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# The debt crisis affecting many developing countries has had

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06 Jul 2011, 10:42
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The debt crisis affecting many developing countries has had three causes: imprudent management and borrowing by debtor countries....
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06 Jul 2011, 12:20
I think the passage is incomplete
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06 Jul 2011, 12:53
Nope.. Its taken rite from the book and it is not incomplete. Moreover, the last para has concluding elements.
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07 Jul 2011, 00:20
OMG !! It is clearly mentioned on the last para that Banks strategies resort to help debtor countries in short run .
D ..clear winner
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07 Jul 2011, 03:54
My 3-2 split had landed me with D and E.. my question is - why not E?
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09 Jul 2011, 20:09
1
RohitKalla wrote:
My 3-2 split had landed me with D and E.. my question is - why not E?

Hi RohitKalla,

The problem with (E) is the word 'sacrifice.' Although the first paragraph tells us that the real interest rate used to fluctuate, but currently remains high, there is no language anywhere in the passage to suggest that this was an intentional, or even incidental, consequence of the solution to the debt crisis. Rather, it's the cause of the crisis--the paragraph discussing the solution, paragraph 3, makes no mention of Real Interest because it isn't of interest (pardon the pun) to the analysis of efforts to solve the problem.

Hope this helps!
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10 Jul 2011, 08:12
I will go with E. what's the OA?
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11 Jul 2011, 03:50
Thanks Eli. I got the point.
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19 Dec 2011, 04:55
I chose D.
I inferred from the term "provide little relief" that the benefit is only for a short term and has little or no effect in the long run. That is why D.

In E, the "sacrifice" takes the option to extremities. The banks are not "deliberately" sacrificing for short-term gains.
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31 Dec 2011, 22:53
I chose A as I thought it is an close contender.
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22 Apr 2012, 20:55
In D by are we referring to " long term growth" of debtor countries ?
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30 Apr 2012, 15:54
Can anyone please explain the logic behind choosing "D" ?
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30 Apr 2012, 18:25
I think the correct answer is D as it is clearly mentioned in the last para that methods adopted by the bank helps debtor countries only in short run .
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12 Jan 2016, 12:16
IMO D.

souvik101990 chetan2u daagh carcass bb Narenn
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12 Jan 2016, 22:46
1
hdwnkr wrote:
IMO D.

souvik101990 chetan2u daagh carcass bb Narenn

Hi,
the present strategies have been discussed in last para and it states that..
Quote:
Present bank strategies deal with the debt crisis by extending the effective maturity of loans. Although any method that reduces the flow of resources from debtor countries will help in the short run, further lending promises little relief to the debt problem. So long as real interest rates remain high, developing countries will remain in debt.

The Q says that the present strategies are inadequate because ?..
WHAT HAS THE PARA TO SAY ABOUT IT?..
Although any method that reduces the flow of resources from debtor countries will help in the short run, further lending promises little relief to the debt problem..
so it clearly states that the strategies will be beneficial only for a short term..
this gives us a reason for the strategy's inadequacies...
and so , D becomes the right choice
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11 May 2016, 06:38
Okay, this makes no sense to me. D was one of the answers I immediately rejected. Why? Its the "growth"

The methods of dealing with the debt crisis do not promote long-term growth. Growth of what? Economic Growth? Debt growth?

The answer only makes sense if we assume the choice is referring to economic growth, not debt growth. The latter would make the choice clearly false, as a promotion of long-term debt growth would be an absurd solution.

So if its economic growth, economic growth is outside the scope of the passage! The question is what is the author suggesting.

It is never stated or implied that economic growth would help with the debt crisis.

The crux of the argument is that the methods in place are inadequate because the a) provide a short term fix by extending maturities, but b) do nothing to decrease real interest rates.

D addresses neither of these. Once again, it is talking about an ambiguous "growth", that has nothing to do with the entities discussed in the passage.

E at least addresses both components of the argument. I have a problem with the word "sacrifice" in E as well. I see that there is nothing in the passage that suggests there was a sacrifice made.

But, the author is suggesting that the banks solution should have decreased real interest rates rather than provided a short term increase in loan maturity, which is a lot closer to E than D.

The explanation from the book is totally nonsensical. The explanation for why choice E is wrong states, "Banks have extended, not restricted loan maturity". Of course the banks have extended loan maturity - and choice E clearly states that, by saying they pursued a strategy of "short term increase in loan maturity. "

Can anyone explain this to me? This is really distressing, because my strategy revolves around rejecting answers outside the scope of the argument, and the "growth" in this choice seemed to me an obvious rejection.
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16 May 2016, 14:46
I figured it out!

So there's a problem with the usage of short-term in E. By saying there was a "short-term increase in loan maturity" the answer choice is saying that the loan maturity has been initially extended, but only for a little while, after which it will be restricted again. The passage states the maturity was extended, but says nothing about a long extension or a short extension, or about the reversal of this extension later.

In retrospect, the use of "sacrifice" is also a bit strong here - maybe the banks could have pursued a strategy of decreasing interest rates on the loans rather than extending their maturities, but there's nothing to suggest that they needed to sacrifice one strategy for the other - they could have easily pursued both.

The usage of short-term in the passage is referring to the short term outlook for the country. I still think the question is tricky because growth is never mentioned, and its a big leap of inference to assume that economic growth will ease the debt crisis. (Often this is isn't even certain in real life). But at least, after narrowing it to D and E, if you catch the tricky wording of the second part of E, you could eliminate it.

Anyway, thought I'd post if anyone saw this later and had the same issue I had.
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Re: The debt crisis affecting many developing countries has had   [#permalink] 26 Sep 2018, 21:32
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