It is commonplace among American economists today to insist that the

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 the 1980s]; 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.

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 [the Depression]. 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.