2023 GS Paper I, all questions

UPSC Prelims 2023 · GS Paper I

Question 22: Economy and Social Development

Consider the following statements :

  1. Statement-IIn the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes.
  2. Statement-IICentral Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.

Which one of the following is correct in respect of the above statements?

aBoth Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
bBoth Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I
cStatement-I is correct but Statement-II is incorrect
dStatement-I is incorrect but Statement-II is correct

AnswerUPSC’s answer is (a).

Both statements are correct and II explains I. After the pandemic, supply disruptions, the war in Ukraine and high commodity prices pushed inflation up, and central banks including the US Federal Reserve, the European Central Bank, the Bank of England and the RBI raised policy rates. They did so because central banks generally assume that tightening money and credit can bring consumer-price inflation down. That assumption is the reason for the rate hikes.

  • I. Many central banks raised rates after the pandemic.
  • II. Central banks assume monetary tightening can curb rising prices, which drives the hikes.

How you could have got this

If you were sure Statement-I is correct, (d) goes. Then judge the second statement; if it is correct too, decide whether it explains the first.

What you needed to know: Many central banks raised rates after the pandemic.

Which options go is worked out from UPSC’s key and the options, not by a model.

Why each option is right or wrong
  • (a) Correct: both are true and the assumption in II explains the hikes in I.
  • (b) II is not merely a side fact; it is why central banks raised rates.
  • (c) Statement II is true, so 'II incorrect' is wrong.
  • (d) Statement I is true, so 'I incorrect' is wrong.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2023, General Studies Paper I, Series A. The paper on upsc.gov.in.