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# Over the last eight years, the Federal Reserve Bank has raised

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Over the last eight years, the Federal Reserve Bank has raised  [#permalink]

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08 May 2017, 10:08
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15% (low)

Question Stats:

79% (01:21) correct 21% (01:34) wrong based on 221 sessions

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Over the last eight years, the Federal Reserve Bank has raised the prime interest rate by a quarter-point more than ten times. The Bank raises rates when its Board of Governors fears inflation and lowers rates when the economy is slowing down.

Which of the following is the most logical conclusion for the paragraph above?

(A) The Federal Reserve should be replaced with regional banks that can respond more quickly to changing economic conditions.
(B) The Federal Reserve has raised the prime rate in recent years to try to control inflation.
(C) The economy has entered a prolonged recession caused by Federal Reserve policies.
(D) The monetary policy of the United States is no longer controlled by the Federal Reserve.
(E) The Federal Reserve has consistently raised the prime rate over the last several years.

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Re: Over the last eight years, the Federal Reserve Bank has raised  [#permalink]

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08 May 2017, 21:34
Over the last eight years, the Federal Reserve Bank has raised the prime interest rate by a quarter-point more than ten times. The Bank raises rates when its Board of Governors fears inflation and lowers rates when the economy is slowing down.

Which of the following is the most logical conclusion for the paragraph above?

(A) The Federal Reserve should be replaced with regional banks that can respond more quickly to changing economic conditions. (Irrelevant)
(B) The Federal Reserve has raised the prime rate in recent years to try to control inflation. (True)
(C) The economy has entered a prolonged recession caused by Federal Reserve policies. (Irrelevant)
(D) The monetary policy of the United States is no longer controlled by the Federal Reserve. (Irrelevant)
(E) The Federal Reserve has consistently raised the prime rate over the last several years. (Cannot be said. In last 8 year, there can be a year or more when Federal Reserve decreased the prime rate)

Hence, B.
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Re: Over the last eight years, the Federal Reserve Bank has raised  [#permalink]

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16 Apr 2018, 09:12
I don't agree with OA as B.
How can fears means "to control".
GMATNinja can you please explain me whether am overthinking or my approach is wrong.

Thank you
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Re: Over the last eight years, the Federal Reserve Bank has raised  [#permalink]

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16 Apr 2018, 11:40
The OA states B as the solution. My question is how does 'fear of inflation' translate to 'control inflation' - it is not given that inflation has occurred
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Re: Over the last eight years, the Federal Reserve Bank has raised  [#permalink]

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17 Apr 2018, 08:52
ronniepepperonnie wrote:
The OA states B as the solution. My question is how does 'fear of inflation' translate to 'control inflation' - it is not given that inflation has occurred

Premise: Bank raises interest when fears(be afraid of (someone or something) as likely to be dangerous, painful, or harmful) inflation(i.e when inflation is approaching) and lowers the rate when economy is slowing(action happening)down
Interpretation: Bank is trying to control economy(both inflation and deflation) by adjusting interest rate

Over the last eight years, the Federal Reserve Bank has raised the prime interest rate by a quarter-point more than ten times. The Bank raises rates when its Board of Governors fears inflation and lowers rates when the economy is slowing down.

Which of the following is the most logical conclusion for the paragraph above?

(A) The Federal Reserve should be replaced with regional banks that can respond more quickly to changing economic conditions.- out of focus, we are not given anything about regional banks
(B) The Federal Reserve has raised the prime rate in recent years to try to control inflation.- Bingo! we are clearly given that rate is adjusted to counter any possible effect on economy
(C) The economy has entered a prolonged recession caused by Federal Reserve policies.- A perfect 180, we are given that prime interest has been raised by a quarter-point more than ten times that means the inflation would have occurred more than 10 times, however this option says "The economy has entered a prolonged recession(inflation falls in recession)". Also we are just given that the rate has been increased more than 10 times and no information is given about the no. of times rate was decreased in last 8 years, hence we cannot just comment whether the recession has been prolonged
(D) The monetary policy of the United States is no longer controlled by the Federal Reserve.- out of focus, nothing has been said about United States or for that matter who is controlling the Federal Reserve
(E) The Federal Reserve has consistently raised the prime rate over the last several years.- warps the information, we are just given that the rate has been increased more than 10 times and no information is given about the no. of times rate was decreased in last 8 years. Also, to comment on consistency we must be given the information no. of times continuous increase/decrease in rate. What if the rate has increased 10 times but only once at the start of period and then more than 9 times in 8th year. We can not just comment about consistency of increase/decrease
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Re: Over the last eight years, the Federal Reserve Bank has raised &nbs [#permalink] 17 Apr 2018, 08:52
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# Over the last eight years, the Federal Reserve Bank has raised

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