1.  Statement : The Central Government has directed the State Government to reduce government expenditure in view of the serious resource crunch and it may not be sanction any additional grant to state for the next six months.
Assumptions : 

I. The State Government are totally dependent on Central Government for its expenditures.
II. The Central Government has reviewed the expenditure account of the State Government.
III. The State Government will abide by the directive.

A. None is implicit.
B. Only II and III are implicit.
C. Only III is implicit.
D. All are implicit.
E. None of these.

Answer: Option B

Explanation:

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