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Economist: The economy of the Republic of Nantau has [#permalink]
05 Oct 2011, 23:35
41% (02:14) correct
59% (01:42) wrong based on 29 sessions
Economist: The economy of the Republic of Nantau has experienced lower than expected growth in the past year, and the value of its currency has dropped against the Yen. As a result, purchases of imported goods, such as usually luxury items or high-end electronics, will likely decrease as people turn to cheaper domestic equivalents. However, this will likely help reverse the negative economic trends by creating a trade surplus as export goods become cheaper.
In the argument given, the two portions in boldface play which of the following roles? (A) The first supplies a context for the argument; the second is the argument's main conclusion. (B) The first introduces a development that the argument predicts will have a certain outcome; the second is a state of affairs that the argument denies will be part of that outcome. (C) The first presents a development that the argument predicts will have a certain outcome; the second acknowledges a consideration that weighs against that prediction. (D) The first provides evidence to support a prediction that the argument seeks to defend; the second is that prediction. (E) The first and the second each provide evidence to support the argument's main conclusion.
Re: Economy of Nantau [#permalink]
09 Oct 2011, 20:27
and the value of its currency has dropped against the Yen.
Imports will be costlier and hence will definitely reduce the demand for luxury items.
However, this will likely help reverse the negative economic trends by creating a trade surplus as export goods become cheaper.
Reduced imports means less usage of foreign currency and hence surplus of foreign currency in comparison with previous estimates.
Currency devaluation also means lower manufacturing cost when seen in terms of foreign currency. e.g. the current devaluation of Indian Rupees against American Dollar. This devaluation has resulted in increased cost of imports like cars, perfumes, electronics etc. But on the other hand Indian IT companies are posting stronger Quarter results. It is possible because, the main export these IT companies i.e. IT services is now cheaper in when seen in American Dollars. Labor rate for an hour remains the same (viz. $50) but the same amount now fetches more in local currency. (INR 2500 Approx). So if the IT Engineer is paid INR 500 per hour, when the exchange rate was INR 42 per dollar (earning from IT service=INR 2100 - INR 500), the same export will cost less now (earning from IT service=INR 2500 - INR 500).
Re: Economy of Nantau
09 Oct 2011, 20:27