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7 Assertion (A): Sunil took credit in the form of advance payment from a buyer and he delivered 1
the goods to the buyer on time and also earned profit. The credit made Sohan better off in this
situation.
Reason (R): Credit can never push a person into a debt trap.
Options:
a) Both A and R are true and R is the correct explanation of A.
b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.

8 Explain a debt-trap with an example. 2

9 What is the main demand for credit in rural area? Explain. 2

10 “Credit can be a curse” justify this statement with a suitable example. 3

11 Why do farmers take a credit in rural areas? Explain. 3

13 Read the following extract and answer the following. 5

It is festival season two months from now and the shoe manufacturer, Salim, has received an
order from a large trader in town for 3,000 pairs of shoes to be delivered in a month time. To

complete production on time, Salim has to hire a few more workers for stitching and pasting
work. He has to purchase the raw materials. To meet these expenses, Salim obtains loans from
two sources. First, he asks the leather supplier to supply leather now and promises to pay him
later. Second, he obtains loan in cash from the large trader as advance payment for 1000 pairs
of shoes with a promise to deliver the whole order by the end of the month. At the end of the
month, Salim is able to deliver the order, make a good profit, and repay the money that he had
borrowed

Q. How did Salim finance his production for the festival season? 1

Q. What was the outcome of Salim's business strategy for the festival season? 1

Q. How did Salim manage his financial commitments during the festival season? 2

14 “Credit sometimes acts as a boon and at times a difficult condition for the borrower from which recovery 5
is very painful”. Describe a situation and suggest two long term solutions for it.