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555-605 Level|   Business|   Long Passage|      
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Conventional wisdom has it that large deficits in the United States bu 04 Jul 2020, 04:54
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I am not able to understand how 'E' is correct for Question 2 .

It is clearly mentioned in the passage "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.".

Option E : The United States government increases the money supply whenever there is enough room for growth to support the increase.

Isn't E contradicting with the views of proponents of second argument ?
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Conventional wisdom has it that large deficits in the United States bu 04 Jul 2020, 21:25
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vishuvashishth
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Hi GmatNinja,
Could you please explain question 2nd , why option A is wrong ?
Let's pull this out of the weeds of macroeconomic policy for a minute. Here's a less jargony example:

    "Dave and Charlie are playing on an active train track, with insufficient regard for whether an oncoming train could kill them."

This does NOT mean that Dave and Charlie don't care about whether they live or die. They're just being careless when choosing where to play, making this decision without thinking about its potentially lethal consequences.

Now, let's return to the passage and your doubt:
vishuvashishth
As per the line mentioned in first paragraph "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. "

Why can't we infer that "The United States government does not usually care whether or not inflation increases" ?
Take one more look at the entire sentence that you've highlighted. Does the wording of choice (A) really match what you see? Does this sentence really tell us that the government does not usually care about whether or not inflation increases?

The answer is no. The second argument zeroes in on a pretty specific scenario, where:

  • The government can finance its deficits by increasing the money supply.
  • The economy could have room for this increase, in which case inflation won't occur.
  • The economy could NOT have room for this growth, in which case inflation would occur.

And the second argument claims that the government does not devote enough attention to whether there is enough room for economic growth. This does NOT imply that the government doesn't care about inflation itself. Rather, it implies that the government is not sufficiently careful when considering whether its actions could lead to inflation. This is much better matched by choice (C):

Quote:
(C) The United States government is sometimes careless in formulating its economic policies.
I hope this helps!
Show more


Quote:
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
Show more

Government will increase money supply without paying much attention on whether economic growth can be increased without causing inflation . It means they are careless in providing money supply without worrying about end results on inflation.


Quote:
(C) The United States government is sometimes careless in formulating its economic policies.
Show more
>> I don’t know why should I think about economic policies formulated by government in this option. Maybe economic polices were formulated by US federal reserve bank or by other financial authorized parties except government .

But in A option I could match with inflation and make sense with the information given in the passage.
Quote:
(A) The United States government does not usually care whether or not inflation increases.
Show more


Please help to explain how could I choose C.
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Conventional wisdom has it that large deficits in the United States bu 18 Jul 2020, 16:18
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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

For question 4, here is the sentence that contains the word "admittedly":
Quote:
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.
Let's establish the context of this sentence in the last paragraph of the passage.

The main idea expressed that paragraph is that "the second argument is also problematic." And here is that "second argument" as it is described in the first paragraph:

  • "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."
  • "Financiers will expect the deficit to cause inflation and will raise interest rates, anticipating that because of inflation the money they lend will be worth less when paid back."

So, in the last paragraph of the passage the author should support his/her contention that this second argument is "problematic." However, the sentence which contains the word "admittedly" is actually somewhat contrary to the idea that the second argument is problematic.

Take another look at that sentence: "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."

Here, the author admits that the financiers will be inclined to raise interest rates if there is a deficit -- just as the "second argument" says. But why are financiers inclined to raise interest rates in that case? In order "to offset mistakenly anticipated inflation."

So the author agrees (with the second argument) that an inclination to raise interest rates will follow an increase in the deficit. However, the author believes that the cause of this phenomenon is ignorance, not the deficit increase itself: "This effect, however, is due to ignorance, not to the deficit itself."

In short, the author admits that the second argument has some truth but does not agree with the conventional reasoning behind that argument.

This analysis is reflected in answer choice (A):
Quote:
(A) the second argument has some truth to it, though not for the reasons usually supposed
Instead of the "reasons usually supposed," the author attributes the partial truth of the second argument to ignorance. (A) is the correct answer.

I hope that helps!

dear GMATNinja, i need your help to clarify further about D in Q4.

for me, i think the author uses "admittedly " because he can understand what the proponents of 2nd argument will do if interest rates increase follow deficits. "admittedly " shows author's understand, based on the problematic believe of proponents of 2nd argument is problematic. so I think author intends to point out the flaw.

that's why I choose D.

please help.
Show more
Here's the wording of choice (D):

Quote:
The author uses the term "admittedly" in order to indicate that (D) financiers should admit that they were wrong in thinking that large deficits will cause higher inflation rates
Show more
(D) states that the reason why the author says "admittedly" is to indicate that financiers should admit that they were wrong.

This is a very different purpose from simply pointing out the flaw, as you say. We can only keep (D) if the author's motivation is to tell readers that financiers should admit that their beliefs are mistaken. This opinion about what financiers should do is not supported at all by the passage, and that's why we can eliminate (D).

As a reminder, the person doing the "admitting" in this paragraph is actually the author, because the author is admitting that the second argument is partially valid. Choice (A) accurately reflects that usage of the term.

I hope this helps clarify the difference between (D) and (A)!
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Conventional wisdom has it that large deficits in the United States bu 11 Aug 2020, 11:38
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zoezhuyan
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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

For question 4, here is the sentence that contains the word "admittedly":
Quote:
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.
Let's establish the context of this sentence in the last paragraph of the passage.

The main idea expressed that paragraph is that "the second argument is also problematic." And here is that "second argument" as it is described in the first paragraph:

  • "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."
  • "Financiers will expect the deficit to cause inflation and will raise interest rates, anticipating that because of inflation the money they lend will be worth less when paid back."

So, in the last paragraph of the passage the author should support his/her contention that this second argument is "problematic." However, the sentence which contains the word "admittedly" is actually somewhat contrary to the idea that the second argument is problematic.

Take another look at that sentence: "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."

Here, the author admits that the financiers will be inclined to raise interest rates if there is a deficit -- just as the "second argument" says. But why are financiers inclined to raise interest rates in that case? In order "to offset mistakenly anticipated inflation."

So the author agrees (with the second argument) that an inclination to raise interest rates will follow an increase in the deficit. However, the author believes that the cause of this phenomenon is ignorance, not the deficit increase itself: "This effect, however, is due to ignorance, not to the deficit itself."

In short, the author admits that the second argument has some truth but does not agree with the conventional reasoning behind that argument.

This analysis is reflected in answer choice (A):
Quote:
(A) the second argument has some truth to it, though not for the reasons usually supposed
Instead of the "reasons usually supposed," the author attributes the partial truth of the second argument to ignorance. (A) is the correct answer.

I hope that helps!

dear GMATNinja, i need your help to clarify further about D in Q4.

for me, i think the author uses "admittedly " because he can understand what the proponents of 2nd argument will do if interest rates increase follow deficits. "admittedly " shows author's understand, based on the problematic believe of proponents of 2nd argument is problematic. so I think author intends to point out the flaw.

that's why I choose D.

please help.
Here's the wording of choice (D):

Quote:
The author uses the term "admittedly" in order to indicate that (D) financiers should admit that they were wrong in thinking that large deficits will cause higher inflation rates
(D) states that the reason why the author says "admittedly" is to indicate that financiers should admit that they were wrong.

This is a very different purpose from simply pointing out the flaw, as you say. We can only keep (D) if the author's motivation is to tell readers that financiers should admit that their beliefs are mistaken. This opinion about what financiers should do is not supported at all by the passage, and that's why we can eliminate (D).

As a reminder, the person doing the "admitting" in this paragraph is actually the author, because the author is admitting that the second argument is partially valid. Choice (A) accurately reflects that usage of the term.

I hope this helps clarify the difference between (D) and (A)!
Show more


Quote:
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.
Show more

Can’t we interpret as below:

Because many financiers already believe that deficits create inflation, So author says that it is true that still they will be inclined to raise interest rates for wrong assumption of anticipated inflation


Quote:
(C) the thesis that large deficits directly cause interest rates to rise has strong support after all
Show more

It seems large number of people (including financiers) believe that large deficits directly cause interest rates to rise.( whatever be the reasons right or wrong but they will believe that interest rates would rise)

Can you please help me to reject C? GMATNinja VeritasKarishma


Quote:
(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
Show more

Can D, E be rejected straightway because D and E is taking about what financiers admin or think and questions is asked WHY AUTHOR USE. There is no interaction between author and financiers. Author is writing based his analysis and argument in the passage.

Please suggest GMATNinja VeritasKarishma
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Conventional wisdom has it that large deficits in the United States bu 02 Oct 2020, 11:39
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Question 4


imSKR

Quote:
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.

Can’t we interpret as below:

Because many financiers already believe that deficits create inflation, So author says that it is true that still they will be inclined to raise interest rates for wrong assumption of anticipated inflation


Quote:
(C) the thesis that large deficits directly cause interest rates to rise has strong support after all

It seems large number of people (including financiers) believe that large deficits directly cause interest rates to rise.( whatever be the reasons right or wrong but they will believe that interest rates would rise)

Can you please help me to reject C? GMATNinja VeritasKarishma


Quote:
(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

Can D, E be rejected straightway because D and E is taking about what financiers admin or think and questions is asked WHY AUTHOR USE. There is no interaction between author and financiers. Author is writing based his analysis and argument in the passage.

Please suggest GMATNinja VeritasKarishma
Show more
Take another look at the exact wording of (C):
Quote:
(C) the thesis that large deficits directly cause interest rates to rise has strong support after all
Show more
The chain of logic that you've described above is accurate -- but the relevant piece of the passage doesn't tell us that large deficits DIRECTLY cause interest rates to rise.

Instead, there is an INDIRECT relationship between large deficits and increase interest rates. Specifically, here's what happens:

    1) There is a large deficit
    2) The government increases the money supply
    3) This causes inflation ONLY IF there is no room for the economy to grow
    4) Financiers mistakenly believe that there is DEFINITELY going to be inflation
    5) So, the financiers raise interest rates because they are not well informed

You can see that there are steps in between the large deficit and increased interest rates. The author isn't saying that there is strong support for a direct link between the two factors, so you can eliminate (C) for question 4.

As for (D) and (E): that author is the one "admitting" something, so you're correct that he/she doesn't include that word to express how the financiers feel.

I hope that helps!
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Conventional wisdom has it that large deficits in the United States bu 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.

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Conventional wisdom has it that large deficits in the United States bu 15 Jun 2021, 00:24
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I am unable to solve below mentioned questions. Can anyone help me?

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

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
For question 2, please see this post and let me know if you have any further questions.

For question 4, here is the sentence that contains the word "admittedly":
Quote:
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.
Let's establish the context of this sentence in the last paragraph of the passage.

The main idea expressed that paragraph is that "the second argument is also problematic." And here is that "second argument" as it is described in the first paragraph:

  • "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."
  • "Financiers will expect the deficit to cause inflation and will raise interest rates, anticipating that because of inflation the money they lend will be worth less when paid back."

So, in the last paragraph of the passage the author should support his/her contention that this second argument is "problematic." However, the sentence which contains the word "admittedly" is actually somewhat contrary to the idea that the second argument is problematic.

Take another look at that sentence: "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."

Here, the author admits that the financiers will be inclined to raise interest rates if there is a deficit -- just as the "second argument" says. But why are financiers inclined to raise interest rates in that case? In order "to offset mistakenly anticipated inflation."

So the author agrees (with the second argument) that an inclination to raise interest rates will follow an increase in the deficit. However, the author believes that the cause of this phenomenon is ignorance, not the deficit increase itself: "This effect, however, is due to ignorance, not to the deficit itself."

In short, the author admits that the second argument has some truth but does not agree with the conventional reasoning behind that argument.

This analysis is reflected in answer choice (A):
Quote:
(A) the second argument has some truth to it, though not for the reasons usually supposed
Instead of the "reasons usually supposed," the author attributes the partial truth of the second argument to ignorance. (A) is the correct answer.

I hope that helps!
Show more

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
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Conventional wisdom has it that large deficits in the United States bu 24 Jun 2021, 19:57
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For question 4, here is the sentence that contains the word "admittedly":
Quote:
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.
Let's establish the context of this sentence in the last paragraph of the passage.

The main idea expressed that paragraph is that "the second argument is also problematic." And here is that "second argument" as it is described in the first paragraph:

  • "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."
  • "Financiers will expect the deficit to cause inflation and will raise interest rates, anticipating that because of inflation the money they lend will be worth less when paid back."

So, in the last paragraph of the passage the author should support his/her contention that this second argument is "problematic." However, the sentence which contains the word "admittedly" is actually somewhat contrary to the idea that the second argument is problematic.

Take another look at that sentence: "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."

Here, the author admits that the financiers will be inclined to raise interest rates if there is a deficit -- just as the "second argument" says. But why are financiers inclined to raise interest rates in that case? In order "to offset mistakenly anticipated inflation."

So the author agrees (with the second argument) that an inclination to raise interest rates will follow an increase in the deficit. However, the author believes that the cause of this phenomenon is ignorance, not the deficit increase itself: "This effect, however, is due to ignorance, not to the deficit itself."

In short, the author admits that the second argument has some truth but does not agree with the conventional reasoning behind that argument.

This analysis is reflected in answer choice (A):
Quote:
(A) the second argument has some truth to it, though not for the reasons usually supposed
Instead of the "reasons usually supposed," the author attributes the partial truth of the second argument to ignorance. (A) is the correct answer.

I hope that helps!

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
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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). :facepalm_man:

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!
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Conventional wisdom has it that large deficits in the United States bu 10 Dec 2022, 02:23
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I rejected option C for question 1 , because no where in the passage it is mentioned that there is 'little support for the widely accepted belief' . Am I wrong in my thinking
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Conventional wisdom has it that large deficits in the United States bu 10 Dec 2022, 04:03
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akt715
I rejected option C for question 1 , because no where in the passage it is mentioned that there is 'little support for the widely accepted belief' . Am I wrong in my thinking
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Hello akt715

You can find the complete Wikipedia of this passage here in the link below

https://gmatclub.com/forum/conventional ... l#p2900158

And don't forget to thank GMATNinja

Cheers
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Conventional wisdom has it that large deficits in the United States bu 02 May 2023, 23:04
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I see that 35%, higher than correct answer C %, of people answered E in 2nd question. That means around 800 people and still nobody asked what's wrong with E. Let me be first. Expert please guide me here.

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Conventional wisdom has it that large deficits in the United States bu 02 May 2023, 23:07
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I crossed C option un 2nd question after reading economy POLICIES. nowhere it's discussed POLICIES. how can we infer that. Experts help me here too.

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Conventional wisdom has it that large deficits in the United States bu 30 Sep 2023, 06:20
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For question 4 - If this helps

You use admittedly when you are saying something that weakens the importance or force of your statement.
E.g. It's only a theory, admittedly, but the pieces fit together.

In this case the author first says "The second argument is also problematic." and then uses, "However" - However, then, admittedly, they will be inclined to raise interest rates to offset mistakenly anticipated inflation. By using admittedly, the author is weakening the earlier statement that ""The second argument is also problematic." Even if we don't know this usage of "admittedly" the CR skills should. But yes this is a difficult one.
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Conventional wisdom has it that large deficits in the United States bu 19 Oct 2025, 22:08
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Hello from the GMAT Club VerbalBot!

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