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Miscellaneous·2021·Easy

In India, the objective of macroeconomics policy is to enhance the economic welfare of the people, and any one wing of such macro policy, monetary or fiscal, cannot independently work without active support of another. Which one of the following statements best reflects the corollary to the passage given above?

In India, the objective of macroeconomics policy is to enhance the economic welfare of the people, and any one wing of such macro policy, monetary or fiscal, cannot independently work without active support of another. Which one of the following statements best reflects the corollary to the passage given above?

Options

  1. a.

    The central bank cannot work independently of the Government.

    Correct answer
  2. b.

    Government should regulate financial markets and institutions closely.

  3. c.

    Market economy is not compatible with the socialist policies of the Government.

  4. d.

    Financial sector reforms are required for enhancing the economic welfare of the people.

Explanation

Option (a) is correct: The passage states (read concludes) that "anyone wing of such macro policy, monetary or fiscal, cannot independently work without the active support of another." Now, the Central Bank deals with the monetary policy, while the government looks after the fiscal policy of the country. Therefore, the statement in option (a) flows as a natural corollary to the conclusion provided in the passage. Option (b) is incorrect: Though the statement might be right in its own sphere, but it is beyond the scope of this passage. Option (c) is incorrect: Not only is the statement in this option beyond the scope of the passage, but it is also incorrect in its own right and a very extreme one. India, which follows a mixed economy, is a classic counterexample to the assertion made in this option. Option (d) is incorrect: To quote a standard definition, "The financial sector is a section of the economy made up of firms and institutions that provide financial services to commercial and retail customers. This sector comprises a broad range of industries including banks, investment companies, insurance companies, and real estate firms." The passage does not discuss financial sector reforms. Rather, it deals with the macroeconomic framework of monetary and fiscal policies, of which, the financial sector is just one (relatively) small aspect.

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