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

1. Modern democracies rely on the market forces to enable them to be welfare states.

2. Markets ensure sufficient economic growth necessary for democracies to be effective.

3. Government programmes are needed for those left behind in economic growth.

Which of the above assumptions is/are valid ?

Statement 1 is incorrect: The passage mentions that “there is a built-in tension between markets and democracy.” The passage further goes on to elaborate on how this tension manifests. Here, “built-in” refers to the inherent conflict between the two systems.

Statement 2 is incorrect: The last few lines of the passage invalidate the claim made in statement 2. The passage mentions that “some people never get the opportunity to develop skills that markets demand” and that “capitalism has always witnessed bursts of unemployment.” Therefore, we can assume that democracies are not efficient if the market runs strong.

Statement 3 is correct: As the markets cannot ensure equity (as understood from various lines of the passage), government programs are needed to complement the market outcomes to help those who have not benefited from the “efficient distribution of resources” of the markets.

Hence, Option (b) is correct.