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Social Science: Money and Credit: Role of Money in an Economy - Role of Money in an Economy

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ConceptRole of Money in an Economy

Question

"Cheap and affordable credit is crucial for the country's development." Assess the statement.

Solution

Cheap and affordable credit is crucial for the country's development due to the following factors:

1. More lending would lead to higher incomes and encourage people to grow crops, do business and set up small scale industries.

2. Cheap credit means more income is left with the borrower to reinvest rather than return as interest. This leads to acceleration of economic activity.

3. Cheap credit would also allow weaker sections of society to enter formal sector of lending and rid them of exploitation.

4. Affordable credit would also end the cycle of debt trap and lead to sustainable economic activity that would allow borrowers to invest in better technology to make their business more competitive

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Solution Concept: Role of Money in an Economy.
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