Question

Read the following statements related to the economy I. Rebuilding efforts in the wake of natural disasters can give a boost to the economy.
II. An increase in consumer spending is most likely to cause a decrease in employment.
III. Carbon trading helps reduce carbon emissions mainly because low polluters buy excess permits to pollute and high polluters are fined by the carbon regulator.
IV. Economic growth of a nation increases the demand for labour, thereby raising income levels.
Which of the above statements is/are TRUE?

• A. I & II
• B. II & III
• C. IV only
• D. None of the above options

Hint:

For policy/mechanism questions, identify the operative mechanism: cap-and-trade reduces emissions through pricing allowances under a fixed cap—trading, not regulator fines, is central.

Answer 1

The Correct Option is D

(I) Not accepted as true here. While measured GDP may rise during reconstruction (spending on rebuilding), this reflects replacement of destroyed capital rather than a real “boost” to economic welfare; many tests treat this statement as misleading/false in the context of “boosting the economy.”
(II) False. Higher consumer spending typically increases aggregate demand, which—ceteris paribus—raises output and employment, not reduces it.
(III) False. In cap-and-trade, high emitters buy allowances from low emitters (who abate more cheaply). The system is driven by trading under a cap; “fines by the regulator” is not the main mechanism described.
(IV) True. Economic growth generally lifts labour demand; tighter labour markets push up employment and earnings/income levels.
Hence only (IV) is correct \(⇒\) \(\boxed{\text{Option C}}\).