Question

In the following question statement is followed by some assumptions are given. An assumption is something supposed or taken for granted. You have to consider the statement and decide which of the assumptions is implicit in the statement ? Choose the most appropriate answer.
Statement : The target of a fiscal deficit of 5% of GDP could not be met, because of a major shortfall in revenue collections.
Assumptions :
1. Shortfall in revenue collections lead to an increase in fiscal deficit.
2. Shortfall in revenue collections lead to a decrease in fiscal deficit.

• A. If only assumption I is implicit.
• B. If only assumption II is implicit.
• C. If neither assumption I nor II is implicit.
• D. If both assumptions I and II are implicit.

Answer 1

The Correct Option is A

To determine which assumption is implicit in the statement, let's analyze the information given:

Statement: The target of a fiscal deficit of 5% of GDP could not be met due to a major shortfall in revenue collections.

Assumptions:

• 1. Shortfall in revenue collections leads to an increase in fiscal deficit.
• 2. Shortfall in revenue collections leads to a decrease in fiscal deficit.

Analysis:

The statement directly connects the inability to meet the fiscal deficit target with a shortfall in revenue collections. This implies that the revenue shortfall negatively impacts the fiscal target. For the fiscal deficit to exceed the target due to revenue shortfall, it would mean that assumption 1, which states that a revenue shortfall leads to an increase in fiscal deficit, is likely implicit.

On the contrary, assumption 2 cannot be implicit because if the revenue collections decrease, it logically leads to an increase, not a decrease, in fiscal deficit, as there are fewer funds to cover expenses.

Conclusion:

The most logical conclusion is that only assumption I is implicit.