. What kind of coins were issued by Razia Sultana?
A6. Razia Sultana, the only female Muslim ruler of India, issued coins in her own name, showing her sovereignty.
Q7. Which sultans had the most elaborate coins?
A7. The Khilji Sultans were known for having the most beautifully designed and detailed coins.
Tughlaq and the Experiment with Coinage
Q8. Who was the first ruler to introduce the modern concept of coins?
A8. Muhammad Tughlaq was the first to use coins made of brass or copper, giving them the same value as gold and silver coins.
Q9. Why did Tughlaq’s coin experiment fail?
A9. His idea failed because people started making fake coins in their homes, which caused the new system to collapse.
Coins during the Mughal Period
Q10. Which Mughal emperor first issued coins in his name?
A10. Emperor Babar was the first Mughal ruler to issue coins called Shahrukhi in his name.
Q11. What details were written on Mughal coins?
A11.
- The Kalma in the centre.
- The names of the first four caliphs.
- The emperor’s name and titles.
- The Hijri date and place of minting.
Q12. What special feature did Emperor Jahangir’s coins have?
A12. Emperor Jahangir’s coins included zodiac signs as symbols.
Q13. Whose name appeared on coins during Emperor Jahangir’s rule?
A13. The name of his wife, Empress Nur Jahan, appeared on some coins, showing her influence.
Introduction of Paper Money
Q14. Who introduced paper money in India?
A14. The French in India were the first to use paper money for trade.
Q15. When was paper money officially introduced in India?
A15. Paper money was formally introduced in 1861, during British rule over India.
Q16. What was used before paper money?
A16. Before paper money, gold, silver, and copper coins were used for all forms of trade and exchange.
Q17. What role did coinage play in the economy of the subcontinent?
A17. Coinage helped in standardizing trade, promoting economic growth, and showing the authority and culture of the ruling dynasties.
Here are complete and clearly written conceptual questions and answers based on the image — Evolution of Money: Trade via Barter System and Why We Need Money.
Conceptual Questions and Answers
Evolution of Money — Trade via Barter System
Q1. What is barter?
A1. Barter is the exchange of goods and services for other goods and services without using money.
Q2. What does the term “to barter” mean?
A2. “To barter” means to trade or exchange one’s goods or services with others to get different goods or services in return.
Q3. Was money used in the barter system?
A3. No, in the barter system, people did not use money. They exchanged goods directly.
Q4. How did people trade in ancient times?
A4. In ancient times, countries exchanged their own goods with those produced in other countries through land and sea routes.
Q5. When did coins replace the barter system?
A5. Later in history, coins made of gold and silver became the main currency, replacing barter as the system of trade.
Q6. What kind of money is used in the modern world?
A6. Today, paper currency is used all over the world. Each country has its own coins and currency.
Q7. What is Pakistan’s currency?
A7. Pakistan’s currency is the rupee (PKR).
Why Do We Need Money?
Q8. Why is money important in people’s lives?
A8. Money is needed to buy goods and services like food, houses, clothes, and transport — the basic necessities of life.
Q9. Besides basic needs, what else do people use money for?
A9. People also use money for education, healthcare, travel, and to buy luxury items that make life more comfortable.
Q10. How is money earned?
A10. Money is earned through jobs and businesses. It allows people to live according to their needs and lifestyles.
Q11. What problems arise when people have little money?
A11. When people have limited money, they struggle to meet their needs and find it difficult to manage daily expenses.
Q12. Why do businesses depend on money?
A12. Businesses depend on money to operate, grow, and pay workers. Without money, businesses cannot function properly.
Q13. How do charitable organisations use money?
A13. Charitable organisations use money to help poor and needy people by providing food, shelter, education, or healthcare.
Q14. How does money improve quality of life?
A14. Money improves life by helping people fulfil needs, buy comforts, and achieve financial independence.
BANKS
Why Are Banks Useful?
Q1. Why do people use banks?
A1. People use banks to save their money safely, deposit their earnings, and make payments using cheques or bank transfers.
Q2. How do banks help in business dealings?
A2. Banks handle large amounts of money for businesses, manage profit and loss accounts, and provide loans to individuals and companies for investment and growth.
Q3. What happens when banks lend money to people?
A3. Banks lend money to people as loans, which must be paid back with interest. This is how banks earn profit.
Q4. How do people earn profit through banks?
A4. When people deposit money in a bank, the bank pays interest on their savings. This is called profit on savings.
Commercial Banks
Q5. What are commercial banks?
A5. Commercial banks are financial institutions that provide monetary services to the general public, businesses, and organisations.
Q6. What services do commercial banks offer?
A6.
- They accept deposits from people.
- They give loans to individuals and businesses.
- They help customers save and manage money safely.
Q7. How do people benefit from commercial banks?
A7. People can save their money, earn profit on deposits, and borrow money from banks to buy houses, cars, or start small businesses.
Q8. How do commercial banks earn profit?
A8. Commercial banks earn profit by charging interest on loans they give and by using customers’ deposits for investments.
State Bank of Pakistan
Q9. What is a central bank?
A9. A central bank is the main bank of a country that controls the country’s financial system, currency, and money exchange.
Q10. When was the State Bank of Pakistan established?
A10. The State Bank of Pakistan was established in 1947 in Karachi and was inaugurated by Quaid-e-Azam Muhammad Ali Jinnah.
Q11. What are the main functions of the State Bank of Pakistan?
A11.
- Issues the currency of Pakistan.
- Controls and supervises commercial banks.
- Manages foreign exchange reserves.
- Balances imports and exports payments.
- Sets the exchange rate of the Pakistani rupee against other currencies.
- Lends money to commercial banks in times of need.
Q12. How does the State Bank guarantee currency payments?
A12. The State Bank issues currency with government backing, guaranteeing that payments made using the currency will be valid and accepted.
Q13. What is meant by foreign exchange reserves?
A13. Foreign exchange reserves are the foreign currencies and assets held by the State Bank to manage trade payments and maintain the value of the national currency.
Q14. How does the State Bank control foreign transactions?
A14. It deals with money transactions between Pakistan and other countries, manages imports and exports, and sets the exchange rate of the Pakistani rupee.
Q15. Why is the State Bank important for the economy?
A15. The State Bank maintains the stability of the financial system, ensures smooth trade, and supports economic growth by controlling money supply and interest rates.