A central message of modern development economics is the importance of income growth, by which is meant growth in Gross Domestic Product (GDP). In theory, rising GDP creates employment and investment opportunities. As incomes grow in a country where the level of GDP was once low, households, communities and governments are increasingly able to set aside some funds for the production of things that make for a good life. Today, GDP has assumed such a significant place in the development lexicon, that if someone mentions “economic growth” , we know they mean growth in GDP .

With reference to the above passage, the following assumptions have been made:
1. Rising GDP is essential for a country to be a developed country.
2. Rising GDP guarantees a reasonable distribution of income to all households.
Which of the above assumptions is/are valid?

The correct option is Neither 1 nor 2.

Let us analyze the validity of each assumption based strictly on the provided passage:

Analysis of Assumption 1: "Rising GDP is essential for a country to be a developed country."
The passage mentions that rising GDP creates employment and investment opportunities and enables funds to be set aside for things that make for a good life. However, it does not state or assume that a rising GDP is an absolute essential requirement or prerequisite for a country to be classified as a developed country. Therefore, Assumption 1 is invalid.

Analysis of Assumption 2: "Rising GDP guarantees a reasonable distribution of income to all households."
The passage notes that as GDP grows, households, communities, and governments are increasingly able to set aside funds. However, it does not state or guarantee that this wealth or income is reasonably or equally distributed to all households. A growth in overall GDP does not automatically guarantee equitable income distribution. Therefore, Assumption 2 is also invalid.

Since neither assumption is supported or valid according to the passage, the correct answer is Neither 1 nor 2.