Multiple choice

Fact 2 would be most likely to contribute to an explanation of fact 1 if which of the following were also true?

Directions: Answer the given question based on the following passage:

Fact 1: Government has been unable to control food inflation which has touched 13% and is expected to go up further.
Fact 2: Speculators have been borrowing money at low rates of interest and investing in the agricultural commodities market for quick profits.

 

  1. The inflation index is composed of nearly all the major exports of the nation.

  2. High prices of consumer goods have pushed down the demand for commodities.

  3. A severe drought in the nation last year had adversely impacted the yield of agricultural commodities.

  4. Sensing a fall in the crop yield, commodity traders have been buying futures contracts of agricultural commodities at a premium.

  5. Prices of agricultural commodities have peaked due to holiday demand.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

(1) Incorrect. Major exports might or might not be consumed in high enough quantities in the native country to cause a spike in inflation. (2) Incorrect. Falling prices would rather drive away the speculators. (3) Incorrect. The drought happened last year. Its impact might not be felt this year or increase inflation further. (4) Correct. Because the speculators feel that agricultural commodity prices will rise further, they have borrowed money to buy future contracts in the anticipation of the prices going higher still. Both the premises get connected in this option. (5) Incorrect. Holiday demand would go down after the holidays are over.

Keep practicing — related questions