In GMAT, we use past perfect tense to establish sequence between two past events one of which took place earlier than the other. We use past perfect tense for the event that took place earlier and simple present tense for the event that took place later to show the sequence. For example:
I had finished his dinner when Joe arrived.
This sentence talks about two actions - one of finishing dinner and the other of Joe arriving. Both these actions have taken place in the past. Use of past perfect tense us that the action of finishing dinner took place first and then Joe arrived. So the prior event has been written in past perfect tense and the later event in simple past. The sequencing has been correctly established in this sentence by using past perfect tense.
7. I read (read) that story last year in literature class.
In thise sentence, there is only one action that took place in the past. Hence, use of past perfect tense is incorrect. Moreover, when we present general information, we must use simple present/past tense, depending upon the context of the sentence.
The above mentioned sentence is presenting general information about what I did last year in the literature class. Hence, use of simple past tense "read" is correct here.
Use of past perfect tense has been covered in details with quiz in the e-gmat
course content namely "Verb - Past Perfect".
Hope this helps.
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