2024 CSAT — Q3
Passage
As inflation rises, even governments previously committed to budget discipline are spending freely to help households. Higher interest rates announced by central banks are supposed to help produce modest fiscal austerity, because to maintain stable debts while paying more to borrow, governments must cut spending or raise taxes. Without the fiscal backup, monetary policy eventually loses traction. Higher interest rates become inflationary, not disinflationary, because they simply lead governments to borrow more to pay rising debt-service costs. The risk of monetary unmooring is greater when public debt rises, because interest rates become more important to budget deficits.
Which of the following statements best reflects/reflect the most logical and rational inference/inferences that can be made from the passage?
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Central banks cannot bring down inflation without budgetary backing.
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The effects of monetary policy depend on the fiscal policies pursued by the government.
Select the correct answer using the code given below.
Thinking pathway
Locate. Find the load-bearing line that each candidate inference must hang off. The passage’s hinge is: “Without the fiscal backup, monetary policy eventually loses traction,” reinforced by “Higher interest rates become inflationary, not disinflationary, because they simply lead governments to borrow more to pay rising debt-service costs.”
Test (find-the-line-then-match, per statement). Statement 2 — monetary policy’s effects depend on fiscal policy: this is almost a transcription of “without the fiscal backup, monetary policy loses traction.” Entailed → valid. Statement 1 — central banks cannot bring inflation down without budgetary backing: combine the traction line with the “higher rates become inflationary without fiscal restraint” line — absent budgetary support, rate hikes fail to disinflate. Entailed → valid. Both inferences sit on quotable lines, so both hold.
Eliminate by anatomy. (a) drops the valid Statement 2 (half right, half wrong — keeps only one supported inference); (b) drops the valid Statement 1 (the same half-right-half-wrong error from the other side); (d) rejects both, the same unlicensed step in reverse — treating two text-entailed inferences as unsupported. The transferable rule: when both statements trace to the same load-bearing line, the answer is “both” — don’t reflexively assume a two-statement RC code has a single-statement key. Key: (c).
Evidence in the text
Both statements are entailed by one line: “Without the fiscal backup, monetary policy eventually loses traction.” Statement 2 is a near-direct restatement (monetary policy’s effect depends on fiscal backup). Statement 1 follows from it plus “Higher interest rates become inflationary, not disinflationary, because they simply lead governments to borrow more” — without budgetary backing, rate hikes fail to bring inflation down. Both valid → (c).
Worked rationale
The passage’s core claim: monetary policy (interest rates) cannot discipline inflation on its own — without fiscal restraint, higher rates just push governments to borrow more, so monetary policy “loses traction” and rates can even become inflationary.
Statement 1 — central banks cannot bring down inflation without budgetary backing. Directly supported: without the fiscal backup, monetary policy loses traction and rate hikes become inflationary rather than disinflationary. Valid.
Statement 2 — monetary policy’s effects depend on fiscal policies. Near-verbatim: “without the fiscal backup, monetary policy eventually loses traction.” Valid.
Both inferences are entailed. Answer: (c) Both 1 and 2.
Why the other options miss
- A half right, half wrong: accepts the strong Statement 1 but drops Statement 2, even though Statement 2 is the more direct restatement of the traction line. A reader fixates on the dramatic “cannot bring down inflation” and overlooks the plainer dependency claim.
- B half right, half wrong: accepts the dependency (2) but rejects Statement 1, perhaps wary of the word “cannot” — yet the passage’s “loses traction” + “becomes inflationary” supports exactly that.
- D a step the text doesn’t license, in reverse: over-rejects two inferences that both rest on the same quotable line.
Specialist insight
This is the inverse of the over-rejection trap: both statements are genuinely entailed by the passage’s single hinge line (“without the fiscal backup, monetary policy eventually loses traction”). The discipline is to resist the habit of hunting for the one right statement — here the line licenses both a dependency claim (2) and its consequence (1). When two candidate inferences both trace cleanly to the text, “both” is the disciplined answer, not a trap.
Both inferences hang off "without the fiscal backup, monetary policy loses traction" — picking only one is the half-true error — (c).