Statement — The fiscal-deficit target of 5% of GDP could not be achieved because there was a major shortfall in revenue collection. Assumptions — I. A shortfall in revenue collection increases the fiscal deficit. II. A shortfall in revenue collection decreases the fiscal deficit.

Introduction / Context:Statement–Assumption questions test whether a given statement logically presupposes certain facts to make sense. Here, the statement links the failure to meet a fiscal-deficit target directly to a “major shortfall in revenue collection,” which invites us to examine what must be true for that linkage to be meaningful.

Given Data / Assumptions:

• Targeted fiscal deficit = 5% of GDP.
• Actual outcome missed due to revenue shortfall.
• Assumption I: revenue shortfall increases the deficit.
• Assumption II: revenue shortfall decreases the deficit.

Concept / Approach:Fiscal deficit = Total Expenditure − Total Revenue. Holding expenditure approximately fixed in the budget period, a fall in revenue pushes the deficit upward. The statement blames the miss on revenue shortfall, which only makes sense if a shortfall tends to raise the deficit, not reduce it.

Step-by-Step Solution:

Verification / Alternative check:If revenue rises (opposite of shortfall), deficit typically shrinks, ceteris paribus. Hence, a shortfall would have the opposite effect—an increase—supporting Assumption I only.

Why Other Options Are Wrong:

Common Pitfalls:Do not import external information about spending changes; evaluate the minimal presupposition to make the speaker’s causal claim meaningful.

Final Answer:Only Assumption I is implicit.