CSAT 2021

Q. 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.

Q 1. Which one of the following statements best reflects the corollary to the passage given above?

(a) The central bank cannot work independently of the Government.
(b) Government should regulate financial markets and institutions closely.
(c) Market economy is not compatible with the socialist policies of the Government.
(d) Financial sector reforms are required for enhancing the economic welfare of the people.

Question from UPSC Prelims 2021 CSAT Paper

Explanation : 

Q1: Correct Answer – (a) The central bank cannot work independently of the Government.

Explanation – (a) The central bank cannot work independently of the Government: This option suggests that the central bank and the government must work together in order to achieve their objectives. In the context of the passage, this means that monetary and fiscal policies must be coordinated in order to enhance the economic welfare of the people.

(b) Government should regulate financial markets and institutions closely: This option suggests that it is important for the government to closely monitor and regulate financial markets and institutions. While this may be a valid statement in general, it does not directly follow from the passage.

c) Market economy is not compatible with socialist policies of the Government: This option suggests that there is a conflict between a market economy and socialist policies implemented by the government. While this may be a topic for debate, it does not directly follow from the passage.

(d) Financial sector reforms are required for enhancing economic welfare of people: This option suggests that reforms in the financial sector are necessary in order to improve economic welfare. While this may be true, it does not directly follow from the passage which focuses on coordination between monetary and fiscal policies.

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