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It comes as no surprise that there is little consensus among economist

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It comes as no surprise that there is little consensus among economist  [#permalink]

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New post Updated on: 02 Dec 2018, 21:10
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It comes as no surprise that there is little consensus among economists who study the prospects for the new European Central Bank (ECB). Some are overwhelmingly enthusiastic about the ECB's potential to eliminate exchange-rate currency fluctuations among its eleven member economies, while others are convinced that cultural differences and inevitable squabbles over monetary policy doom the central bank to failure.

The pessimists have a valid point. The ECB's primary goal, as specified by the Maastricht treaty, is to bring about price stability within its area of sovereignty. This stability, however, is predicated on reducing the current incongruity of prices throughout the region. Currently, though, there are too many cultural and financial variables that prevent prices from coming into alignment anytime soon.

For a start, the prices of many products sold in Europe already vary from country to country by large margins. The average cost of a pair of blue jeans is 34 percent higher in Germany than it is in Italy. Some reasons for this can be remedied through legislation. lf Germany were to repeal its law prohibiting supermarkets from stocking aspirin on their shelves. for example, aspirin prices might come in line with the rest of the European as Union. But most price differentials derive from seemingly immutable standards of living. Personal incomes in Spain and Portugal are well below the European average, as they have been for decades. Thus, prices stay lower to accommodate weaker buying power. And since Scandinavian countries show no sign of adopting the high demand for coffee products that exists in France and Italy, coffee prices will remain much higher in southern Europe than in the north.

Until now, Europe's different currencies have done well to divert consumers' attention from these price differentials. But now that Europe has adopted its one currency. the euro, Europeans are more likely to seek out the best price regardless of geography. This could mean depressed localized economies of scale. Many countries will not recover from this situation in the short term.

Fortunately for the ECB‘s architects, there are two extraordinary financial models to study and replicate: the German Bundesbank and America‘s Federal Reserve Board. Each country within the European Union, regardless of its population or the size of its gross domestic product, will be represented equally in the ECB's governing council, which will dictate the policies that the various national central banks will implement. As long as the lines of communication remain open and country representatives keep an open mind toward what may become a radical overhaul within European commerce. the euro and the ECB have a fighting chance to survive.


1. The primary purpose of the passage is to

A. compare the ECB to other financial governing bodies
B. assert that the European countries that have not yet embraced the euro are destined to so do before too long
C. provide support for the theory that Europe's transition to a central bank will have many obstacles
D. enumerate several examples of the constantly changing global financial climate
E. prove that the ECB will never bring about the price stability on which its survival so clearly depends

2. in the passage, the author is primarily concerned with which of the following?

A. comparing two different approaches to resolving a conflict
B. expressing dismay over a poorly reasoned conclusion
C. presenting information and offering different ways to interpret it
D. describing a problem that will not be solved easily
E. defending an established policy

3. Which of the following best describes the organization of the passage?

A. Two historical backgrounds are compared and contrasted.
B. A problem is identified. discussed, and resolved.
C. A theory is discussed. and evidence is introduced to condemn it.
D. A paradox is described. and one side is shown to be more dominant than the other.
E. A debate is introduced, and supporting evidence for both sides is presented.

4. Which of the following best describes the relation of the last paragraph to the passage as a whole?

A. It advances an argument to be debated further.
B. it outlines a process to be reexamined,
C. It adds some positive points to an otherwise negative outlook.
D. It reinforces a theory that is not easily disproved.
E. lt poses a question that as yet has no answer.

5. The author‘s attitude toward the success of the ECB can best be described as

A. indifference
B. hostility
C. skepticism
D. amusement
E. admiration

6. The author most probably mentions the Bundesbank in order to

A. suggest an alternate composition of the ECB's governing council
B. compare its fiscal policies to those of the Federal Reserve Bank
C. provide an example of a financial institution to which the ECB will never measure up
D. indicate that there are other established fiscal entities for the ECB to emulate
E. urge the German government to ease its restrictions on supermarkets

7. The passage most clearly implies which of the following?

A. Countries whose economies are depressed by the price wars following the arrival of the euro will eventually rebound and prosper.
B. The average German or Italian has more disposable income than does the average Portuguese or Spaniard.
C. Were it not for the Maastricht treaty. the ECB would never have come about.
D. The arrival of the euro has not solved the problem of price disparity in Europe.
E. The governing council may have to alter its plan of equal representation to account for the contributions of each country to Europe’s overall gross domestic product.

8. The passage suggests that the author believes which of the following?

A. Stabilizing the euro within global currency markets is the first step toward its legitimacy as a viable saving vehicle.
B. The cultures of the various European countries will begin to grow together soon after the euro completely supplants all the separate currencies that are now in use.
C. Multiple factors will prevent price stability from happening anytime soon, and it probably won't happen
at all.
D. The Bundesbank should assume all financial responsibilities for the European Union until the ECB becomes fully operational.
E. The gross domestic product of a nation should determine the number of delegates that nation sends to the ECB's governing council.

9. Which of the following, if true, would most clearly weaken the chances of the ECB's survival?

A. Federal Reserve Board governors have no experience with having to reconcile various languages and cultures into their financial policies.
B. The prices for most cosmetics in Belgium and The Netherlands are virtually identical.
C. Some of the legislation that is necessary for price reform will take years to put into effect.
D. As prices fall in Russia. which is not part of the European Union, commercial entities in Europe will buy Russian raw materials in larger quantities.
E. The term of service for each member of the ECB's governing board is only three years.



96

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Originally posted by SajjadAhmad on 30 Nov 2018, 10:59.
Last edited by workout on 02 Dec 2018, 21:10, edited 3 times in total.
Added questions 6,7,8,9
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Re: It comes as no surprise that there is little consensus among economist  [#permalink]

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New post 30 Nov 2018, 11:30
3
SajjadAhmad wrote:
It comes as no surprise that there is little consensus among economists who study the prospects for the new European Central Bank (ECB). Some are overwhelmingly enthusiastic about the ECB's potential to eliminate exchange-rate currency fluctuations among its eleven member economies, while others are convinced that cultural differences and inevitable squabbles over monetary policy doom the central bank to failure.

The pessimists have a valid point. The ECB's primary goal, as specified by the Maastricht treaty, is to bring about price stability within its area of sovereignty. This stability, however, is predicated on reducing the current incongruity of prices throughout the region. Currently, though, there are too many cultural and financial variables that prevent prices from coming into alignment anytime soon.

For a start, the prices of many products sold in Europe already vary from country to country by large margins. The average cost of a pair of blue jeans is 34 percent higher in Germany than it is in Italy. Some reasons for this can be remedied through legislation. lf Germany were to repeal its law prohibiting supermarkets from stocking aspirin on their shelves. for example, aspirin prices might come in line with the rest of the European as Union. But most price differentials derive from seemingly immutable standards of living. Personal incomes in Spain and Portugal are well below the European average, as they have been for decades. Thus, prices stay lower to accommodate weaker buying power. And since Scandinavian countries show no sign of adopting the high demand for coffee products that exists in France and Italy, coffee prices will remain much higher in southern Europe than in the north.

Until now, Europe's different currencies have done well to divert consumers' attention from these price differentials. But now that Europe has adopted its one currency. the euro, Europeans are more likely to seek out the best price regardless of geography. This could mean depressed localized economies of scale. Many countries will not recover from this situation in the short term.

Fortunately for the ECB‘s architects, there are two extraordinary financial models to study and replicate: the German Bundesbank and America‘s Federal Reserve Board. Each country within the European Union, regardless of its population or the size of its gross domestic product, will be represented equally in the ECB's governing council, which will dictate the policies that the various national central banks will implement. As long as the lines of communication remain open and country representatives keep an open mind toward what may become a radical overhaul within European commerce. the euro and the ECB have a fighting chance to survive.
1. The primary purpose of the passage is to

A. compare the ECB to other financial governing bodies
B. assert that the European countries that have not yet embraced the euro are destined to so do before too long
C. provide support for the theory that Europe's transition to a central bank will have many obstacles
D. enumerate several examples of the constantly changing global financial climate
E. prove that the ECB will never bring about the price stability on which its survival so clearly depends

2. in the passage, the author is primarily concerned with which of the following?

A. comparing two different approaches to resolving a conflict
B. expressing dismay over a poorly reasoned conclusion
C. presenting information and offering different ways to interpret it
D. describing a problem that will not be solved easily
E. defending an established policy

3. Which of the following best describes the organization of the passage?

A. Two historical backgrounds are compared and contrasted.
B. A problem is identified. discussed, and resolved.
C. A theory is discussed. and evidence is introduced to condemn it.
D. A paradox is described. and one side is shown to be more dominant than the other.
E. A debate is introduced, and supporting evidence for both sides is presented.

4. Which of the following best describes the relation of the last paragraph to the passage as a whole?

A. It advances an argument to be debated further.
B. it outlines a process to be reexamined,
C. It adds some positive points to an otherwise negative outlook.
D. It reinforces a theory that is not easily disproved.
E. lt poses a question that as yet has no answer.

5. The author‘s attitude toward the success of the ECB can best be described as

A. indifference
B. hostility
C. skepticism
D. amusement
E. admiration



96


------------------------
I am so confused between Choice C and E in Question 1, could anyone explain it please?

2. in the passage, the author is primarily concerned with which of the following?

A. comparing two different approaches to resolving a conflict
B. expressing dismay over a poorly reasoned conclusion
C. presenting information and offering different ways to interpret it
D. describing a problem that will not be solved easily => "The pessimists have a valid point. The ECB's primary goal, as specified by the Maastricht treaty, is to bring about price stability within its area of sovereignty. This stability, however, is predicated on reducing the current incongruity of prices throughout the region. Currently, though, there are too many cultural and financial variables that prevent prices from coming into alignment anytime soon."
E. defending an established policy

3. Which of the following best describes the organization of the passage?

A. Two historical backgrounds are compared and contrasted.
B. A problem is identified. discussed, and resolved.
C. A theory is discussed. and evidence is introduced to condemn it.
D. A paradox is described. and one side is shown to be more dominant than the other.
E. A debate is introduced, and supporting evidence for both sides is presented.

4. Which of the following best describes the relation of the last paragraph to the passage as a whole?

A. It advances an argument to be debated further. => I am not sure about this, just feel that option C is better. Glad to hear you guys thought
B. it outlines a process to be reexamined,=> Dont have any reexamined process
C. It adds some positive points to an otherwise negative outlook.=> "Fortunately for the ECB‘s architects, there are two extraordinary financial models to study and replicate..."
D. It reinforces a theory that is not easily disproved.=> Incorrect
E. lt poses a question that as yet has no answer. => no question

5. The author‘s attitude toward the success of the ECB can best be described as

A. indifference=> Dont find anything relate to this
B. hostility => Not really
C. skepticism => the most suitable option
D. amusement => no evidence
E. admiration => no evidence
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Re: It comes as no surprise that there is little consensus among economist  [#permalink]

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New post 01 Dec 2018, 18:49

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It comes as no surprise that there is little consensus among economist  [#permalink]

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New post 03 Dec 2018, 07:38
1
Skyline393

E is not the answer. As the the author's main purpose is not to "prove" that ECB will fail. Although the author's point of the ECB is pessimistic, he didn't mention that ECB will never succeed.

C is the answer. The author mostly "provides" obstacles which ECB faces in the various passages.
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It comes as no surprise that there is little consensus among economist &nbs [#permalink] 03 Dec 2018, 07:38
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It comes as no surprise that there is little consensus among economist

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