Directions (16-18): In the given question, two words are omitted, which are replaced by blanks. Choose the best combination of the words that can fit into the given blank at the same order so to make a grammatically and logically correct statement.

The central bank introduced measures to ______ shadow banking activities and ______ liquidity to ensure financial stability.

The correct option is dismantle, infuse.

To determine the correct combination of words, let us analyze the context of the sentence step-by-step:

Analyzing the first blank:
The sentence discusses a "central bank" introducing measures regarding "shadow banking activities" to "ensure financial stability." Shadow banking refers to unregulated financial intermediaries that can create systemic risks. To ensure stability, a central bank would typically aim to curb, restrict, or eliminate these risky activities. The word dismantle (which means to gradually cause an organization or system to stop working, or to take it apart) fits logically here, as breaking down risky shadow banking activities protects the financial system.

Analyzing the second blank:
The second part of the sentence refers to "liquidity" to ensure "financial stability." To keep a system stable, central banks typically supply or inject money flow into the market. The word infuse (which means to inject, introduce, or instill) fits perfectly, as "infusing liquidity" means injecting money into the financial system to keep it running smoothly.

Why other options are incorrect:
• invigorate, conserve: "Invigorate" means to give strength or energy to. A central bank would not want to strengthen risky, unregulated shadow banking activities.
• prolong, restrict: "Prolong" means to extend the duration of. Extending shadow banking would run counter to stabilizing the financial system.
• validate, suspend: "Validate" means to recognize or make legally valid. Validating unregulated shadow banking is contrary to the regulatory goals of a central bank.
• highlight, withdraw: Withdrawing liquidity restricts the money supply, which generally destabilizes the financial market rather than ensuring stability in this context.