It is commonplace among American economists today to insist that the

Question

It is commonplace among American economists today to insist that the United States’ government budget deficit--the amount spent annually in excess of tax revenues--has a uniformly destructive effect on the national economy. The argument goes: the government is spending not only its current income but tomorrow’s as well. Economists argue further that the deficit prevents government programs that would not only help its citizens but, through investment, would also help the economy. Finally, they contend, the deficit eats up funds that could otherwise be lent to private businesses, whose use of such funds would help expand the economy.

Critics of the deficit ignore several issues. For one, they do not acknowledge that debt can also be viewed, ironically, as an asset. United States debt is largely covered by the sale of government bonds, which are popular not only with United States citizens but also with foreign countries. Why do so many countries obligingly enact economic policies favorable to the United States? Because these governments hold sizable United States bond portfolios, and so have a vested interest in long-term American economic health.

What about the argument that deficits have an adverse effect on the economy? Some facts indicate otherwise. For example, during the 1980s, the United States budget deficit grew at an unprecedented rate, yet inflation dropped 6.5 percent to 2.9 percent, and interest rates dropped just as dramatically. In addition to the rate drop, the supply of funds available for lending remained steady, contradicting the contention that the deficit always has a negative economic impact. Corporate and private lending actually increased; in fact, many of the problems of the decade were due to an overabundance of credit, which encouraged questionable investments, rather than to the large deficit.

The last president who seriously tried to balance the United States federal budget was Herbert Hoover; the Depression ensued. During his second term, Franklin D. Roosevelt half-heartedly tried to slow government spending and balance the budget. Since government spending had helped ease the Depression, the slowdown in spending helped cause a revival of that economic nightmare. While it is possible for deficit spending to reach exorbitant levels, there is such a thing as a healthy deficit.   1 
 1. According to the passage, the economic problems of the 1980s were largely due to

A. the federal budget deficit, which caused a substantial shrinkage of funds available for lending to private businesses
B. a precipitous drop in the gross national product, the result of which was an artificially inflated budget deficit
C. the decreases in the sale to other countries of available government bonds
D. the glut in borrowing capacity, which fostered an atmosphere conducive to overconfident speculation
E. the decrease in funds available to private businesses produced by the deficit

2 
 2. The passage implies that countries that maintain substantial holdings in United States bonds

A. could exert through those holdings an excessive and harmful influence on the course of the United States' economy
B. have been continually increasing in number since the beginning of the 1980s, when the interest rates dropped dramatically
C. follow economic policies more favorable to the United States than they otherwise might
D. are the reason that interest rates dropped so precipitously during the previous decade
E. provide the capital necessary for the government to fund programs and loans to private companies

3 
 3. It can be inferred from the passage that the author disagrees with all of the following EXCEPT

A. Herbert Hoover attempted to address the nation's economic problems in a manner that has had far-reaching positive economic impact.
B. Corporate and private lending is the only effective way to expand the economy.
C. Roosevelt's attempts to balance the federal budget helped cause a temporary regeneration of the Depression.
D. During the 1980s, the reason funds available for lending shrank was not because of the drop in interest rates.
E. Foreign governments bought United States Bonds in order to prevent the United States economy from collapsing.

4 
 4. The author mentions Herbert Hoover in order to

A. demonstrate the validity of claims made by economists mentioned in the first paragraph
B. support the claim that budget deficits are often preferable to their remedy
C. compare him unfavorably with his successor, Franklin D. Roosevelt
D. justify the later assertion that "it is true that deficit spending can reach exorbitant levels"
E. point to the first president who made a serious effort to invest heavily in United State bond portfolios

RC Butler 2021  -  Practice Two RCs Daily.   
Passage # 29 Date: 21-Jan-2021
 This question is a part of RC Butler 2021 .  Click here for Details

gmat1393 · Answer

Sajjad1994

Please share OE for Q3

Jaya6 · Answer

can someone provide answer to Q1

Sajjad1994 · Answer

Official Explanation

3. It can be inferred from the passage that the author disagrees with all of the following EXCEPT

Difficulty Level:   Hard

Explanation

The phrase can be inferred in the question stem indicates that this is an inference question. The subject of this question is unknown, since there are no key words in the question. The task of the question is indicated by the phrase the author disagrees with all of the following EXCEPT. To answer the question, determine what the passage states about each choice and eliminate any choice with which the author disagrees. Since it is an  EXCEPT  question, the correct answer is the choice with which the author agrees.

Choice A: No.  This answer choice uses the extreme language far-reaching and is a reversal. The passage states in the last paragraph that the last president who seriously tried to balance the United States federal budget was Herbert Hoover; the Depression ensued. During his second term, Franklin D. Roosevelt half-heartedly tried to slow government spending and balance the budget. Since government spending had helped ease the Depression, the slowdown in spending helped cause a revival of that economic nightmare. That is the opposite of a positive economic impact as mentioned in the answer choice.

Choice B: No.  The recycled language corporate and private lending may make this choice seem tempting. However, the word only is an example of extreme language and is not supported by the text. The author suggests other effective ways to expand the economy including government spending   had helped ease the Depression.

Choice C:  Correct.   The author notes in the fourth paragraph that During his second term, Franklin D. Roosevelt half-heartedly tried to slow government spending and balance the budget. Since government spending had helped ease the Depression, the slowdown in spending helped cause a revival of that economic nightmare. The author would agree with this answer because it is a correct paraphrase of the text in the passage.

Choice D: No.  This is a reversal. In the third paragraph the author states that the supply of funds available for lending remained steady…Corporate and private lending actually increased. Therefore, funds for lending didn’t shrink.

Choice E: No.  This answer choice uses the extreme language to prevent and collapsing and is a reversal. In the second paragraph, the passage states that these governments hold sizable United States bond portfolios, and so have a vested interest in long-term American economic health. It does not indicate that these governments bought the bonds to prevent the United States economy from collapsing.

The correct answer is choice C.

Sajjad1994 · Answer

Official Explanation

1. According to the passage, the economic problems of the 1980s were largely due to

Difficulty Level:   Medium

Explanation

The phrase according to the passage indicates that this is a retrieval question. The subject of this question is the economic problems of the 1980s. The task of the question is to determine what the economic problems were largely due to. To answer the question, determine what the passage states about the subject and evaluate the answer choices, eliminating any choice that cannot be supported by the text. According to the final sentence of the third paragraph, Corporate and private lending actually increased  ; in fact, many of the problems of the decade were due to an overabundance of credit, which encouraged questionable investments, rather than to the large deficit.

Choice A: No.  This choice is a reversal. While the author did discuss the availability of funds for lending to private businesses, it was with the opposite idea in mind. In the third paragraph, the author notes that In addition to the rate drop, the supply of funds available for lending remained steady.

Choice B: No.  This choice is based on outside knowledge. The passage never specifically mentions gross national product.

Choice C: No.  This choice is a memory trap and a reversal. It may be tempting to select this answer because the author mentions the sale of government bonds to foreign countries in the second paragraph but the context is that United States debt is largely covered by the sale of government bonds, which are popular not only with United States citizens but also with foreign countries. So, it is not a decrease of such sales.

Choice D:  Correct.   The glut in borrowing capacity is supported by the phrase in the passage that states that corporate and private lending actually increased. The phrase an atmosphere conducive to overconfident speculation is a rewording of the phrase an overabundance of credit, which encouraged questionable investments as mentioned in the third paragraph.

Choice E: No.  This choice is a reversal. While the author did discuss the availability of funds for lending to private businesses, it was with the opposite idea in mind. In the third paragraph, the author notes that In addition to the rate drop, the supply of funds available for lending remained steady.

The correct answer is choice D.

Anshuman0902 · Answer

sajjad1994
please provide OE for question number 4

Sajjad1994 · Answer

Official Explanation

4. The author mentions Herbert Hoover in order to

Difficulty Level:   Medium

The phrase in order to indicates that this is a purpose question. The subject of the question is Herbert Hoover. The task of the question is to determine why the author mentions Herbert Hoover in the passage. To answer the question, determine why Hoover is mentioned, then evaluate the answer choices, eliminating any choice which does not match the author’s purpose. According to the fourth paragraph, the last president who seriously tried to balance the United States federal budget was Herbert Hoover; the Depression ensued. During his second term, Franklin D. Roosevelt half-heartedly tried to slow government spending and balance the budget. Since government spending had helped ease the Depression, the slowdown in spending helped cause a revival of that economic nightmare. While it is possible for deficit spending to reach exorbitant levels, there is such a thing as a healthy deficit.

Choice A: No.  This is a reversal. The economists mentioned in the first paragraph believe that the United States’ government budget deficit--the amount spent annually in excess of tax revenues--has a uniformly destructive effect on the national economy. The text following the first mention of Hoover supports the author’s contention that there is such a thing as a healthy deficit, which contrasts with the claims of the economists.

Choice B:  Correct.   The author notes that Hoover tried to balance the United States federal budget and the Depression ensued...Franklin D. Roosevelt half-heartedly tried to slow government spending and balance the budget…the slowdown in spending helped cause a revival of that economic nightmare  . Therefore, the author concludes in the final sentence that there is such a thing as a healthy deficit.

Choice C: No.  This is a no such comparison answer. While this may be a tempting answer choice because the mention of Hoover is followed by a discussion of Roosevelt, there is no direct comparison made between the two presidents.

Choice D: No.  This is a memory trap. The word while indicates that the author includes the phrase to acknowledge a counterargument before moving to his own argument immediately thereafter—there is such a thing as a healthy deficit. Hoover is mentioned as an example of the negative effects of trying to balance the budget not of deficit spending.

Choice E: No.  This is a memory trap for the sentence that states the last president who seriously tried to balance the United States federal budget was Herbert Hoover; the Depression ensued. The answer also contains the recycled language United States bond portfolios which was mentioned in the second paragraph but not in relation to Hoover.

The correct answer is choice B.

UnicornAngel · Answer

Can someone please explain question 1's solution. I still didnt get it right....
 bb   GMATNinja

SH160703 · Answer

every question is wrong i guess have to give up on RCs .... thank You guys for everything

It is commonplace among American economists today to insist that the

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It is commonplace among American economists today to insist that the

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