NCERT Solutions for Class 7th Social Science Chapter 20 Introduction — In-text Questions
Book page 194 Updated on2026-09-19
Q1.
Do you recall the flow of money from shopkeepers to workers as salaries, who further spent it on essential items (chapter ‘From Barter to Money’ in Part 1 of Grade 7 textbook)?
Answer
Yes — money moves in a circle, and every rupee that is spent becomes somebody else’s income.
In that chapter the flow ran like this: a shopkeeper earns money by selling goods → he pays part of it as salaries to the people who work for him → those workers spend their salaries on essential items like food, clothes and school things → that spending becomes the income of other shopkeepers and producers → who again pay salaries. The same rupee keeps travelling.
shopkeeper’s sales → salaries to workers
workers’ salaries → spending on essentials
spending → income of other sellers and producers
… and the circle begins again
This chapter picks up exactly where that one stopped. If money is always on the move, then something has to hold it, keep it safe and carry it between all these hands. That something is financial infrastructure.
Q2.
How do these monetary transactions take place between people?
Answer
Through the banks and payment systems that make up financial infrastructure. Money passes between people in two broad ways.
Way
How it works
Where the chapter explains it
Cash
Notes and coins handed over directly; withdrawn at the bank counter with a withdrawal slip, or from an ATM with a debit card and PIN
Page 203, Fig. 8.13
Cheque
A paper instruction to your bank to pay a named person from your account; the amount is debited from you and credited to them
Page 204, Fig. 8.14
Debit card at a POS machine
Swipe or insert the card, enter the amount and the PIN; money moves instantly from the customer to the shop
Pages 204–205, Fig. 8.15
Netbanking
Check balances and transfer money through the bank’s website or app on a computer or smartphone
Page 205, Fig. 8.16
UPI on a mobile phone
Scan a QR code or use the receiver’s phone number, enter the amount and the UPI PIN; the money reaches the other account at once
Pages 205–207, Fig. 8.18
Behind every one of these, both people need a bank account — which is why the chapter says that to use a bank’s services “one first needs to open a bank account”.
Q3.
Also, how is the development and maintenance of the vast physical infrastructure funded?
Answer
Out of the savings that financial infrastructure collects and lends. Roads, bridges, railways and power lines cost far more than any one person or company has in hand, so the money has to be gathered from many savers and lent to those who build.
The chapter names the routes by which this happens:
Banks lend. Deposits from crores of account holders become loans to businesses “for purchasing new machinery and raw materials, transporting products” and similar work.
The RBI lends to the government. As banker to banks and to the government, the RBI “also provides loans to banks and the government”.
Special institutions fund special sectors. The Industrial Finance Corporation of India funds businesses in areas like power and textiles. NABARD funds banks that give loans for farming, village industries, “and infrastructure like roads and irrigation”.
Companies raise money from the public. By issuing shares on a stock exchange, a company can collect small amounts from many investors and use the total for large projects.
Taxes. The chapter’s margin note on page 209 defines tax as “a compulsory contribution given by individuals and businesses… to the government on income and profit”. Government spending on infrastructure comes from this pool.
Why it happens: a bridge earns nothing on the day it is built — the benefit comes over the thirty years after. So it must be paid for now out of money that someone else has saved, and repaid later out of the benefit. Financial infrastructure is the machinery that makes such a long swap possible; without it, a country can only build what it can pay for today in cash.