Choose the given statement that is true/false.

Debt trap is good for an economy.

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True

False

answer is B.

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Detailed Solution

The above statement is false.
The debt trap is a situation where a debtor repays his previous loans and their interest, takes more loans, and falls into a vicious cycle of debt. Many countries in the world are suffering from this continuous debt trap cycle and cannot repay their loans. For example- a farmer takes a loan from moneylenders in his village. The farmer uses that loan to buy fertilizers, seeds, pesticides, and machinery for his farm. But after five months, all his crops are destroyed due to excessive rainfall, and he cannot earn any income to repay his loan. Thus, to repay his previous loan, he asks for a different money lender for loans and repays his previous loans. This vicious cycle of debt traps should be avoided wherever possible.
The correct statement is debt trap is terrible for an economy.

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