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Mohan is an agricultural labourer. There are several months in a year when he has no work and needs credit to meet his daily expenses. He depends upon his employer, the landowner for credit who charges an interest rate of 5 per cent per month. Mohan repays the money by working physically for the landowner on his farmland. Over the years his debt will:
Option (a) is correct because Mohan’s debt will keep increasing. The landowner charges a high monthly interest of 5% and since Mohan cannot make full payments in cash, his physical labour cannot cover the growing debt completely.
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