Question

A central message of modern development economics is the importance of income growth, by which meant growth in Gross Domestic Product (GDP). In theory, rising GDP creates employment and investment opportunities. As incomes grow in a country where the level of GDP was once low, households, communities, and governments are increasingly able to set aside some funds for the production of things that make for a good life. Today GDP has assumed such a significant place in the development lexicon, that if someone mentions "economic growth", we know they mean growth in GDP.

With reference to the above passage, the following assumptions have been made:

1. Rising GDP is essential for a country to be a developed country.

2. Rising GDP guarantees a reasonable distribution of income to all households. 

Which of the above assumptions is/are valid?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer 1

Ans- d) Neither 1 nor 2

Explanation:-

• Assumption 1 is not correct as the passage doesn't define what a developed country is.
• Assumption 2 is also not correct, as the passage doesn't reflect that rise in GDP is guarantees the reasonable distribution of income to all sections of society. 

Answer 2

Correct option is (d) Neither 1 nor 2

Neither assumptions are made in the passage. Statement1: Rising GDP may be essential for a country to be a developed country in future but it is nowhere assumed or hinted in the passage. Statement 2 is that rising GDP ensures a reasonable distribution of income.