With reference to the above passage, the following assumptions have been made: 1. Lower tax rates in a country invariably translate into greater investments in higher education. 2. Investment in the education of children ensures their economic freedom. 3. Economic freedom has a positive impact on building up human capital. Which of the above assumptions is/are valid?

Passage

People will invest in education whenever they are granted the economic freedom to fully enjoy its benefits. Again, this is for the obvious reason that the return on education increases as the level of economic freedom rises. When people, thanks to lower tax rates, are allowed to retain most of the higher income that they gain from each incremental level of education, it makes eminent sense to invest in education. On the other hand, when the government decides to tax the higher income of educated individuals at even higher rates, it makes very little sense to invest in educating oneself further. The same incentives apply to parents who decide on whether to invest in their children’s education.

QUESTION

CSAT

Medium

Comprehension

Prelims 2020

With reference to the above passage, the following assumptions have been made:

Lower tax rates in a country invariably translate into greater investments in higher education.
Investment in the education of children ensures their economic freedom.
Economic freedom has a positive impact on building up human capital.

Which of the above assumptions is/are valid?

Select an option to attempt

Explanation

Statement 1 is incorrect. It suggests that lower tax rates will always lead to greater investment in higher education. While the passage discusses a direct correlation, the use of the word "invariably" makes this statement too extreme.

Statement 2 is incorrect. The passage attributes investment in higher education to economic freedom resulting from lower tax rates, not the other way around.

Statement 3 is correct. It aligns with the idea that greater economic freedom facilitates investment in education, a critical element in building human capital.

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