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Should I consider common knowledge or only what's in the [#permalink]
28 Sep 2006, 14:41
Should I consider common knowledge or only what's in the passage for RC questions?
For example please focus on last paragraph:
American economists continually attempt to gauge the health of the economy, both for the gain of the private sector as well as for the global standing of the United States. Different elements of the economy react differently to changes in prosperity. Some elements rise and fall as the economy waxes and wanes. These are known as coincident indicators. Other elements are known as leading indicators and usually show a downturn before the economy does. A third group of elements are known as lagging indicators and lose vigor only after the economy has already begun to slow. Economists can predict the direction of the economy by monitoring these indicators.
Coincident indicators, such as manufacturing and employment rates, are the best gauge of the current state of the economy. A continued shift in these indicators allows economists to determine whether the economy itself is in the process of an upturn or a downturn. These indicators coincide with shifts in the economy because they are dependent on sustained prosperity. But since coincident indicators reflect only the current state of the economy, they are not especially useful in predicting how the economy will perform in the near future. Economists must look to other indicators for that.
The indicators with the greatest predictive power are leading indicators, such as mortgage applications and profit margins. When these indicators rise or fall, economists can often foretell similar changes in the country's economic health. These indicators do not cause changes in the economy. Rather, they often signal changes in economic behavior that lead to shifts in the economic cycle. By contrast, the third type of indicator â€“ lagging indicators â€“ is useless as a harbinger of change. But these indicators can be helpful in confirming the assessments of economists.
LAST PARAGRAPH: Determining which elements of the economy fall into which category of indicator requires analysis of copious data and an understanding of the factors that propel the economy. One must determine which events surrounding a turn in the business cycle actually contributed to the change. Establishing a solid framework for understanding the behavior of these indicators helps economists to avoid miscalculations and to guide the country through periods of slow or negative economic growth
Here are the questions:
According to the passage, the main purpose of economic indicators would be which of the following?
A. to facilitate the analysis necessary to maintain forward economic momentum
B. to allow investors to time their investments in sync with economic cycles
C. to foster healthy economic competition among various commercial sectors
D. to bring to light several key factors in economic downturns
E. to promote widespread understanding of economic principles
I picked D. I know that indicators are used for other purposes, but the passage only mentions downturns. (slow to negative)
I picked A without reading the passage TBH, BUT yes according to my GMAT tutor you are expected to know certain things about the world around you.
For instance I got a q about Russia wrong because I discarded the right answer on the basis that the answer mentioned the Cold War but the passge didn't, apparently anyone going to business school school should know about things like the Cold War