700 Level Strengthen Question - Gold Standard : GMAT Critical Reasoning (CR)
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# 700 Level Strengthen Question - Gold Standard

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700 Level Strengthen Question - Gold Standard [#permalink]

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10 Mar 2013, 20:48
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Its Monday and here comes a brand new question from e-GMAT Bakery!

Prior to 1971, the United States was on various forms of a gold standard through which the value of the dollar was backed by gold reserves and paper money could be redeemed for gold on demand. Since 1971, the United States dollar has been a fiat currency backed by "full faith and credit” of the government and not backed by, valued in, or convertible into gold. A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue. Besides, the economy has historically performed best under a gold standard. Therefore, for reasons above, the voters should vote for a party that backs the return of the gold standard in the country.

Which of the following data sets can be best used by the author of the above argument to further his conclusion?

A. Major economic indicators of United States since 1980
B. Expenditure on education and healthcare from 1960 to 2000
C. Money printed by the government as proportion of the Gross Domestic Product from 1950 to 1970
D. Growth in the difference between the revenue and expenditure figures for the government for the last 100 years beginning from 1901.
E. Economic growth in the country in 1971 and in 1972.

OA and OE will be posted after some initial discussion!

-Chiranjeev
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Last edited by egmat on 07 May 2013, 07:58, edited 1 time in total.
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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10 Mar 2013, 20:57
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Expert's post
Hi,

The wait is over! Here are the official answer and the official explanation.

The official Answer is Option D, which, by the way, was marked correctly by 63% people in 72 votes. Kudos!

I see some great discussion has taken place on this forum. Thanks to all the members who participated, explained and fought for their answers, while maintaining the spirit of the forum. It was great to see such intense activity in a short span of time.

Ok. Now, let’s come to the official explanation. First of all, I have observed that even those who have marked the correct option on this thread are not entirely accurate in their support for Option D. So, I would suggest them also to go through the official explanation. Given that I have the privilege of posting the official explanation after going through the discussions on this thread, I would try to address some of the doubts through this post.

So, here we start:

Argument Analysis

Conclusion:

The author recommends that voters vote for a party that backs the return of the gold standard in the country.

Premises (Reasons for support):

The reasons cited by the author for his recommendation are:
1. A gold standard restricts the ability of government to print money at will
2. A gold standard restricts the ability of government to spend more than it earns in tax revenue
3. The economy has historically performed best under a gold standard

Please note that these three premises are independent and one does not necessarily leads to other. I have seen some posts using one of these premises to support the other premises. This is not the intention of the author as is clear from the grammatical structure used to present these premises. The first two premises are separated by ‘and’ and the third premise is introduced using ‘besides’. Therefore, these three are INDEPENDENT and SEPARATE premises.

Background Information:

1. Prior to 1971, the United States was on various forms of a gold standard through which the value of the dollar was backed by gold reserves and paper money could be redeemed for gold on demand
2. Since 1971, the United States dollar has been a fiat currency backed by "full faith and credit” of the government and not backed by, valued in, or convertible into gold.

Question Stem analysis and Prethinking

“Which of the following data sets can be best used by the author of the above argument to further his conclusion?”

So, we are looking for a data set which the author could use to substantiate his position. In this case, the author can support his position by supporting ANY or ALL of his premises. To do that, we need data to compare the performance of the economy before and after 1971; i.e. before and after the gold standard was done away with. The key is the comparison – just getting data from one era (pre or post 1971 does not help)

While in other strengthen questions, the correct option statement could introduce a new reason to support the conclusion, this cannot be the case with this question. Why? Because all the option statements are data sets and until and unless the passage makes clear the relevance of the data set, we cannot comment on the usability of the data set.

Any data set that the author can use to support any of his premises (cited reasons for support) would be a correct answer choice.

With these thoughts in mind, let’s go over to the option statements.

A. Major economic indicators of United States since 1980 – While economic indicators could be relevant to support his third premise, this choice does not give us the ability to compare the performance before and after 1971. Without this comparison, we cannot strengthen the belief in the third premise. Therefore this choice is INCORRECT.

B. Expenditure on education and healthcare from 1960 to 2000 – As we can see, this data does not correspond to any of the premises. While some of us may think that this data corresponds to the third premise which talks about performance of economy, the data set is too specific to two sectors – expenditure on any one or two sectors is determined not only by the economic performance but also a number of other factors such as priorities of the government. Thus, this is INCORRECT.

C. Money printed by the government as proportion of the Gross Domestic Product from 1950 to 1970 – I have seen some great discussion on the thread for and against this option statement. First of all, the data is relevant, unlike Option B. The data corresponds to the first premise of the author. However, the data set has a similar deficiency as in case of option A – it only talks about one period – in this case, it only talks about period of gold standard currency. The premise says that
“A gold standard restricts the ability of government to print money at will”
Now, to back this up, the author has to present data which shows an increase in money printed as proportion of Gross Domestic Product, after the fiat currency was introduced in 1971. Just knowing this data for period before 1971 won’t help the cause of the author. Therefore, this option is also INCORRECT.

D. Growth in the difference between the revenue and expenditure figures for the government for the last 100 years beginning from 1901. – The data set is relevant as it corresponds to the second premise of the author. Also, the time period captures both the period before and after 1971. This data can be used by the author to support his premise 2 that the difference between revenue and expenditure of government became more pronounced after gold standard was discontinued in 1971. Therefore, this option is CORRECT.

E. Economic growth in the country in 1971 and in 1972. – Even though the data set is relevant as it corresponds to premise 3 but the time period is too small to make any material support for premise 3. Therefore, this option is INCORRECT.

Hope this helps

Thanks,
Chiranjeev
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Last edited by egmat on 12 Mar 2013, 23:08, edited 1 time in total.
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 02:39
2
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egmat wrote:
Its Monday and here comes a brand new question from e-GMAT Bakery!

Prior to 1971, the United States was on various forms of a gold standard through which the value of the dollar was backed by gold reserves and paper money could be redeemed for gold on demand. Since 1971, the United States dollar has been a fiat currency backed by "full faith and credit” of the government and not backed by, valued in, or convertible into gold. A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue. Besides, the economy has historically performed best under a gold standard. Therefore, for reasons above, the voters should vote for a party that backs the return of the gold standard in the country.

Which of the following data sets can be best used by the author of the above argument to further his conclusion?

A. Major economic indicators of United States since 1980
B. Expenditure on education and healthcare from 1960 to 2000
C. Money printed by the government as proportion of the Gross Domestic Product from 1950 to 1970
D. Growth in the difference between the revenue and expenditure figures for the government for the last 100 years beginning from 1901.
E. Economic growth in the country in 1971 and in 1972.

OA and OE will be posted after some initial discussion!

-Chiranjeev

I'll go for D too
Since the author of the argument said that the economy has historically performed best under a gold standard.. So, to further his conclusion, we need to look for a set of data before and after 1971 that will prove that
A and E are out because it represents only the period after 1971.
C is out because it represents only the period before 1971
B is OUT of scope ( data about education and healthcare are irrelevant)

So, we are left with D
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 02:24
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Basically the argument says what is the most debate argument of these days: the debt of the nations and the ceiling of the debt. In other words: the public debt.

This is a tough question because the answers are quite vague.

I go for D. B explains only the expenditure but do not say nothing about the revenue. so we could spend 100 ut gain in revenue 1000, so the problem will be inconsistent.

I go for D.
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 05:54
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A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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12 Mar 2013, 23:03
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Initialy I went with D, then after reading the discussion I returned back and I will keep A and D as contender and for some reason D weighs more...My reasoning as below

I can call it a background premisePrior to 1971, the United States was on various forms of a gold standard through which the value of the dollar was backed by gold reserves and paper money could be redeemed for gold on demand. Since 1971, the United States dollar has been a fiat currency backed by "full faith and credit” of the government and not backed by, valued in, or convertible into gold.

Main PremiseA gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue.

Additional Premise Besides, the economy has historically performed best under a gold standard.

Main Conclusion Therefore, for reasons above, the voters should vote for a party that backs the return of the gold standard in the country.

The author says voters should vote for a party that backs the return of gold standard for two reasons
1) because gold standard restricts government ability to print money at will and to spend more than what it earns
2) the economy has historically performed best under a gold standard

There is an unstated assumption that policies post 1971 doesn't support the above 2....what will he require to support this conclusion?? certainly
the facts with respect to the above 2 points of post 1971..A "Major economic indicators of United States since 1980" will touch and reaffirm the additional premise. D will touch and reaffirm the main premise.......They both can be the answers but since D touches the crux of the argument that is the main premise ....I will go with D only

As for C, I guess we already know that government has printed money in proportion with its earning (can be GDP here), since its a very character of the gold standard and it was followed by the country....This point doesn't add anything

Which of the following data sets can be best used by the author of the above argument to further his conclusion?

A. Major economic indicators of United States since 1980
B. Expenditure on education and healthcare from 1960 to 2000
C. Money printed by the government as proportion of the Gross Domestic Product from 1950 to 1970
D. Growth in the difference between the revenue and expenditure figures for the government for the last 100 years beginning from 1901.
E. Economic growth in the country in 1971 and in 1972.

OA and OE will be posted after some initial discussion!

-Chiranjeev[/quote]

I welcome any criticism for my reasoning
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Re: R: 700 Level Strengthen Question - Gold Standard [#permalink]

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15 Mar 2013, 14:00
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Kudos for the first one who answered correct this tough question?

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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 02:40
there can be lot of factors affecting the Growth as defined in option D: difference between the revenue and expenditure figures for the government for the last 100 years beginning from 1901.with this data set in hand we cannot be 100 percent sure as whether gold standard is a better option !!
my take is C
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 03:39
egmat wrote:
Its Monday and here comes a brand new question from e-GMAT Bakery!

Prior to 1971, the United States was on various forms of a gold standard through which the value of the dollar was backed by gold reserves and paper money could be redeemed for gold on demand. Since 1971, the United States dollar has been a fiat currency backed by "full faith and credit” of the government and not backed by, valued in, or convertible into gold. A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue. Besides, the economy has historically performed best under a gold standard. Therefore, for reasons above, the voters should vote for a party that backs the return of the gold standard in the country.

Which of the following data sets can be best used by the author of the above argument to further his conclusion?

A. Major economic indicators of United States since 1980
B. Expenditure on education and healthcare from 1960 to 2000
C. Money printed by the government as proportion of the Gross Domestic Product from 1950 to 1970
D. Growth in the difference between the revenue and expenditure figures for the government for the last 100 years beginning from 1901.
E. Economic growth in the country in 1971 and in 1972.

OA and OE will be posted after some initial discussion!

-Chiranjeev

Premise: A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue. Besides, the economy has historically performed best under a gold standard.

Conclusion: The voters should vote for a party that backs the return of the gold standard in the country.

This is a "strengthen question". So we are looking for a choice whose negation would weaken the premise or refute the conclusion. In the context of this question, we would be looking for a data set whose lack would reduce the force of the premise or the validity of the conclusion:

The first trick is to focus on what is said in the premise. Let us use that trick. The first sentence says:

"A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue"

Does the lack of any of the data set given in the choices be to the disadvantage of the author in strengthening his premise? Indeed yes. Choice C which says "Money printed by the government as proportion of the Gross Domestic Product from 1950 to 1970" if is not available to the author would reduce the author's ability to show the truth of the sentence underlined above. If the data were present the author may be able to support his argument that the ability of the government to print money was according to its revenue before 1970.

None of the other data sets mentioned in the other choices directly addresses the issue raised by the author.

Choice D is close but it doesn't directly support the Gold Standard argument of the author which is making the government print money in accordance with its income. Actually choice D is vaguely worded and it seems it is not quite clear in what it wants to convey.

So we can conclude from the above analysis that C is indeed the choice.
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 04:57
egmat wrote:

Prior to 1971, the United States was on various forms of a gold standard through which the value of the dollar was backed by gold reserves and paper money could be redeemed for gold on demand. Since 1971, the United States dollar has been a fiat currency backed by "full faith and credit” of the government and not backed by, valued in, or convertible into gold. A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue. Besides, the economy has historically performed best under a gold standard. Therefore, for reasons above, the voters should vote for a party that backs the return of the gold standard in the country.

Which of the following data sets can be best used by the author of the above argument to further his conclusion?

A. Major economic indicators of United States since 1980
B. Expenditure on education and healthcare from 1960 to 2000
C. Money printed by the government as proportion of the Gross Domestic Product from 1950 to 1970
D. Growth in the difference between the revenue and expenditure figures for the government for the last 100 years beginning from 1901.
E. Economic growth in the country in 1971 and in 1972.

OA and OE will be posted after some initial discussion!

-Chiranjeev

Prethinking :-
premise - A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue. Besides, the economy has historically performed best under a gold standard.
conclusion - Therefore, for reasons above, the voters should vote for a party that backs the return of the gold standard in the country.

From the premise we can infer that the economy has performed better under gold standard because the Revenue has been more than Expenditure.
So to strengthen the authors conclusion he needs to provide some data point stating the above for both the phases.

POE
Option A :- this option talks about the phase from 1980 - OFS
Option B :- This option talks about only expenditure on one sector, to strengthen the authors conclusion we need to look at the holistic view and would also need some information about revenue.
Option C :- This option only talks about first phase - inconsistent
Option D :- Correct
Option E :- This option talks about only second phase- inconsistent

IMO :- D
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 05:17
Dinesh2Apr wrote:
egmat wrote:

Prior to 1971, the United States was on various forms of a gold standard through which the value of the dollar was backed by gold reserves and paper money could be redeemed for gold on demand. Since 1971, the United States dollar has been a fiat currency backed by "full faith and credit” of the government and not backed by, valued in, or convertible into gold. A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue. Besides, the economy has historically performed best under a gold standard. Therefore, for reasons above, the voters should vote for a party that backs the return of the gold standard in the country.

Which of the following data sets can be best used by the author of the above argument to further his conclusion?

A. Major economic indicators of United States since 1980
B. Expenditure on education and healthcare from 1960 to 2000
C. Money printed by the government as proportion of the Gross Domestic Product from 1950 to 1970
D. Growth in the difference between the revenue and expenditure figures for the government for the last 100 years beginning from 1901.
E. Economic growth in the country in 1971 and in 1972.

OA and OE will be posted after some initial discussion!

-Chiranjeev

Prethinking :-
premise - A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue. Besides, the economy has historically performed best under a gold standard.
conclusion - Therefore, for reasons above, the voters should vote for a party that backs the return of the gold standard in the country.

From the premise we can infer that the economy has performed better under gold standard because the Revenue has been more than Expenditure.
So to strengthen the authors conclusion he needs to provide some data point stating the above for both the phases.

POE
Option A :- this option talks about the phase from 1980 - OFS
Option B :- This option talks about only expenditure on one sector, to strengthen the authors conclusion we need to look at the holistic view and would also need some information about revenue.
Option C :- This option only talks about first phase - inconsistent
Option D :- Correct
Option E :- This option talks about only second phase- inconsistent

IMO :- D

Dinesh2Apr,

The author's point is that the gold standard restricts the ability of the government to spend at will. This is what the author needs to bolster and and not the merits of the gold standard vis-a-vis others. And it is choice C that could directly support this point.

In fact he does use comparison when he says that the gold standard has helped the economy perform the best but I think that is not his main point. Besides choice D would only weakly support it because it would not really prove that the gold standard is responsible for the better performance of the economy. And above all the wording of the choice doesn't make the sense clear.
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 05:41
This question goes beyond the simple analysis of a time frame, before or after.

the question says the GS is a good way to do not get an over liquidity in the economy system. if we have a GDP (the total of goods and servicesproduct by a nation) related to the money printed: if we have GDP 100 the FED can print 100 so: no inflation, no over liquidity but this doesn't explain in my opinion the expenditure on on side and the revenue by gov on the other side.
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 05:52
carcass wrote:
This question goes beyond the simple analysis of a time frame, before or after.

the question says the GS is a good way to do not get an over liquidity in the economy system. if we have a GDP (the total of goods and servicesproduct by a nation) related to the money printed: if we have GDP 100 the FED can print 100 so: no inflation, no over liquidity but this doesn't explain in my opinion the expenditure on on side and the revenue by gov on the other side.

Dear Carcass,

It doesn't have to relate the revenue and expenditure of the government because that is not the author's main point. All it has to do is to relate the money printed to the revenue. That would help the author's point that money cannot be printed at will by the government and so the government's ability to spend is restricted.
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 06:08
egmat wrote:
Its Monday and here comes a brand new question from e-GMAT Bakery!

Prior to 1971, the United States was on various forms of a gold standard through which the value of the dollar was backed by gold reserves and paper money could be redeemed for gold on demand. Since 1971, the United States dollar has been a fiat currency backed by "full faith and credit” of the government and not backed by, valued in, or convertible into gold. A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue. Besides, the economy has historically performed best under a gold standard. Therefore, for reasons above, the voters should vote for a party that backs the return of the gold standard in the country.

Which of the following data sets can be best used by the author of the above argument to further his conclusion?

A. Major economic indicators of United States since 1980
B. Expenditure on education and healthcare from 1960 to 2000
C. Money printed by the government as proportion of the Gross Domestic Product from 1950 to 1970
D. Growth in the difference between the revenue and expenditure figures for the government for the last 100 years beginning from 1901.
E. Economic growth in the country in 1971 and in 1972.

OA and OE will be posted after some initial discussion!

-Chiranjeev

Conclusion: The voters should vote for party that backs the return for the gold standard.
Something is said to be replaced by the previous one, if and only if the previous one is better than the present one. The grounds one which the discussion of unraveling the current policy depends is the issue that the older policy does not allow the govt to reprint the currency at its will and more than the revenue earned.

Hence to support , we need to strengthen the thought that proves the reasoning. So i vote for D.
C is a trap answer......we do not know anything about the money printed of gdp after 1971...so there is no way that we can compare these.

Consider kudos if post helps

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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 06:21
carcass wrote:
A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue

Dear Carcass,

Not restricting the ability to print money at will, does not restrict the ability to spend. Restricting the ability to spend money invariably means restricting the ability to print money. So restricting the ability to print money at will, seems to be the author's main point.
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 06:56
OKI i will try to explain as why i had opted for C .BTW i had ruled out D in my previous post
this argument is basically comparing two eras pre 1971 and post 1971 .pre 1971 america had some gold standards to mark their dollars and post 1971 it had no such standard and was free to print dollars with full impunity .now the argument gives lots of pros of gold standards and finally concludes that gold standards are much better

the interesting line in the argument is :A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue.
the stem ask us as what data set sud we present to support our argument : that is what C presents
in other words if i have proportion as described in C then i can say that yes gold standards are good enough because it actually had restricted the number of dollars that America printed

i reiterate again that D cannot be the answer as for a span of 100 years if u study the growth the way it is defined in D then u cannot just pin point that the only factor responsible for that growth is so called gold standard .there can be thousand other standards which might have brought that growth !!
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 07:28
IMO OA:D.

e-GMAT,just can't wait to see your explanations guys....

Great qs btw!
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 08:09
My answer is D. Since the argument compares "how govt issues money" prior to 1971 and after 1971 so we should have an answer which gives us the data "before 1971" and "after 1971". So, we have two options B & D and D is more comprehensive.
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 10:30
Conclusion:
Therefore, for reasons above, the voters should vote for a party that backs the return of the gold standard in the country

Argument:
The economy has historically performed best under a gold standard

Why?:
A gold standard restricts the ability of government to print money at will and to spend more than it earns in tax revenue.

Points to note: "historically" in the argument indicates that there would be certain data set to justify the "why". So we should look for data set that shows us the discrepancy between revenue and expenditure over time (prior and post 1971) to see the impact of lack of gold standard after 1971.

A. Major economic indicators of United States since 1980. Incorrect. Doesnt give me any information on revenue and expenditure view over time
B. Expenditure on education and healthcare from 1960 to 2000. Incorrect. Doesnt give me any information on revenue and expenditure view over time
C. Money printed by the government as proportion of the Gross Domestic Product from 1950 to 1970. Incorrect. Doesnt give me any information on revenue and expenditure view over time. The money printed as a proportion of GDP doesnt show the widening gap between revenue and expenditure.
D. Growth in the difference between the revenue and expenditure figures for the government for the last 100 years beginning from 1901. BINGO! This will clearly validate the argument and show the widening gap post 1971.
E. Economic growth in the country in 1971 and in 1972. Incorrect. Doesnt give me any information on revenue and expenditure view over time
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Re: 700 Level Strengthen Question - Gold Standard [#permalink]

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11 Mar 2013, 10:33
D .... the others are either irrelevant to conclusion or or insufficient sample to judge "B"
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Re: 700 Level Strengthen Question - Gold Standard   [#permalink] 11 Mar 2013, 10:33

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