Chapter 3

NCERT
Class 10
Economics
Solutions
1. In situations with high risks, credit might create further problems for the borrower. Explain.

Question:

In situations with high risks, credit might create further problems for the borrower. Explain.

Answer:

In risky situations, the loan can create many problems for the borrower, we will understand it as follows. In our daily life, there are many transactions in many activities where credit is used in some form or the other. The main demand for loans in rural areas is for growing crops. Farmers take loan at the beginning of the season to grow the crop and repay the loan when the crop is ready. But if the crop is destroyed due to some reason, then the repayment of the loan becomes impossible. In such a situation, the farmer is forced to sell some part of his land. Thus, taking a loan in this risky situation creates many problems for the borrower and instead of increasing his earnings, his situation worsens.

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