Read the following passages and answer the items that follow the passages. Your answers to these items should be based on the passages only. As inflation rises, even governments previously committed to budget discipline are spending freely to help households. Higher interest rates announced by central banks are supposed to help produce modest fiscal austerity, because to maintain stable debts while paying more to borrow, governments must cut spending or raise taxes. Without the fiscal backup, monetary policy eventually loses traction. Higher interest rates become inflationary, not disinflationary, because they simply lead governments to borrow more to pay rising debt-service costs. The risk of monetary unmooring is greater when public debt rises, because interest rates become more important to budget deficits.
Based on the above passage, the following assumptions have been made: 1. Fiscal policies of governments are solely responsible for higher prices. 2. Higher prices do not affect the long-term government bonds. Which of the assumptions given above is/are valid?
Neither 1 nor 2
Assumption 1 is invalid: The passage explores the interaction between government spending, fiscal policies, monetary policies, and interest rates in influencing inflation. It does not imply that fiscal policies alone are the cause of rising prices. Furthermore, the passage highlights the role of monetary policy in affecting inflation, as noted in the statement, “Higher interest rates are announced by central banks…. Higher interest rates become inflationary.”
Assumption 2 is invalid: The passage makes no reference to the impact or connection between long-term government bonds and rising prices.
Important Questions from Miscellaneous Topics
Which one of the following statements best reflects the critical message conveyed by the author of the passage?
With reference to the above passage, the following assumptions have been made:
I. No country needs to depend on ecosystems to boost national income.
II. Resource-rich countries need to share their resources with those of scant resources so as to prevent the degradation of ecosystems.
Which of the above assumptions is/are valid?Which one of the following statements best reflects the central idea of the passage?
With reference to the above passage, the following assumptions have been made:
I. Path-dependent green investments will eventually most likely benefit growth as well as public finances in a country like India.
II. If other green technologies follow the same pattern as that of solar energy, there will most likely be an easy green transition.
Which of the above assumptions is/are valid?Three prime numbers p, q and r, each less than 20, are such that p − q = q − r. How many distinct possible values can we get for (p + q + r)?
