UPSC Prelims 2014— Question 61

Correct answer: Option C. A lower interest rate generally reduces the cost of borrowing and can encourage businesses to undertake more investment. The direct macroeconomic effect tested here is an increase in investment expenditure. The other options do not follow as the standard consequence of a lower interest rate. Option A: Incorrect. This option does not match the verified answer because its proposition, location, institution, sequence, or combination conflicts with the relevant fact tested in the question. The option reads: “decrease the consumption expenditure in the economy” Option B: Incorrect. This option does not match the verified answer because its proposition, location, institution, sequence, or combination conflicts with the relevant fact tested in the question. The option reads: “increase the tax collection of the Government” Option C: Correct. This option is consistent with the governing fact or the valid combination identified in the question. The option reads: “increase the investment expenditure in the economy” Option D: Incorrect. This option does not match the verified answer because its proposition, location, institution, sequence, or combination conflicts with the relevant fact tested in the question. The option reads: “increase the total savings in the economy” The key Prelims lesson is to test each proposition independently before selecting the combination. Where the question uses words such as 'only', 'all', 'none', 'always' or a precise institutional/geographical association, a single inaccurate component is sufficient to eliminate the option. The answer recorded here follows the official answer key for the question-paper series represented by the uploaded source and has been cross-checked against an independent published key. The explanation is intended for conceptual revision rather than as a reproduction of any third-party solution.