Question 1
What is financial infrastructure? How does it complement physical infrastructure?
Steps only
Banks and payment systems manage money; they help fund and use physical networks.
Answer
The two systems support each other.
CLASS 7 · SOCIAL STUDIES · CHAPTER 8
Banks and the Magic of Finance
Simple answers to eight questions about banks, interest, investment and digital payment safety.
8 worked answersComplete chapter answers
8 worked answers · short steps first, explanations when you need them
Questions and activities
Textbook pages 196–197
Question 2
How does having a bank account help people? Should everyone be required to have one?
Steps only
Explain useful services, then distinguish access to banking from compulsory use.
Answer
Banking should be accessible and voluntary.
Question 3
What are the possible advantages and disadvantages of compound interest for savers and borrowers?
Steps only
Compound interest can grow savings but also increase unpaid debt.
Answer
It helps savers and can make borrowing more costly.
Question 4
How does financial infrastructure enable money to flow between households and businesses? How can government facilitate this flow?
Steps only
Show savings, payments, loans and wages moving between households and businesses.
Answer
Government can make the system safe, fair and accessible.
Question 5
Why might a fixed deposit pay more interest than a savings account?
Steps only
Fixed deposits restrict access for a period, so banks may offer more interest.
Answer
The higher rate rewards keeping money deposited longer.
Question 6
Sahil received ₹10,000 and earns 12% interest per year if he does not spend it. How much will he have after three years?
Steps only
Annual interest ₹1,200; three-year interest ₹3,600; total ₹13,600.
Answer
Sahil would have ₹13,600 with simple interest.
Question 7
How does the stock market mobilise individual savings? How do companies benefit from issuing shares?
Steps only
People’s savings become investment; companies receive funds by selling ownership shares.
Answer
Investing can bring returns, but it also carries risk.
Question 8
How can we balance the convenience of digital payments with the risk of cyber fraud?
Steps only
Check details, keep codes private, avoid suspicious links and report unknown transactions quickly.
Answer
Convenience and safety can go together with careful habits.