Social Science (087) — AI-generated practice question

Whether credit improves or worsens a borrower's situation depends on the following factors:

1. Purpose of credit: Salim borrowed to meet working capital needs for a confirmed order — a productive, short-term use. Swapna borrowed for cultivation with uncertain returns.

1. Risk involved: Salim faced low risk as he already had an order. Swapna faced high risk — crop failure due to pests was beyond her control.

1. Outcome of the activity: Salim completed the order, earned profit, and repaid the loan. Swapna's crop failed; she could not repay, leading to a debt trap and forced sale of land.

1. Support in case of loss: Swapna had no backup support; debt compounded over years, pushing her further into poverty.

Conclusion: As the text states, "whether credit would be useful or not depends on the risks in the situation and whether there is some support, in case of loss."

Source: Chapter 3, Money and Credit — Two Different Credit Situations

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Examiners look for: (1) a clear contrast between Salim and Swapna, (2) identification of key determining factors — risk, purpose, outcome, support — with evidence from both examples, and (3) the textbook conclusion quoted or paraphrased. Avoid writing a narrative retelling; instead, analytically link each factor to the outcome. Using subheadings or numbered points keeps the answer structured and scores well.