Social Science — CBSE Class 10 board question

Credit refers to an agreement where a lender supplies money, goods, or services in return for a promise of future payment. It is essential for economic activities in the following ways:

1. Meets working capital needs: Salim, a shoe manufacturer, borrowed from a leather supplier and a trader to purchase raw materials and hire workers. This helped him complete his order on time and earn profit.

1. Supports agricultural production: Farmers like Shyamal take crop loans at the beginning of the season to meet expenses on seeds, fertilisers, and pesticides, and repay after harvest.

1. However, credit can also be harmful: Swapna's crop failed and she could not repay the loan, leading to a debt trap. Whether credit is beneficial depends on the risks involved.

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

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• Examiners expect two clear examples (Salim and Swapna are ideal as they contrast positive and negative impact).
• Mention that credit helps meet working capital/production expenses — this is key terminology.
• End with the nuance that credit can also lead to a debt trap — this shows complete understanding and fetches the third mark.
• Avoid writing long paragraphs; use numbered points for clarity in a 3-mark answer.