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# Paradox Revision: The exchange rate between the currency

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05 Mar 2015, 07:25
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This question is part of the GMAT Club Critical Reasoning : Paradox Revision Project.

The exchange rate between the currency of Country X and that of Country Y has historically favored the currency of Country Y. Because of this, citizens of Country Y often take their vacations in Country X, where the exchange rate makes hotels and restaurants more affordable. Yet, citizens of Country Y rarely purchase clothing or electronics in Country X, despite the fact that those items are more expensive in their home country, even when sales taxes are taken into account. Which of the following, if true, would best explain the buying habits of the citizens of Country Y?

A. Citizens of Country Y prefer the fashions available in their own country.

B. Stores in Country X receive the latest fashions and technology several months after they are available in Country Y.

C. The citizens of Country X resent the buying power of the currency of Country Y.

D. The government of Country Y imposes tariffs on imported goods.

E. The currencies of Country X and Country Y are both weak compared to the currency of Country Z.

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05 Mar 2015, 07:26
Post Reserved for OE. Kudos for answers and explanations.
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05 Mar 2015, 19:16

A - It is clearly mentioned that " those items are more expensive in their home country...". Apart from that this option is talking about "preference" not actual buying habit. So, incorrect.
B - Explains a reason, apart from cost, that is considered while making decision to buy. Correct.
C - Does not affect the buyers of country Y. Incorrect.
D - Buying is not "Importing". Incorrect.
E - The argument is concerned about the currency comparison between country X and Y. So, this OFS. Incorrect.
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06 Mar 2015, 18:58
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souvik101990 wrote:
This question is part of the GMAT Club Critical Reasoning : Paradox Revision Project.

The exchange rate between the currency of Country X and that of Country Y has historically favored the currency of Country Y. Because of this, citizens of Country Y often take their vacations in Country X, where the exchange rate makes hotels and restaurants more affordable. Yet, citizens of Country Y rarely purchase clothing or electronics in Country X, despite the fact that those items are more expensive in their home country, even when sales taxes are taken into account. Which of the following, if true, would best explain the buying habits of the citizens of Country Y?

A. Citizens of Country Y prefer the fashions available in their own country.

B. Stores in Country X receive the latest fashions and technology several months after they are available in Country Y.

C. The citizens of Country X resent the buying power of the currency of Country Y.

D. The government of Country Y imposes tariffs on imported goods.

E. The currencies of Country X and Country Y are both weak compared to the currency of Country Z.

although answer given is D, i believe that it does not clear the paradox...
statement D tells us that the goods purchased in country X will have taxes on it so it will become more expensive when brought to country Y.... but do tariffs make it more expensive than the purchase value in their own country.. this cannot be resolved by statement D...

B is again closer but does it tell us that people would prefer latest fashion over the price tag and they will not wait for a slightly more time and if the item is out of fashion by the time it comes to country Y.. no it does not..

in all choices, A might be the closest although not extremely convincing... it tells us that all citizens in Y prefer the fashion of their country so they may be limiting themselves to those clothes.. why would someone buy a thing if it is not preferred in looks and fashion and not upto taste of all..
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08 Mar 2015, 17:24
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The exchange rate between the currency of Country X and that of Country Y has historically favored the currency of Country Y. Because of this, citizens of Country Y often take their vacations in Country X, where the exchange rate makes hotels and restaurants more affordable. Yet, citizens of Country Y rarely purchase clothing or electronics in Country X, despite the fact that those items are more expensive in their home country, even when sales taxes are taken into account. Which of the following, if true, would best explain the buying habits of the citizens of Country Y?

A. Citizens of Country Y prefer the fashions available in their own country.

B. Stores in Country X receive the latest fashions and technology several months after they are available in Country Y.
If the fashions and technology is inexpensive enough in Country X, residents of Country Y may still wait to go buy their clothes and electronics in Country X.

C. The citizens of Country X resent the buying power of the currency of Country Y.
Does not impact Country Y's spending habit.

D. The government of Country Y imposes tariffs on imported goods.
If the tariffs are high enough they may deter Country Y from buying the fashions and electronics in Country X.

E. The currencies of Country X and Country Y are both weak compared to the currency of Country Z.
Has nothing to do with Country Y's spending in Country X.
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18 Apr 2015, 01:35
4
chetan2u wrote:
souvik101990 wrote:
This question is part of the GMAT Club Critical Reasoning : Paradox Revision Project.

The exchange rate between the currency of Country X and that of Country Y has historically favored the currency of Country Y. Because of this, citizens of Country Y often take their vacations in Country X, where the exchange rate makes hotels and restaurants more affordable. Yet, citizens of Country Y rarely purchase clothing or electronics in Country X, despite the fact that those items are more expensive in their home country, even when sales taxes are taken into account. Which of the following, if true, would best explain the buying habits of the citizens of Country Y?

A. Citizens of Country Y prefer the fashions available in their own country.

B. Stores in Country X receive the latest fashions and technology several months after they are available in Country Y.

C. The citizens of Country X resent the buying power of the currency of Country Y.

D. The government of Country Y imposes tariffs on imported goods.

E. The currencies of Country X and Country Y are both weak compared to the currency of Country Z.

although answer given is D, i believe that it does not clear the paradox...
statement D tells us that the goods purchased in country X will have taxes on it so it will become more expensive when brought to country Y.... but do tariffs make it more expensive than the purchase value in their own country.. this cannot be resolved by statement D...

B is again closer but does it tell us that people would prefer latest fashion over the price tag and they will not wait for a slightly more time and if the item is out of fashion by the time it comes to country Y.. no it does not..

in all choices, A might be the closest although not extremely convincing... it tells us that all citizens in Y prefer the fashion of their country so they may be limiting themselves to those clothes.. why would someone buy a thing if it is not preferred in looks and fashion and not upto taste of all..

The way I approached this question is:

1. Look for the main decision point for the buying behaviour of country Y citizens in the question stem. We can do so by checking close to keywords 'Yet' and 'Despite'.

The exchange rate between the currency of Country X and that of Country Y has historically favored the currency of Country Y. Because of this, citizens of Country Y often take their vacations in Country X, where the exchange rate makes hotels and restaurants more affordable. Yet, citizens of Country Y rarely purchase clothing or electronics in Country X, despite the fact that those items are more expensivein their home country, even when sales taxes are taken into account. Which of the following, if true, would best explain the buying habits of the citizens of Country Y?

So clearly, the decision point is 'affordability' for country Y citizens.

Next, Scan the answer choices for options that negate 'affordability' and we have D

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18 Apr 2015, 05:13
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The only reason for Citizens of Country Y not buying clothers and electronic is becuse these good have to be taken back with them and country Y imposes import tax on the items. (Probably with the addition of income tax, the total price of item would go up)

Good question Souvik.

souvik101990 wrote:
This question is part of the GMAT Club Critical Reasoning : Paradox Revision Project.

The exchange rate between the currency of Country X and that of Country Y has historically favored the currency of Country Y. Because of this, citizens of Country Y often take their vacations in Country X, where the exchange rate makes hotels and restaurants more affordable. Yet, citizens of Country Y rarely purchase clothing or electronics in Country X, despite the fact that those items are more expensive in their home country, even when sales taxes are taken into account. Which of the following, if true, would best explain the buying habits of the citizens of Country Y?

A. Citizens of Country Y prefer the fashions available in their own country.

B. Stores in Country X receive the latest fashions and technology several months after they are available in Country Y.

C. The citizens of Country X resent the buying power of the currency of Country Y.

D. The government of Country Y imposes tariffs on imported goods.

E. The currencies of Country X and Country Y are both weak compared to the currency of Country Z.

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06 May 2015, 01:33
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Request clarification :
Does shopping of clothes & electronics good abroad & carrying it to the native country equivalent of IMPORT ?
If yes, only then option 'D' stands a strong chance.
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18 Jun 2015, 05:38
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NickHalden wrote:
Request clarification :
Does shopping of clothes & electronics good abroad & carrying it to the native country equivalent of IMPORT ?
If yes, only then option 'D' stands a strong chance.

Yes, I would like more clarification as well. When I travel abroad and claim goods on my customs form, I do not pay a tariff or any tax in my native country(because I am obliviously not bringing a lot in). To me, the passage was focused on individual travelers and not large imports into the country that would warrant tariffs.

If NickHalden question is confirmed, then I would agree that D is the correct answer.
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22 Jun 2015, 09:34
The Answer should be B and not D. This is because the passage already speaks about the cost factor: Yet, citizens of Country Y rarely purchase clothing or electronics in Country X, despite the fact that those items are more expensive in their home country, even when sales taxes are taken into account. Therefore there must be some other reason which makes them do so. In this regard B fits the puzzle perfectly.
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22 Jun 2015, 12:16
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Paradox: Even though some stuff is cheaper in X, people of Y don't buy them!

A. Citizens of Country Y prefer the fashions available in their own country.
So how does that explain why citizens of country Y do NOT buy cheaper stuff from X?
No where it is mentioned that X has outdated fashion!

B. Stores in Country X receive the latest fashions and technology several months after they are available in Country Y.
Ok, so the stuff arrives a bit late in country X, but no where it is mentioned that citizens of country Y will buy only if it is new or something they have not seen in their country before.

C. The citizens of Country X resent the buying power of the currency of Country Y.
Country X is resenting the buying power, but this gap in currency value should infact encourage the citizens of country Y to buy more stuff from country X!

D. The government of Country Y imposes tariffs on imported goods.
When the citizens come back from holidays, with all their souvenirs such as a hat or a new ipod, they are taxed by their own government!
Please note that we have to assume that they are taxed in a way that it surcharge surpasses that of price of same stuff in country Y including the sales tax.

E. The currencies of Country X and Country Y are both weak compared to the currency of Country Z.
Relation to Country Z (outside and irrelevant information) adds nothing to solve this paradox
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23 Jun 2015, 06:49
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Patronus wrote:
Paradox: Even though some stuff is cheaper in X, people of Y don't buy them!

A. Citizens of Country Y prefer the fashions available in their own country.
So how does that explain why citizens of country Y do NOT buy cheaper stuff from X?
No where it is mentioned that X has outdated fashion!

B. Stores in Country X receive the latest fashions and technology several months after they are available in Country Y.
Ok, so the stuff arrives a bit late in country X, but no where it is mentioned that citizens of country Y will buy only if it is new or something they have not seen in their country before.

C. The citizens of Country X resent the buying power of the currency of Country Y.
Country X is resenting the buying power, but this gap in currency value should infact encourage the citizens of country Y to buy more stuff from country X!

D. The government of Country Y imposes tariffs on imported goods.
When the citizens come back from holidays, with all their souvenirs such as a hat or a new ipod, they are taxed by their own government!
Please note that we have to assume that they are taxed in a way that it surcharge surpasses that of price of same stuff in country Y including the sales tax.

E. The currencies of Country X and Country Y are both weak compared to the currency of Country Z.
Relation to Country Z (outside and irrelevant information) adds nothing to solve this paradox

I follow what you're saying, but I think it is just a poor question all around. I am not sure about most other countries, but in the countries I have lived, bringing in a small amount of goods from a vacation is not technically considered "imports" that warrants taxing or especially a tariff (this would be extreme).

The passage never verifies the idea of purchasing goods in large or small amounts or if taxes are imposed on travelers bringing back small goods . How should one know or assume the legislation of Country X?

B isn't ideal, but i have to make less assumptions in that option to make the explanation plausible.

Just my opinion.
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23 Jun 2015, 09:18
Wofford09 wrote:
I follow what you're saying, but I think it is just a poor question all around. I am not sure about most other countries, but in the countries I have lived, bringing in a small amount of goods from a vacation is not technically considered "imports" that warrants taxing or especially a tariff (this would be extreme).

So what I think of 'import' is that it can be any item brought into one's country, especially across from a national border. Items can be big or small. From what I know about imports is that the tariffs/taxes are decided broadly based on the countries trade relation among other complex factors. So we cannot say that because an item is small it should have no tariff, may be it is not charged because of the trade relations between those countries.

Next, the next big idea is hidden in the argument itself. If we go back to the argument, it says that exchange rate between X and Y favors guys of Y, and therefore guys in Y go to X for holidays. What can we infer from this? A subtle understanding of behavioral aspect of Y's. i.e. they prefer to go to X because it is cheaper for Y's to spend there holidays there.

Now comes the paradox: that even though the currency is cheaper in Y, those holiday goers still do not buy stuff! Well what could be the problem? Probably it is not cheaper for Y's to buy those stuff. That's it.

If we can hunt for an answer choice that proves that something - anything - that makes it not so cheap for Y's to buy stuff, that is our answer.

Well that is how I arrived at D. B, I believe, does not do a good job in even remotely thinking in the lines of "is it cheaper for Y's?". It talks about fashion, which I could not infer if it was really a behavioral aspect of Y.

Wofford09 wrote:
The passage never verifies the idea of purchasing goods in large or small amounts

It does not matter if the goods are small or large. A small sized iphone bought from Taiwan will have import duty levied on it as will a 10k Baju Kurungs from Malaysia.

Wofford09 wrote:
or if taxes are imposed on travelers bringing back small goods .

Please note that resolving the paradox involves bringing in new information. It is from the Strengthen, Weaken family where new information in choices is not just expected but also a feature to have in correct answer.

Wofford09 wrote:
How should one know or assume the legislation of Country X?

We are talking about the legislation of Country Y, who is imposing tariffs/taxes. I think you mistyped Y as X.
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23 Jun 2015, 09:36
yeah true to the questions tag the answer also seems to be like a paradox
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09 Apr 2016, 12:31
i have a slight confusion to pick between choices B and D
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27 May 2016, 08:03
Buying something from a country while on vacation is not usually considered as import, and therefore not subject to tariffs. Although importing can be more expensive, buying it personally may not.
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18 Sep 2016, 06:17
Both answer choices C and D require an assumption to be true.

C: People of country Y prefers latest products and fashion. This is not very clear from the argument.

D: Import duties will make the price of products bought in Country X higher than the price in country Y. Since the visitors visit Country X only because of the affordability of hotels and other things, we can assume that they are price conscious and thus this seems to be a more correct answer.
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28 Jan 2017, 07:08
I am convinced this is a poorly written question unless someone can truly explain why D is the answer.
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28 Jan 2017, 22:15
A: Though this may be one of the reason but not certainly qualify to deter people from Y to buy clothes in X. Incorrect
B: Same as A. Incorrect
C: Out of scope
D: Good one Hold it.
E: out of scope

IMO D
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29 Jan 2017, 00:03
Out of the options, only B and D stands out.
B conveys a reason why clothing or technology doesn't appeal to citizens of country Y.
D says that the country imposes tariffs on imports. But the question is about shopping, which can be done in country X while vacation and not only on imported goods.
B stands out.
However OA is D?
Paradox Revision: The exchange rate between the currency &nbs [#permalink] 29 Jan 2017, 00:03

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