Choose the given statement is true/false:

‘Credit sometimes pushes the borrower into a situation from which recovery is very painful.’

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True

False

answer is A.

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Detailed Solution

The given statement is true.
Accepting credit could indeed put the borrower in trouble and lead to a debt trap in a high-risk situation. Let's use an illustration to clarify. Farmers require financing because they employ expensive inputs like pesticides, water, and fertilizers. They often take out loans at the start of the season and pay them back once the crop is harvested, but if the crop fails, that farmer will have to take out another loan to cover his expenses. The farmer can become stuck in a "debt trap," a vicious cycle of recovery from which they have no way out.

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