Reading Passage Question
The domestic economy expanded in a remarkably vigorous and steady fashion. The resurgence in consumer confidence was reflected in the higher proportion of incomes spent for goods and services and the marked increase in consumer willingness to take on installment debt. A parallel strengthening in business psychology was manifested in a stepped-up rate of plant and equipment spending and a gradual pickup in outlays for inventory. Confidence in the economy was also reflected in the strength of the stock market and in the stability of the bond market. For the year as a whole, consumer and business sentiment benefited from rising public expectations that a resolution of the conflict in Vietnam was in prospect and that East-West tensions were easing.
The United States balance of payments deficit declined sharply. Nevertheless, by any other test, the deficit remained very large, and there was actually a substantial deterioration in our trade account to a sizable deficit, almost two thirds of which was with Japan.
The underlying task of public policy for the year ahead—and indeed for the longer run—remained a familiar one: to strike the right balance between encouraging healthy economic growth and avoiding inflationary pressures. With the economy showing sustained and vigorous growth, and with the currency crisis highlighting the need to improve our competitive posture internationally, the emphasis seemed to be shifting to the problem of inflation. The Phase Three program of wage and price restraint can contribute to dampening inflation. Unless productivity growth is unexpectedly large, however, the expansion of real output must eventually begin to slow down to the economy’s larger run growth potential if generalized demand pressures on prices are to be avoided. Indeed, while the unemployment rates of a bit over five percent were still too high, it seems doubtful whether the much lower rates of four percent and below often cited as appropriate definitions of full employment do in fact represent feasible goals for the United States economy—unless there are improvements in the structure of labor and product markets and public policies influencing their operation. There is little doubt that overall unemployment rates can be brought down to four percent or less, for a time at least, by sufficient stimulation of aggregate demand. However, the resultant inflationary pressures have in the past proved exceedingly difficult to contain.
“The Domestic Economy Expanded in a Remarkably Vigorous and Steady Fashion” is a GMAT reading comprehension passage with answers. Candidates must have a solid grip in English GMAT reading comprehension. There are 4 multiple choice questions in the above GMAT Reading Comprehension passages. GMAT Reading Comprehension Questions are delineated to evaluate candidates’ abilities to analyze and be conceptual for the answers. Candidates can brace up and take preparation by answering GMAT Reading Comprehension Practice Questions.
Solution and Explanation
- The passage was most likely published in a
(A) popular magazine
(B) general newspaper
(C) science journal
(D) financial journal
(E) textbook
Answer: D
Explanation: The beginning of the passage states that the domestic economy was raised in a notably dynamic and steady manner. The comeback in consumer confidence was viewed in the higher amount of income that was spent on goods and services. Also, the marked boost for taking an installment debt for the purpose of consumer willingness. These all things can be only mentioned in a financial journal, rather than in any popular magazines, general newspapers, science journals, or textbooks. Thus, option(D) stands to be appropriate against the above question.
- Confidence in the economy was expressed by all of the following except
(A) a strong stock market
(B) a stable bond market
(C) increased installment debt
(D) increased plant and equipment expenditures
(E) rising interest rates
Answer: E
Explanation: The passage states that confidence in the economy was also shown in the durability of the stock market along with the durability of the bond market. The recovery in consumer confidence was viewed as a higher rise in incomes spent on goods and services. It was also viewed as a notable hike in consumer willingness to take on installment debt. An alignment strengthening in business psychology was demonstrated in a stepped-up rate of the plant. Rising interest rate is an essential feature by which confidence in the economy has been pointed out in the passage. Thus, option(E) will be an applicable answer to this question.
- According to the passage, a major problem is how to
(A) sustain economic growth
(B) improve labor productivity
(C) balance growth with low inflation
(D) stimulate demand
(E) avoid large increases in imports
Answer: C
Explanation: The elemental task of public policy for the year ahead, and also for the long-term basis, remained a familiar one. It is to view the correct ratio between entertaining healthy growth in the economy and averting inflationary pressures. With the economy showing sustained and vigorous growth, the emphasis shifted to the problem of inflation. The problem with low inflations also moves with the currency shortages displaying the need to improve our competitive posture on an international basis. Therefore, option(C) is the correct answer to the above question.
- Most of the trade deficit in the balance of payments was attributed to trade with which country?
(A) United Kingdom
(B) Japan
(C) Germany
(D) France
(E) Saudi Arabia
Answer: B
Explanation: The passage explains that the United States balance of payments deficit deteriorates rigorously. However, by means of other tests, the loss remained very huge, and there was actually a considerable deterioration in our trade account. It is at a considerable deficit, of which Japan is almost two-thirds. Hence, option(B) is the suitable answer to the above question.
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