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From a letter to the commercial editor of a newspaper: Your

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VP
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From a letter to the commercial editor of a newspaper: Your [#permalink]

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24 Feb 2005, 07:06
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From a letter to the commercial editor of a newspaper: Your article of January 9 drew attention to the large deficit in Playland's balance of payments that has worsened over the past three years. Yet, you favor the recent trade treaty signed between Playland and Workland. That treaty results in a lowering of our import duties that will flood us with Workland's goods. This will only exacerbate our balance of trade. How can you be in favor of the treaty?

Which of the following considerations would weaken the letter writer's argument?

(A)Import diversion versus import creation.

(B)Prices paid by importers versus prices paid by consumers

(C)Economic goals versus political goals

(D) Duties levied increase government revenue

Manager
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24 Feb 2005, 07:20
I would pick up B.

(A)Import diversion versus import creation
I don't see any import creation over here and so its out of scope.

(B)Prices paid by importers versus prices paid by consumers
If the prices paid by importers are reduced, then the prices paid by consumer are also reduced.

(C)Economic goals versus political goals
Out of Scope

(D) Duties levied increase government revenue
It strengthens it.

It could be true and might not hold in all cases.

I speculated between B and E and picked up B.
Director
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24 Feb 2005, 19:47
All economics terms... Tough for me...

I will pick (D).. (I could understand only that choice.. )
VP
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24 Feb 2005, 20:48
(C)Economic goals versus political goals
VP
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25 Feb 2005, 20:30
Hello, guys

OA is A.

Anybody explain it?
Director
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26 Feb 2005, 13:47
I thought it was E because when it comes to free market the import duties hardly some into picture and the journal/whatever is justified in atleast tending towards such an economy.

Is that away from what was asked ?

Thanks
SVP
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01 Mar 2005, 08:59
This is a hard one for me too. I have to use POE for this, I think.

The argument:
Fact: Playland has large balance of payment deficit
Fact: Trade treaty between P and W requires lowering of P's import duties and will make worse of P's balance of trade.
Conclusion: The treaty should not be supported.

(A)Import diversion versus import creation.
Not sure.

(B)Prices paid by importers versus prices paid by consumers
Lowering of prices by importers and consumers is a good thing. However it doesn't solve the trade balance problem.

(C)Economic goals versus political goals
Not sure.

(D) Duties levied increase government revenue
Duties levid increase government revenue, therefore less import duties means less gov revenue, making the BOP even worse. Support the argument.

Not sure. Seems out of scope since the argument is not really about protecting domestic industries.

In the end I was able to eliminate only two choices with confidence, and a third one with reluctance. Choose from (A) and (C), it seems that (A) directly talks about the issue of trade while the other is a little out of scope. So I would pick (A).
Intern
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11 Mar 2005, 19:43
Assuming P has to rely only on imports, by reducing the taxes on import from W, P can consolidate the buying power and can bargain, because of its buying power.
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