Solve this multiple-choice question and choose the correct option.

Cause–Effect reasoning: Relate a current incentive announcement to last year's broad tax hike. Statement I: The State Government announced a special tax package for new industries to be set up in the State. Statement II: Last year the State Government hiked taxes for all industrial activities in the State. Choose the correct option describing the relationship.

Difficulty: Easy

Correct Answer: Statement II is the cause and Statement I is its effect

Explanation:

Interpretation A prior across-the-board hike could have dampened investment; a subsequent special package is a corrective to attract new units.

Causal chain Earlier hike (II) → investment concerns/pressure → incentive package (I).

Note This direction is more plausible than the reverse; both statements clearly connect via policy response.