Because the "baby boom" has skewed the nation's population distributio

Question

New Project RC Butler 2019  -  Practice 2 RC Passages Everyday   
Passage # 376, Date : 07-Oct-2019
 This post is a part of New Project RC Butler 2019 .  Click here for Details

Because the "baby boom" has skewed the nation's population distribution, net benefits vary greatly from generation to generation. While the "baby boomers" have worked, from the late 1960s through the next couple of decades, the government has greatly expanded the benefits that it offers to the elderly. These benefits have been affordable because there have been so many more workers than retirees. But once the "baby boomers" begin to retire, the ratio of workers to retirees will plummet from 3.4 today to 1.9 in 2037.

If these government programs are to continue at their current level at that time - and many of the programs have mandatory spending levels -
a greater lifetime tax burden is implied for today's young than the benefits they can expect to receive. One estimate is that to neutralize the imbalance of current policy, either discretionary spending would have to be cut by 19.6% or taxes would have to be increased 11.4% annually.

This is more of an equity issue than an economic issue, and is thus a matter of ethical judgement whether or not this burden on the young is unfair. Reducing the national debt eliminates the explicit burden, although it is not large enough to eliminate the implicit burden. When the national debt was accumulated, taxpayers at the time enjoyed a higher standard of living - either through lower taxes or higher government services - than would have been available were there no budget deficits. The result of their higher standard of living is a lower (potential) standard of living in the future, because the "crowding out" effect means that the future capital stock, and with it the future productive capacity of the economy, is smaller than it would have been had we never accumulated a national debt. In effect, budget deficits transferred the consumption of future generations to past generations. Reducing the national debt redirects that transfer from the present generation back to the future. Instead of using the surplus to consume now, we are paying off the debt, which will lead to a greater capital stock and productive capacity in the future and with it a higher standard of living.   1 
 C 
 1. What is the meaning of the author's claim "This is more of an equity issue than an economic issue" in the opening of paragraph three?

(A) economists refuse to consider ethical judgments when providing analysis
(B) the costs of extraordinary tax rates impact the equity of the young, b...not their fiscal policy
(C) economics pertains to the financial implications of the burden, but not: its fairness
(D) equity issues involve the value after expenses such as taxes, whereas economics is the study of general financial matters
(E) the economic issues related to these potential tax rate hikes are better modeled by equity worksheets

2 
 B 
 2. Which of the following financial situations is most analogous to the financial situation described in the passage?

(A) A small business borrows heavily to invest in new equipment but is able to pay off its debt early when it is awarded a lucrative government contract.
(B) A small business subsidizes its products to meet consumer price demands but is later faced with mounting debts.
(C) A small business is turned down Tor a loan at a local bank because the owners have bad credit histories.
(D) A small business sinks further into debt when it is forced to exchange cheap bank loans for higher rate corporate bonds.
(E) A small business is able to cut spending through greater commercial efficiency and thereby payoff its. long-term debts.

3 
 A 
 3. The second sentence of the second paragraph serves to:

(A) exemplify the severity of the preceding statement
(B) provide a point of reference for further calculations
(C) demonstrate the tax rate growth from 1960 to 2037
(D) provide evidence for an earlier assertion
(E) derive numbers from previous calculations

4 
 D 
 4. This passage is most probably an excerpt from a text with a primary focus on which of the following?

(A) the effect of the "baby boom’ on economics in the United States
(B) economic forecasts for the next three generations
(C) ethical judgments in economic policy
(D) the national debt of the United States
(E) a ‘tax and spend’ fiscal policy

Radhika0209 · Answer

I have a doubt in Q3, i choose option 2 over option 1. y option 2 is wrong

adstudy · Answer

Hey Radhika0209 If these government programs are to continue at their current level at that time - and many of the programs have mandatory spending levels - a greater lifetime tax burden is implied for today's young than the benefits they can expect to receive. One estimate is that to neutralize the imbalance of current policy, either discretionary spending would have to be cut by 19.6% or taxes would have to be increased 11.4% annually. Meaning - Government programs are spending at a certain level, which is certainly high, because the demand for these services (retiree services) is less as the number of retirees are less. But in the future, the demand will likely increase. So to provide the same level of services as today, a greater tax burden has to be implied on the today's young. But even after shelling so much, they want be able to receive the benefits as much as they have spent. This is conveyed in the following lines - "a greater lifetime tax burden is implied for today's young than the benefits they can expect to receive." Now, to just showcase how much this actually means in terms of figure, the author EXEMPLIFIES in the very next line, which is as follows - "One estimate is that to neutralize the imbalance of current policy, either discretionary spending would have to be cut by 19.6% or taxes would have to be increased 11.4% annually." This means current tax, which may already be high, will have to be increased by 11.4% annually and spending will have to be reduced by 19.6% to match the levels of services to what they are today. Now coming to the question - 3. The second sentence of the second paragraph serves to: (A) exemplify the severity of the preceding statement (B) provide a point of reference for further calculations B is incorrect because the author at no point provides a reference for further calculations. If these lines were for reference, then they would probably contain some parameters or something that tells you how and when to calculate the percent. But the passage does not do any of those things. Hence A is the best answer of the lot Hope this helps

DexterZabula · Answer

Although got all correct, I doubt heavily if the passage is GMAT like.
You need a prior knowledge of economics
1. to process few options
2. comprehend how capital stock and productive capacity relates to standard of living.
3. to understand terms - baby boom, crowding out - as they aren't described  .

Also, Q4. is so non-GMAT and the answer to it further strays away from GMAT  .

I would love to check the validity of the source as well.

Its_me_aka_ak · Answer

4. This passage is most probably an excerpt from a text with a primary focus on which of the following?

(A) the effect of the "baby boom’ on economics in the United States
(B) economic forecasts for the next three generations
(C) ethical judgments in economic policy
(D) the national debt of the United States
(E) a ‘tax and spend’ fiscal policy    
 
someone kindly express their reasoning for Q 4as it is confusing to me if national debt as a whole concept is the main focus of the passage. i think it's more about what Boom effect did to US (although it's not mentioned in the passage that this is about US)

Sajjad1994 · Answer

Explanation

4. This passage is most probably an excerpt from a text with a primary focus on which of the following?

Difficulty Level:   750

Explanation

The passage primarily discusses the implications of the  "baby boom"  generation on the nation's population distribution, the expansion of benefits to the elderly by the government, the potential burden on the younger generation due to increased taxes, and the impact of the national debt on the economy and future generations. It emphasizes how the national debt has affected the present and future standard of living and the economic capacity of the country. While the passage touches on ethical judgments and economic considerations, its core focus is on the national debt and its consequences. Therefore,  option (D)  is the most appropriate choice that aligns with the primary subject matter of the passage.

Answer: D

Its_me_aka_ak · Answer

I still believe that everything mentioned above aims to be triggered by Boom effect. From economic imbalance to future implications.

Sajjad1994 · Answer

No worries, let's close it here.

Its_me_aka_ak · Answer

Still thanks for the reasoning, Sajjad.

KHannigan · Answer

More malformed questions from this series. It should probably be pulled from the database.

Errors include:

Q1:
- C is noted as correct, however it is not. Option C explains the meaning of economics and equity, but it does not explain  the meaning of the author's claim , which would best be expressed as "while the skew in net benefits results in unfair outcomes, it does not have a marked deleterious effects on the economy".

Q2:
Whose financial situation? The answer options establish a subject "a small business" however the passage doesn't relate to a single subject, it instead describes the interrelationship between three (primarily two) subjects - past, present, and future generations. There are even several blatant typos in the options: "turned down Tor a loan", "thereby payoff its. long-term". Pretty sub-par.

Q3:
Usage of "exemplify" here is atypical and unnatural. The sentence does not 'exemplify' in the sense of  being an example  (transitive verb), which is the prevailing usage amongst native speakers. It does exemplify in the sense of  providing examples  (transitive verb) however this is a rapidly declining usage that rings particularly wrong in this sense due to ascribing agency to a sentence.

Q4:
The "correct" answer has no basis in rationality. A, B, C, and D are all equally viable.

shloka30 · Answer

Why is the answer to question 3 not D - the calculations do provide evidence for the preceeding statement that the taxes would have to be increased?
And option A talks about the severity of the statement , which is a subjective term

atuls.26 · Answer

Upon reading the statement in context to the whole passage you can say......
First the author is presenting his/her claim about how burdensome the consequences of the programs can be and then supports the intensity of the claim by given example.

Because the "baby boom" has skewed the nation's population distributio

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Because the "baby boom" has skewed the nation's population distributio

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