Q1. [1] medium thorough-understanding
Credit helped Salim, the shoe manufacturer, expand his business and increase earnings, but pushed Swapna, the farmer, deeper into debt. Both borrowed money to meet production costs. What factor BEST explains why credit had such opposite outcomes for the two borrowers?
(A) Salim borrowed from a formal source while Swapna borrowed from an informal source
(B) Salim had a higher income than Swapna before taking the loan
(C) Salim's earnings increased as planned, while Swapna's crop failed, leaving her unable to repay
(D) Salim used the loan for manufacturing while Swapna used it for consumption
- A Salim borrowed from formal sources while Swapna borrowed from informal sources.
- B The level of risk in their situations differed — Salim faced a confirmed order while Swapna's crop was vulnerable to failure.
- C Salim repaid his loan faster than Swapna could.
- D Swapna had no collateral to offer the moneylender, so she was charged a higher rate.
Generated by claude-sonnet-4-6 · 2026-06-26 13:23 · grounding rag
Model Answer
Answer: B
Salim faced a confirmed order, guaranteeing income to repay the loan, while Swapna's crop failed due to pests, making repayment impossible and pushing her into a debt trap.
Explanation
The passage explicitly states: "Whether credit would be useful or not depends on the risks in the situation." Salim had a confirmed order (low risk), while Swapna faced crop failure (high risk). The question asks for the best explanation of opposite outcomes — that is the difference in risk levels, not the source of credit (though informal sources worsened Swapna's situation, it wasn't the direct cause of the opposite outcomes). Option B matches the textbook's own conclusion most precisely.