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27 Feb 2021, 01:22
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1. Which of the following best summarizes the central idea of the passage?
(A) A decrease in nongovernment borrowing or an increase in the availability of credit can eliminate or lessen the ill effects of increased borrowing by the government.
(B) Educating financiers about the true relationship between large federal deficits and high interest rates will make financiers less prone to raise interest rates in response to deficits.
(C) There is little support for the widely held belief that large federal deficits will create higher interest rates, as the main arguments given to defend this claim are flawed.
(D) When the government borrows money, demand for credit increases, typically creating higher interest rates unless special conditions such as decreased consumer spending arise.
(E) Given that most financiers believe in a cause-and-effect relationship between large deficits and high interest rates, it should be expected that financiers will raise interest rates.
The author does not merely give us data regarding deficits in the United States. He begins by saying that according to conventional wisdom, large deficits in the United States budget cause interest rates to rise. He then gives two arguments that provide support for this claim. In the subsequent paragraphs, the points out the loopholes and attacks both the arguments.
The answer option that captures the essence of the passage is option C. Hence C is correct.
2. It can be inferred from the passage that proponents of the second argument would most likely agree with which of the following statements?
(A) The United States government does not usually care whether or not inflation increases.
(B) People in the United States government generally know very little about economics.
(C) The United States government is sometimes careless in formulating its economic policies.
(D) The United States government sometimes relies too much on the easy availability of foreign credit.
(E) The United States government increases the money supply whenever there is enough room for growth to support the increase
The question asks about the second argument. This means that we have to go to the first paragraph to find the answer to this question.
Para 1, line 10- The second argument supposes that the government will tend to finance its deficits by increasing the money supply with insufficient regard for whether there is enough room for economic growth to enable such an increase to occur without causing inflation.
A is incorrect because it is not said that the government does not care whether inflation increases. What is said is that the government has insufficient regard for whether there is enough room for economic growth to enable such an increase to occur without causing inflation. Eliminate
B- This is information that is beyond the scope of the passage. Eliminate
C- “The second argument supposes that the government will tend to finance its deficits by increasing the money supply with insufficient regard for whether there is enough room for economic growth to enable such an increase to occur without causing inflation.”
It can be inferred from para 1, line 10 that the proponents of the second argument are most likely to agree with option C- The United States government is sometimes careless in formulating its economic policies. Correct.
D- There is no information to support option D. Eliminate.
E- This is opposite to - “with insufficient regard for whether there is enough room for economic growth”- Eliminate
3. Which of the following claims concerning the United States government's financing of the deficit does the author make in discussing the second argument?
(A) The government will decrease the money supply in times when the government does not have a deficit to finance.
(B) The government finances its deficits by increasing the money supply whenever the economy is expanding.
(C) As long as the government finances the deficit by borrowing, nongovernment borrowers will pay higher interest rates.
(D) The only way for the government to finance its deficits is to increase the money supply without regard for whether such an increase would cause inflation.
(E) Inflation should be caused when the government finances the deficit by increasing the money supply only if there is not enough room for economic growth to support the increase.
Let’s go back to the second argument again- The second argument supposes that the government will tend to finance its deficits by increasing the money supply with insufficient regard for whether there is enough room for economic growth to enable such an increase to occur without causing inflation.
This is a direct one. Only option E is supported by the passage.
4. The author uses the term "admittedly" (see highlighted text) in order to indicate that
(A) the second argument has some truth to it, though not for the reasons usually supposed
(B) the author has not been successful in attempting to point out inadequacies in the two arguments
(C) the thesis that large deficits directly cause interest rates to rise has strong support after all
(D) financiers should admit that they were wrong in thinking that large deficits will cause higher inflation rates
(E) financiers generally do not think that the author's criticisms of the second argument are worthy of consideration
Para 1- The author says that the proponents of the second argument argue that - financiers will expect the deficit to cause inflation and will raise interest rates, anticipating that because of inflation the money they lend will be worthless when paid back. In the third paragraph, the author attacks the second argument. He says that - “However, since many financiers believe that deficits ordinarily create inflation, then admittedly they will be inclined to raise interest rates to offset mistakenly anticipated inflation”
This means that yes- they will be inclined to raise interest rates, but it is because of ignorance and not because of the reasons stated by the proponents of the second argument. Option A is correct.
Vishnupriya
CrackVerbal Prep Team
(A) A decrease in nongovernment borrowing or an increase in the availability of credit can eliminate or lessen the ill effects of increased borrowing by the government.
(B) Educating financiers about the true relationship between large federal deficits and high interest rates will make financiers less prone to raise interest rates in response to deficits.
(C) There is little support for the widely held belief that large federal deficits will create higher interest rates, as the main arguments given to defend this claim are flawed.
(D) When the government borrows money, demand for credit increases, typically creating higher interest rates unless special conditions such as decreased consumer spending arise.
(E) Given that most financiers believe in a cause-and-effect relationship between large deficits and high interest rates, it should be expected that financiers will raise interest rates.
The author does not merely give us data regarding deficits in the United States. He begins by saying that according to conventional wisdom, large deficits in the United States budget cause interest rates to rise. He then gives two arguments that provide support for this claim. In the subsequent paragraphs, the points out the loopholes and attacks both the arguments.
The answer option that captures the essence of the passage is option C. Hence C is correct.
2. It can be inferred from the passage that proponents of the second argument would most likely agree with which of the following statements?
(A) The United States government does not usually care whether or not inflation increases.
(B) People in the United States government generally know very little about economics.
(C) The United States government is sometimes careless in formulating its economic policies.
(D) The United States government sometimes relies too much on the easy availability of foreign credit.
(E) The United States government increases the money supply whenever there is enough room for growth to support the increase
The question asks about the second argument. This means that we have to go to the first paragraph to find the answer to this question.
Para 1, line 10- The second argument supposes that the government will tend to finance its deficits by increasing the money supply with insufficient regard for whether there is enough room for economic growth to enable such an increase to occur without causing inflation.
A is incorrect because it is not said that the government does not care whether inflation increases. What is said is that the government has insufficient regard for whether there is enough room for economic growth to enable such an increase to occur without causing inflation. Eliminate
B- This is information that is beyond the scope of the passage. Eliminate
C- “The second argument supposes that the government will tend to finance its deficits by increasing the money supply with insufficient regard for whether there is enough room for economic growth to enable such an increase to occur without causing inflation.”
It can be inferred from para 1, line 10 that the proponents of the second argument are most likely to agree with option C- The United States government is sometimes careless in formulating its economic policies. Correct.
D- There is no information to support option D. Eliminate.
E- This is opposite to - “with insufficient regard for whether there is enough room for economic growth”- Eliminate
3. Which of the following claims concerning the United States government's financing of the deficit does the author make in discussing the second argument?
(A) The government will decrease the money supply in times when the government does not have a deficit to finance.
(B) The government finances its deficits by increasing the money supply whenever the economy is expanding.
(C) As long as the government finances the deficit by borrowing, nongovernment borrowers will pay higher interest rates.
(D) The only way for the government to finance its deficits is to increase the money supply without regard for whether such an increase would cause inflation.
(E) Inflation should be caused when the government finances the deficit by increasing the money supply only if there is not enough room for economic growth to support the increase.
Let’s go back to the second argument again- The second argument supposes that the government will tend to finance its deficits by increasing the money supply with insufficient regard for whether there is enough room for economic growth to enable such an increase to occur without causing inflation.
This is a direct one. Only option E is supported by the passage.
4. The author uses the term "admittedly" (see highlighted text) in order to indicate that
(A) the second argument has some truth to it, though not for the reasons usually supposed
(B) the author has not been successful in attempting to point out inadequacies in the two arguments
(C) the thesis that large deficits directly cause interest rates to rise has strong support after all
(D) financiers should admit that they were wrong in thinking that large deficits will cause higher inflation rates
(E) financiers generally do not think that the author's criticisms of the second argument are worthy of consideration
Para 1- The author says that the proponents of the second argument argue that - financiers will expect the deficit to cause inflation and will raise interest rates, anticipating that because of inflation the money they lend will be worthless when paid back. In the third paragraph, the author attacks the second argument. He says that - “However, since many financiers believe that deficits ordinarily create inflation, then admittedly they will be inclined to raise interest rates to offset mistakenly anticipated inflation”
This means that yes- they will be inclined to raise interest rates, but it is because of ignorance and not because of the reasons stated by the proponents of the second argument. Option A is correct.
Vishnupriya
CrackVerbal Prep Team
15 Jun 2021, 00:24
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GMATNinja
Does 'admittedly' here apply to the author or to the financiers? I thought it makes more sense if applied to the financiers. Hence I ended up picking C over A. How do we know it applies to the author? Please help! GMATNinja
24 Jun 2021, 19:57
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vatsal323
The author includes the word "admittedly" to inform us about how he/she feels about the information in the sentence.
Consider this alternate example: "Unfortunately, I won't be able to attend my nephew's poop-emoji themed birthday party." (No, really: this is an actual thing).
What is the purpose of including the word "unfortunately" in the above sentence? Just to show how I feel about the rest of the information -- I think it's unfortunate that I will miss the event.
Similarly, in using the word "admittedly" the author is telling us how he/she feels about the information in the sentence.
The financiers aren't admitting anything -- the author is admitting that a certain piece of info is correct, while still maintaining that the rest of the argument is wrong.
I hope that helps!
03 Dec 2025, 22:39
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For Question 2, I selected option A because it states ???with insufficient regard??? to whether there is enough room for economic growth to allow such an increase without causing inflation ??? meaning no regard, so no concern.
Regarding option C, it refers to ???economic policies,??? which can include a wide range of areas beyond the deficit, such as taxation. It does not say ???some economic policies???; it says ???sometimes careless,??? but the full scope of economic policy still remains. Therefore, I eliminated C.
I agree with the explanation that was provided, but my concern is that during the exam it will be very difficult to select option C. How do I avoid such mistakes? I feel I am not learning effectively from my mistakes when the differences between choices are very subtle.
Regarding option C, it refers to ???economic policies,??? which can include a wide range of areas beyond the deficit, such as taxation. It does not say ???some economic policies???; it says ???sometimes careless,??? but the full scope of economic policy still remains. Therefore, I eliminated C.
I agree with the explanation that was provided, but my concern is that during the exam it will be very difficult to select option C. How do I avoid such mistakes? I feel I am not learning effectively from my mistakes when the differences between choices are very subtle.
