CAT 2025 Question Paper | VARC Slot 3

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Question 15 : The given sentence is missing in the paragraph below. Decide where it best fits among the options 1, 2, 3, or 4 indicated in the paragraph.

Sentence: Productivity gains, once expected to feed through to broader living standards, now primarily serve to enhance returns to wealth.

Paragraph: Economists now argue that inequality is no longer a by-product of growth but a condition of it. ____ (1) ____. Unlike wages, wealth reflects not just income but also access to assets, favourable institutional conditions – such as low interest rates – and public policies like low taxes and housing shortages. ____ (2) ____. In other words, wealth depends on political choices in ways that income currently does not. It’s not just the inequality itself that is the issue but the erosion of mechanisms that once constrained it. ____ (3) ____. Wealth and income inequality are linked, but where wages have stagnated and collective bargaining has weakened, capital income – derived from profits, rents and interest – has been boosted by design. ____ (4) ____.

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Video Explanation

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Explanatory Answer

The missing sentence says productivity gains have not fed through to broader living standards but serve instead to enhance returns to wealth.
The first sentence of the given paragraph says inequality is no longer a by-product of growth but a condition of it. The sentence that follows blank 1 explains how wealth can ease access to assets, favourable institutional conditions and public policies. The sentence that follows blank 2 also links to this idea: wealth depends on political choices in ways that income currently does not. We can rule out blanks 1 and 2 as placing the missing sentence here would break the flow of ideas about how wealth and income differ. Now, the sentence before blank 3 refers to an erosion of mechanisms that constrained inequality. The missing sentence is also about a mechanism that reduces inequality: productivity gains. So, blank 3 looks like a possible choice to place the missing sentence. However, the sentence that follows blank 3 loops back to the idea in the sentence before blank 3, as it mentions inequality again and says wealth and income inequality are linked. So, blank 3 is not apt. Consider blank 4. The sentence before it explains how capital income has been boosted where wages are stagnant and collective bargaining weak. The missing sentence adds to this idea, explaining how yet another factor that was expected to reduce inequality now serves to enhance returns to wealth. The missing sentence fits in best in blank 4.

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The answer is 'Option 4'

Choice 3 is the correct answer.

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