Direction: The first and sixth sentences are marked as S1 and S6. The middle four sentences in each have been jumbled up and labelled as P, Q, R and S. This is followed by four options each suggesting a sequence of the sentences. Identify the most appropriate option.
S1 : Like many of its tropical counterparts, India was a colony of Britain, which ruled out any move to adjust the exchange rate.
S6 : Banks were left with unrecoverable assets.
P : Indebted business failed.
Q : With devaluation made politically impossible, fall in export demand led to sustained and deep deflation.
R : Indebted households liquidated a variety of assets to repay loans when they could.
S : Real interest rates rose.
The correct sequence should be and
- AOption (a)
RSPQ
- BOption (b)
QSRP
- COption (c)
SQPR
- DOption (d)
PSRQ
View answer & explanationHide answer & explanation
Correct answer
SQPR
Why this answer is correct
The correct answer is 'SQPR'.
Key Points
- The passage talks about India being a colony of Britain, which ruled out any move to adjust the exchange rate. This sets the context for the following events that led to the banks being left with unrecoverable assets.
- Sentence S says that real interest rates rose, which made it harder for indebted households and businesses to repay their loans.
- Sentence Q states that with devaluation made politically impossible, fall in export demand led to sustained and deep deflation. This led to a decrease in the demand for exports, causing a fall in export earnings and worsening the balance of payments situation.
- Sentence P mentions that indebted businesses failed, and sentence R says that indebted households liquidated a variety of assets to repay loans when they could. These events further exacerbated the economic situation.
- Finally, the passage concludes by saying that the banks were left with unrecoverable assets, which implies that the economic situation had become quite dire. Therefore, the correct sequence is SQPR.