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.
Verbal Reasoning
Cause and Effect
Difficulty: Easy
Choose an option
-
AStatement I is the cause and Statement II is its effect
-
BStatement II is the cause and Statement I is its effect
-
CBoth are independent causes
-
DBoth are effects of independent causes
-
EBoth are effects of a common cause
Answer
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.
Final Answer Statement II is the cause and Statement I is its effect