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Statement: The Central Government has directed the State Governments to reduce government expenditure in view of the serious resource crunch and it may not be able to sanction any additional grant to the states for the next six months. Assumptions: The State Governments are totally dependent on Central Government for its expenditures. The Central Government has reviewed the expenditure account of the State Government. The State Governments will abide by the directive.

Correct Answer: Only II and III are implicit

Explanation:

Nothing about the sources of income of the State Governments is mentioned in the statement. So, I is not implicit. Since the Central Government has directed the State Governments to reduce expenditure, so II is implicit. Further, since the Central Government has refused any further grant to the State Governments for the next six months, it is quite clear that these Governments will abide by the directive. So, III is also implicit.

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