The Economist Reading Challenge Week 4: Article 2

Question

https://gmatclub.com/blog/wp-content/uploads/2021/04/economist-logo2.png Reading Challenge: Week 4 | Article 2 Full Collection of The Economist Reading Challenges STEP 1: Read The Economist Article: America’s inflation spike begins In the spring of 2020 American consumer prices fell for three consecutive months as the pandemic struck. Rents collapsed, hotel rooms went empty and oil prices turned negative. All sudden spurts of deflation or inflation make the news twice: first when they happen and then a year later, when they distort comparisons that look back 12 months. Sure enough on April 13th statisticians announced that consumer prices in March were fully 2.6% higher than a year earlier, up from 1.7% in February. The increase in headline inflation was the biggest since November 2009, when similar “base effects” were in play after the global financial crisis....... read the full article on Economist.com - registration is required for limited Free Access . You can also get Full Access to The Economist Magazine as a part of the The Economist GMAT Tutor Course Article Length: 800 words Time multiplier: 1.75x 7 mins to read the passage and 1 min per question STEP 2: Attempt the questions Attempt the questions and post your responses by Friday 8am Pacific Time . We will be keeping this thread in competition mode so no one can see others users’ responses. Good Luck! 1 1. According to the article, which of the following would most directly cause an inflation problem for the economy? A. An inflation of more than 2% B. Prices continuing to increase C. Monetary-policy framework D. The Fed showing a lack of concern E. An economic recovery 2 2. The author implies that the March CPI increase was: A. troublesome. B. superficial. C. significant. D. ineffective. E. anticipated. 3 3. The primary purpose of the passage is to: A. assess the validity of a certain view. B. distinguish between two phenomena. C. identify the causes of a problem. D. describe a current trend. E. allay concern about a particular phenomenon. Note: The above questions were created by GMAT Club STEP 3: Check Main Economist Reading Challenge Topic for weekly winners and to Find More Questions and Articles to Read Step 4: Ace the RC section on the GMAT!

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sumitkrocks · Answer

1. According to the article, which of the following would most directly cause an inflation problem for the economy?

A. An inflation of more than 2%

There is no such evidence presented in the passage; however, Federal reserve has targeted the price index for personal consumption expenditures inflation to be 2%.
Eliminate  
 
B. Prices continuing to increase 
 Increase in prices are affects; the passage is more concerned about the causes.

C. Monetary-policy framework

Fed’s monetary framework to manage recovery is the central theme and designed considering the slowness, slack, lost inflation months etc; however, the estimates based on which the framework is crafted has started showing enough deviations in terms of rate inflation, labor employment data etc.
In view of the above, Monetary- policy framework is the most important thing that could cause inflation problem if remain unchecked in need.  
 
 D. The Fed showing a lack of concern 
 Fed has to be actively monitoring and show concern in need, but merely showing concerns are not enough. A solid framework is required i.e Monetary-policy framework, which shall be flexible enough to adjust to volatile market conditions

E. An economic recovery 
 Economic recovery may lead to increased inflation, but it is not the main concern

C is the answer IMO

2. The author implies that the March CPI increase was:

Refer :  “consumer prices in March were fully 2.6% higher than a year earlier, up from 1.7% in February. The increase in headline inflation was the biggest since November 2009”

It is evident that March CPI were substantial and beyond expectations

A. troublesome.
B. superficial.
C. significant.
D. ineffective.
E. anticipated.

C is the right answer

3. The primary purpose of the passage is to:

A. assess the validity of a certain view. 
 No single view is presented in the passage

B. distinguish between two phenomena. 
 Passage is rather discussing the present market conditions and future estimates derived based on historical data

C. identify the causes of a problem.

Cause and effect is one aspect of the passage, but not the main purpose of writing the passage

D. describe a current trend. 
 Yes, Author’s focus is to access the trend of recovery and see how various factors are contributing or behaving

E. allay concern about a particular phenomenon.

Author has been neutral in his/her view and do not try to allay any concerns

D is the answer IMO

mSKR · Answer

a reheating economy push up the consumer-price index 
 predicts that the combination of base effects and a boomy reopening will drive the headline annual rate of inflation close to 4% by May. 
 The path of inflation matters more than usual because of the amount of economic uncertainty in the air 
 If the labor market continues to outperform expectations the economy will eat up slack and push up inflation sooner.

Seeing the current trend, it seems inflation around 4% could be dangerous for economy because prices continue to rise. The government doesn’t seems to be sure of monetary policy framework . But this issue all is happening because of economic recovery after the pandemic. Economic recovery is the root cause for creating inflation. It is mainly due to economic uncertainty in the air due to its rebounding.

CORRECT ANSWER: E

From the context below: 
 consumer prices in March were fully 2.6% higher than a year earlier, up from 1.7% in February. 
  In March alone prices rose by 0.6% compared with the previous month, the fastest pace since 2012 
 The increase in headline inflation was the biggest since November 2009, when similar “base effects” were in play after the global financial crisis. 
  will drive the headline annual rate of inflation close to 4% by May. 
 It indicates that effect in march are significant/large and by May it would be troublesome 
 
It seems the figures can impact by May, so the March CPI is significant

A. troublesome.  If inflation goes over 4% by may, it would be troublesome. But troublesome seems to be numbers of upcoming months 
B. superficial.--> I don’t think these numbers are not worrisome.
 C. significant.  correct 
D. ineffective.--> they are effective 
E. anticipated.--> not expected but seemed to be similar since 2009 but it was no expected

CORRECT ANSWER: C

The passage describes that America’s inflation spike begins and what would be the impact on economy and discussing the effect may exist by when in future and how this can be sorted out.
The passage describes the trends with the graph and mention the possibilities and the risks with the trends .
 
A. assess the validity of a certain view.
The passage doesn’t mention specifically a certain view and validate it but describes more of a trend
B. distinguish between two phenomena.
The 2 trends have been mentioned but the primary purpose is not to distinguish about two phenomena
C. identify the causes of a problem.
It is known what cause the problem . Later paragraphs explain what is the trend and what can be done
 D. describe a current trend. 
Correct: it seems suitable as the whole passage describes about the ongoing trend 
E. allay concern about a particular phenomenon.
It doesn’t seem to lessens the intensity of concern about a particular phenomena, The passages shows concerns that the impact may exist for long time ( till 2022-2023) and no one is sure how to overcome the problem. Some suggestions have been mentioned in the last para .

CORRECT ANSWER: D

Ranasaymon · Answer

1. According to the article, which of the following would most directly cause an inflation problem for the economy?

->Q: What would most directly cause an inflation problem for the economy?
-> 'In March alone prices rose by 0.6% compared with the previous month, the fastest pace since 2012. Much of that was driven by a big increase in petrol prices but even the “core” consumer-price index (CPI), which strips out food and energy prices, was up by 0.3% (an annualised pace of 4.1%). Services prices in particular have started to rebound: hotel rooms were 4.4% dearer than a month earlier and rent, a big component of the index, has firmed in recent months'

From the above sentences, it may seem that continuing price increases would most directly causes the inflation problem

A. An inflation of more than 2%
-> An inflation can be more than 2%. But it does not always cause problem. 
B. Prices continuing to increase
-> Yes
C. Monetary-policy framework
-> Author mentioned policy framework as a suggestion for the Fed. It would not directly cause an inflation problem. 
D. The Fed showing a lack of concern
-> Even if the Fed show a lack of concern, it may not cause a problem in this case. 
E. An economic recovery Correct
-> the combination of base effects and a boomy reopening(recovery) can cause problem. But only economic recovery is not responsible in this case.

2. The author implies that the March CPI increase was:

-> The increase in headline inflation was the biggest since November 2009, when similar “base effects” were in play after the global financial crisis.
Nov 2009--> Similar Base effect--> Similar price increase. 
 March 202--> Similar Base effect--> Similar price increase.

A. troublesome. No
B. superficial.
-> Nowhere in the passage talks about superficiality of CPI increase. 
C. significant.
-> We can not infer that. 
D. ineffective.
-> obviously no. 
E. anticipated. Yes

3. The primary purpose of the passage is to:

-> Passage: Info+
 Topic : Inflation
 Scope: Rise in Inflation 
Author's POV: Concern for rise in inflation

A. assess the validity of a certain view.
-> The passage does not start with a view. Here, the author is not trying to validate any view. 
B. distinguish between two phenomena.
-> There is only one phenomenon which is rise in inflation. Moreover, the author did not make any distinction. 
C. identify the causes of a problem.
-> This option is a descriptive one. The cause of the problem is given in the first paragraph. Moreover, author was concerned about inflation, and gave little opinion in the last paragraph. 
D. describe a current trend.
-> The passage is not a purely descriptive one. We can easily eliminate this option.
E. allay concern about a particular phenomenon. Correct
-> Yes, Author expressed his concern about rise in inflation

emonp · Answer

1. According to the article, which of the following would most directly cause an inflation problem for the economy?

'It would be wrong, however, to dismiss the rise in inflation as a mere mathematical quirk. America’s economy is emerging from the downturn at great speed as jobs return and vaccinated consumers start spending'
'Capital Economics, a consultancy, predicts that the combination of base effects and a boomy reopening will drive the headline annual rate of inflation close to 4% by May'
 
A. An inflation of more than 2%
-The Fed's target inflation is 2%. An inflation of more than 2% may not cause problem. 
B. Prices continuing to increase
-Check the second paragraph. The continuing increase in price would not cause problem, rathe the boomy reopening will generate problem. 
C. Monetary-policy framework
-'Its new policy framework seeks to overshoot its 2% target temporarily after recessions, in order to make up lost ground'
-Monetary-policy framework is used to compensate lost inflation, not to generate inflation problem. 
D. The Fed showing a lack of concern
-The Fed just mentions inflation as a temporary problem. It's not a lack of concern. 
E. An economic recovery Correct
-> the combination of base effects and a boomy reopening(recovery) can cause problem. But only economic recovery is not responsible in this case.

2. The author implies that the March CPI increase was:

A. troublesome. Yes
B. superficial. Incorrect 
C. significant. Incorrect 
D. ineffective. Incorrect 
E. anticipated. Incorrect

3. The primary purpose of the passage is to:

A. assess the validity of a certain view.
-Where is the view? Is there any evaluation of this so called view? No
B. distinguish between two phenomena.
- Where are the two phenomena?
C. identify the causes of a problem.
-Did not cover the whole passage, Partially covered. 
D. describe a current trend.
-To express current trend is not the main focus of the passage. Yes, data about rise in inflation is given. But the focus on the rise in inflation, possible cause, and a suggestion. 
E. allay concern about a particular phenomenon. Correct
-Check the topic of the passage. 'Rise in inflation and its cause'

Sajjad1994 · Answer

Hello everyone here

We are closing the competition mode on this post, all the replies being taken for the evaluation and the winner will be announced on Monday at around 8am Pacific Time. Thank you for your participation.

Good Luck!

tjbath74 · Answer

Great work on dealing with this rather technical passage. Below are a few comments on the questions.

Q1

The question asks what the most DIRECT cause is.

This is answer  (B) , as supported by the  3rd paragraph:

“The Federal Reserve targets annual inflation of 2%..... Still, if prices rise…. as they roughly have in recent months, base effects mean that the target will soon be exceeded in annual terms”

In less fancy words, this states that if prices continue to rise the inflation will continue beyond the Fed’s target, resulting in an inflation problem. Additional support can be found in the last sentence of the second paragraph:  “The combination of base effect   and a boomy reopening will….”

Though some of the other answers are certainly related, they are less direct than the pricing increase discussed above.

Q2

(C)  significant is correct because of the quotes you correctly identified: the passage specifically states that the increase had meaning and was larger than expected. For this reason, it is also better than  (E)  anticipated: though some increase was expected, the magnitude of the increase was not.

Q3

As many suggested,  (D)  is the best at capturing the informative tone of the passage. The author does not seek to calm people down/address their worries as in  (E)  allay concern, which seems to be the other most common choice.

Winner will be announced tomorrow at around 8am Pacific Time.

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The Economist Reading Challenge Week 4: Article 2

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The Economist Reading Challenge Week 4: Article 2

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