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.
Which of the following statements best reflect/reflects the most logical and rational inference/inferences that can be made from the passage? 1. Central banks cannot bring down inflation without budgetary backing. 2. The effects of monetary policy depend on the fiscal policies pursued by the government. Select the correct answer using the code given below:
Both 1 and 2
Inference 1: The passage explains that central banks' use of higher interest rates is intended to encourage fiscal discipline. However, without fiscal measures such as reducing government spending or increasing taxes, monetary policy may become less effective and could even contribute to inflationary pressures. This highlights the crucial role of fiscal backing in enabling central banks to effectively manage inflation.
Inference 2: The passage emphasizes that fiscal backing is essential for the continued effectiveness of monetary policy. This point is illustrated by the statements, “Without the fiscal backup, monetary policy eventually loses traction” and “The risk of monetary unmooring is greater when public debt rises.” Higher interest rates can lead to increased government borrowing due to rising debt-service costs, demonstrating that fiscal policies play a pivotal role in determining the impact of monetary policy.
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)?
