Official Answer Key & Detailed Solution
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Correct Answer: Option (A) — Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
Concept & Option Breakdown
Standard Reference VerifiedStatement-I is correct: Following the pandemic, global central banks (including the US Federal Reserve, European Central Bank, and RBI) aggressively hiked benchmark policy rates to manage record inflationary pressures. Statement-II is correct: Central banks operate under the conventional macroeconomic premise that raising policy rates increases borrowing costs, cools aggregate demand, and thereby tames consumer price inflation. Statement-II provides the direct economic rationale explaining the actions described in Statement-I.
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