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Conventional wisdom has it that large deficits in the United States bu

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Re: Conventional wisdom has it that large deficits in the United States bu  [#permalink]

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New post 28 Nov 2018, 04:55
How is C correct for Q2? The part of the passage that says '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' clearly supports option A.
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Conventional wisdom has it that large deficits in the United States bu  [#permalink]

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New post 02 Dec 2018, 12:20
GMATNinja wrote:
ShashankDave wrote:
GMATNinja
Please help with Q1.

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.

I dont understand how C is correct. My problem is the opening words "There is little support for the widely believed.." Little support? from whom? Where did author mention that there is little support?
That's what I don't understand. How can we say that there is little support? We can say for sure that the arguments are questionable..but little support? I often make mistakes in these easy questions..please help

According to conventional wisdom, large deficits in the United States budget cause interest rates to rise. Two main arguments are given for this claim. The author describes each of these main arguments and explains why they are not valid.

The author then explains another factor that CAN causes interest rates to rise when there is a deficit: "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 effect, however, is due to ignorance, not to the deficit itself, and could be lessened by educating financiers on this issue." In other words, even IF interest rates rise when there is a deficit, the rise is due to ignorance, not the deficit itself.

Do deficits cause interest rates to rise? Sure, there might be some other evidence in support of the conventional wisdom, but the author has seemingly weakened all of the main arguments/evidence. We can infer that this would leave "little support" for the conventional wisdom.



GMATNinja

Followup on this

i) The author has definitely weakened the argument that "Deficits cause inflation" ....

However we do not know how people have reacted to this weakening of the argument put forth by the author in this passage

If only the author believes these weakeners and not anyone else in the public -- how can one conclude that "there is little support for this widely held belief / argument" ... Maybe just the author believe there is little support whereas everyone else in the public believes this widely held view


ii) Is B just too narrow for a central idea ? I selected B because i thought this was accurate as per mentioned in the last line ...B is perhaps a recommendation to the problem / not necessarily the main idea
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Re: Conventional wisdom has it that large deficits in the United States bu  [#permalink]

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New post 06 Dec 2018, 18:13
jabhatta@umail.iu.edu wrote:
GMATNinja wrote:
ShashankDave wrote:
GMATNinja
Please help with Q1.

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.

I dont understand how C is correct. My problem is the opening words "There is little support for the widely believed.." Little support? from whom? Where did author mention that there is little support?
That's what I don't understand. How can we say that there is little support? We can say for sure that the arguments are questionable..but little support? I often make mistakes in these easy questions..please help

According to conventional wisdom, large deficits in the United States budget cause interest rates to rise. Two main arguments are given for this claim. The author describes each of these main arguments and explains why they are not valid.

The author then explains another factor that CAN causes interest rates to rise when there is a deficit: "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 effect, however, is due to ignorance, not to the deficit itself, and could be lessened by educating financiers on this issue." In other words, even IF interest rates rise when there is a deficit, the rise is due to ignorance, not the deficit itself.

Do deficits cause interest rates to rise? Sure, there might be some other evidence in support of the conventional wisdom, but the author has seemingly weakened all of the main arguments/evidence. We can infer that this would leave "little support" for the conventional wisdom.


GMATNinja

Followup on this

i) The author has definitely weakened the argument that "Deficits cause inflation" ....

However we do not know how people have reacted to this weakening of the argument put forth by the author in this passage

If only the author believes these weakeners and not anyone else in the public -- how can one conclude that "there is little support for this widely held belief / argument" ... Maybe just the author believe there is little support whereas everyone else in the public believes this widely held view

We were not asked about what everyone else in the public believes...

Quote:
1. Which of the following best summarizes the central idea of the passage?

...we're asked which choice best summarizes the central idea of the passage (in other words, the central idea that the author presents in this passage).

jabhatta@umail.iu.edu wrote:
ii) Is B just too narrow for a central idea ? I selected B because i thought this was accurate as per mentioned in the last line ...B is perhaps a recommendation to the problem / not necessarily the main idea

Yep! Too narrow. Now that we're clearer about the exact question that's being asked, let's take another look at (B):

Quote:
(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.

"Main idea" questions require us to understand why the author wrote the passage as a whole. For this reason, answer choices can accurately reflect why the author wrote a particular paragraph, or suggest a likely belief of the author. However, these kinds of choices are still incorrect answers to the question, which pertains to the entire passage.

That's why we eliminate (B) and keep (C). I hope this helps!
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Re: Conventional wisdom has it that large deficits in the United States bu &nbs [#permalink] 06 Dec 2018, 18:13

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