Statement: The target of a fiscal deficit of 8% of GDP could not be met…
2016
Statement: The target of a fiscal deficit of 8% of GDP could not be met because of many shortfalls in revenue collection. Assumptions: I. Shortfall in revenue collection leads to an increase in fiscal deficit. II. Shortfall in revenue collection leads to a decrease in fiscal deficit.
- A.
If only I is implicit
- B.
If only II is implicit
- C.
Both I and II are implicit
- D.
Both I and II are not implicit
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Correct answer: A
The statement clearly says that the target of fiscal deficit could not be met because of shortfalls in revenue collection. This means that when revenue decreases, the deficit increases, as there is less income but expenses remain the same. Hence, Assumption I is correct, while Assumption II is opposite to logic.