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One of the key reasons that imports of certain finished goods

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Intern
Intern
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S
Joined: 30 Jan 2017
Posts: 49

Kudos [?]: 42 [0], given: 13

Location: India
Schools: ISB '19
GMAT 1: 630 Q47 V29
GPA: 3.9
CAT Tests
One of the key reasons that imports of certain finished goods [#permalink]

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New post 21 Aug 2017, 11:24
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Difficulty:

  95% (hard)

Question Stats:

35% (02:45) correct 65% (01:54) wrong based on 31 sessions

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One of the key reasons that imports of certain finished goods of category A in country X have increased significantly is that it’s cheaper for country X’s retailers to import these goods than to purchase the same from local manufacturers. Hence, as it often happens, because of these increased imports, the value of country X’s currency has correspondingly decreased, making critical imports such as steel more expensive for the country.

The information above supports which of the following hypothesis about country X?

a. An additional significant import tariff on goods in category A will likely help increase the value of currency of country X in the coming future.
b. Appropriately subsidizing industries that import steel is likely to negate any impact that country X's currency devaluation has had on its GDP.
c. Due to increased imports of category A goods, many consumers in country X have experienced lower prices than they paid before.
d. The loss in local production of goods caused by corresponding increased imports has not had as severe an impact on the GDP of country X as has the increase in steel prices.
e. To prevent any further reduction in its currency's value, country X must restrict imports more severely than it currently does.
[Reveal] Spoiler: OA

Kudos [?]: 42 [0], given: 13

Intern
Intern
avatar
S
Joined: 30 Jan 2017
Posts: 49

Kudos [?]: 42 [0], given: 13

Location: India
Schools: ISB '19
GMAT 1: 630 Q47 V29
GPA: 3.9
CAT Tests
Re: One of the key reasons that imports of certain finished goods [#permalink]

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New post 21 Aug 2017, 11:25
Isn't Option A a may be true statement ? We need a MUST BE TRUE hypothesis.

Kudos [?]: 42 [0], given: 13

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Senior Manager
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Joined: 28 Mar 2017
Posts: 419

Kudos [?]: 106 [2], given: 118

One of the key reasons that imports of certain finished goods [#permalink]

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New post 21 Aug 2017, 11:54
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One of the key reasons that imports of certain finished goods of category A in country X have increased significantly is that it’s cheaper for country X’s retailers to import these goods than to purchase the same from local manufacturers. Hence, as it often happens, because of these increased imports, the value of country X’s currency has correspondingly decreased, making critical imports such as steel more expensive for the country.

The information above supports which of the following hypothesis about country X?

a. An additional significant import tariff on goods in category A will likely help increase the value of currency of country X in the coming future.
This is correct. Since cheap imports are reducing the value of currency, then probably increasing the cess on those items might increase the value of currency.

b. Appropriately subsidizing industries that import steel is likely to negate any impact that country X's currency devaluation has had on its GDP.
This option reverses the cause and effect. The decrease in the currency's value causes an increase in the prices of steel and not vice versa.

c. Due to increased imports of category A goods, many consumers in country X have experienced lower prices than they paid before.
We can't say just because of cheaper category A goods, ALL the goods become cheap.

d. The loss in local production of goods caused by corresponding increased imports has not had as severe an impact on the GDP of country X as has the increase in steel prices.
GDP is a very big term. The argument talks about currency value and not about GDP.

e. To prevent any further reduction in its currency's value, country X must restrict imports more severely than it currently does.
"must" is a very extreme word. The argument uses the words like "often".

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Kudos if it helps !!

Kudos [?]: 106 [2], given: 118

One of the key reasons that imports of certain finished goods   [#permalink] 21 Aug 2017, 11:54
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