It is currently 23 Sep 2017, 16:51

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Close

Request Expert Reply

Confirm Cancel

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

V10-11

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:

Hide Tags

Expert Post
Founder
Founder
User avatar
P
Joined: 04 Dec 2002
Posts: 15456

Kudos [?]: 27970 [0], given: 5052

Location: United States (WA)
GMAT 1: 750 Q49 V42
GMAT ToolKit User Premium Member CAT Tests
V10-11 [#permalink]

Show Tags

New post 17 Aug 2015, 10:28
Expert's post
3
This post was
BOOKMARKED
00:00
A
B
C
D
E

Difficulty:

  45% (medium)

Question Stats:

63% (01:20) correct 37% (01:30) wrong based on 51 sessions

HideShow timer Statistics

The currency of Country A has been strengthening against other worldwide currencies for the past year, and economists have observed that the worldwide demand for products manufactured in Country A has been rapidly growing. Thus, the economists reason that Country A’s currency is strengthening because of classic supply and demand factors.

Which of the following is an assumption made by the economists in reaching their conclusion?


A. It is not difficult to ship products made in Country A to other countries
B. Country A has lower manufacturing costs than other markets
C. The demand for products manufactured in Country A will continue to increase
D. Country A has a regulatory system that ensures its manufactured products meet high quality standards
E. Manufacturing companies in Country A receive payment in Country A’s local currency
[Reveal] Spoiler: OA

_________________

Founder of GMAT Club

GMAT Club's Special offer for Student Loans only through Aug 31 - New!
Just starting out with GMAT? Start here... or use our Daily Study Plan


Co-author of the GMAT Club tests

Kudos [?]: 27970 [0], given: 5052

Economist GMAT Tutor Discount CodesOptimus Prep Discount CodesEMPOWERgmat Discount Codes
Expert Post
Founder
Founder
User avatar
P
Joined: 04 Dec 2002
Posts: 15456

Kudos [?]: 27970 [0], given: 5052

Location: United States (WA)
GMAT 1: 750 Q49 V42
GMAT ToolKit User Premium Member CAT Tests
Re V10-11 [#permalink]

Show Tags

New post 17 Aug 2015, 10:28
Official Solution:


The currency of Country A has been strengthening against other worldwide currencies for the past year, and economists have observed that the worldwide demand for products manufactured in Country A has been rapidly growing. Thus, the economists reason that Country A’s currency is strengthening because of classic supply and demand factors.

Which of the following is an assumption made by the economists in reaching their conclusion?


A. It is not difficult to ship products made in Country A to other countries
B. Country A has lower manufacturing costs than other markets
C. The demand for products manufactured in Country A will continue to increase
D. Country A has a regulatory system that ensures its manufactured products meet high quality standards
E. Manufacturing companies in Country A receive payment in Country A’s local currency


(A) The difficulty of shipping products from Country A to other countries is irrelevant.

(B) This is not an assumption made the economists.

(C) The passage does not state that the current economic conditions will continue.

(D) The regulatory system of Country A is irrelevant.

(E) Correct. If manufacturers in Country A require payment in local currency, then demand for that currency from foreign buyers must increase. This helps to logically support the economists’ conclusion.


Answer: E
_________________

Founder of GMAT Club

GMAT Club's Special offer for Student Loans only through Aug 31 - New!
Just starting out with GMAT? Start here... or use our Daily Study Plan


Co-author of the GMAT Club tests

Kudos [?]: 27970 [0], given: 5052

Intern
Intern
avatar
Joined: 18 Jul 2016
Posts: 9

Kudos [?]: [0], given: 85

V10-11 [#permalink]

Show Tags

New post 25 Oct 2016, 07:32
Hi bb, thanks for the question. The question demands prior knowledge of how the trade and currency valuation are related.

I took a different approach of understanding that 'demand and supply has led to increase in the currency value' and 'the international demand has been high' is explicitly given as a premise. So the assumption could only be that Country A has been able to successfully supply to the demand. So anything related to the ease of supply could be considered. Hence chose A. :(. Probably A is irrelevant because if we negate the statement, i.e., If shipping is difficult, still supply could be made through difficult routes.

Also, 'the classic demand and supply' seems to refer to demand and supply of products manufactured in the country and not the currency. Payment made in any currency would increase the country's reserves to strengthens its currency. Pls correct me if I m wrong.

Last edited by Sneha Jaiswal on 25 Oct 2016, 11:56, edited 1 time in total.

Kudos [?]: [0], given: 85

Manager
Manager
User avatar
B
Status: In the realms of Chaos & Night
Joined: 13 Sep 2015
Posts: 171

Kudos [?]: 87 [0], given: 94

Schools: Insead '18, ISB '19
Re: V10-11 [#permalink]

Show Tags

New post 25 Oct 2016, 11:00
Sneha Jaiswal wrote:
Hi bb, thank for the question. The question demands prior knowledge of how the trade and currency valuation are related.

I took a different approach of understanding that 'demand and supply has led to increase in the currency value' and 'the international demand has been high' is explicitly given as a premise. So the assumption could only be that Country A has been able to successfully supply to the demand. So anything related to the ease of supply could be considered. Hence chose A. :(. Probably A is irrelevant because if we negate the statement, i.e., If shipping is difficult, still supply could be made through difficult routes.

Also, 'the classic demand and supply' seems to refer to demand and supply of products manufactured in the country and not the currency. Payment made in any currency would increase the country's reserves to strengthens its currency. Pls correct me if I m wrong.


Hi sneha

I had the same query as yours when i first attempted this question. Moreover, me too was on the verge of dropping a post on similar lines.
It seems you joined gmatclub recently and i assume that you are in the preliminary stage of preperation.
So a small piece of advice.
In the question above,

The currency of Country A has been strengthening against other worldwide currencies for the past year, - the question specifically starts by discussing about currency of country A. You may call this a premise or Intermediate conclusion.

and economists have observed that the worldwide demand for products manufactured in Country A has been rapidly growing. - a premise aka additional information.

Thus, the economists reason that Country A’s currency is strengthening because of classic supply and demand factors. - the conclusion.

Also keep the main conclusion's aim in the back of the mind when reading thru the choices.
The whole argument is revolving around country's A Currency. So keep a eye open for any option which refers to the same.
You shall find this beneficial especially in the sub-600 and 600-700 range of questions.

Hope its clear.

Now the reason i underlined intermediate conclusion, consider the following argument -

"Economists have observed that the worldwide demand for products manufactured in Country A has been rapidly growing. They reason that Country A’s currency is strengthening because of classic supply and demand factors. Thus it can be concluded that the currency of Country A has been strengthening against other worldwide currencies for the past year."

Re-read the answers.

:idea:
_________________

Good luck
=========================================================================================
"If a street performer makes you stop walking, you owe him a buck"
"If this post helps you on your GMAT journey, drop a +1 Kudo "


"Thursdays with Ron - Consolidated Verbal Master List - Updated"

Kudos [?]: 87 [0], given: 94

Intern
Intern
avatar
Joined: 18 Jul 2016
Posts: 9

Kudos [?]: [0], given: 85

Re: V10-11 [#permalink]

Show Tags

New post 25 Oct 2016, 12:19
Hi Nightfury,
Thanks for the reply. Its quite funny but I have my GMAT in 1 week. :|

Regarding the question, I wouldnt categorise the 1st statement (The currency of Country A has been strengthening against other worldwide currencies for the past year, ) as an intermediate conclusion but as a fact or evidence (which cannot be disputed). ICs by the author can be disputed.

I get your point of looking for main subject in the choices but the correct answer choice here says that payment in the same currency creates demand for the currency and hence brings in more currency. This increase in currency in the country is again assumed to strengthen the currency against other currencies. Isnt this possible even if the payment is in any other currency. I am sorry it might be silly but I am quite unaware of all this. Kindly explain.

Thanks for your patience and help in advance. :)

Kudos [?]: [0], given: 85

Expert Post
Verbal Expert
User avatar
S
Joined: 14 Dec 2013
Posts: 3139

Kudos [?]: 3107 [0], given: 22

Location: Germany
Schools: HHL Leipzig
GMAT 1: 780 Q50 V47
WE: Corporate Finance (Pharmaceuticals and Biotech)
GMAT ToolKit User Premium Member Reviews Badge
Re: V10-11 [#permalink]

Show Tags

New post 25 Oct 2016, 12:38
Sneha Jaiswal wrote:
Hi Nightfury,
Thanks for the reply. Its quite funny but I have my GMAT in 1 week. :|

Regarding the question, I wouldnt categorise the 1st statement (The currency of Country A has been strengthening against other worldwide currencies for the past year, ) as an intermediate conclusion but as a fact or evidence (which cannot be disputed). ICs by the author can be disputed.

I get your point of looking for main subject in the choices but the correct answer choice here says that payment in the same currency creates demand for the currency and hence brings in more currency. This increase in currency in the country is again assumed to strengthen the currency against other currencies. Isnt this possible even if the payment is in any other currency. I am sorry it might be silly but I am quite unaware of all this. Kindly explain.

Thanks for your patience and help in advance. :)


Nightfury14 wrote:
Sneha Jaiswal wrote:
Hi bb, thank for the question. The question demands prior knowledge of how the trade and currency valuation are related.

I took a different approach of understanding that 'demand and supply has led to increase in the currency value' and 'the international demand has been high' is explicitly given as a premise. So the assumption could only be that Country A has been able to successfully supply to the demand. So anything related to the ease of supply could be considered. Hence chose A. :(. Probably A is irrelevant because if we negate the statement, i.e., If shipping is difficult, still supply could be made through difficult routes.

Also, 'the classic demand and supply' seems to refer to demand and supply of products manufactured in the country and not the currency. Payment made in any currency would increase the country's reserves to strengthens its currency. Pls correct me if I m wrong.


Hi sneha

I had the same query as yours when i first attempted this question. Moreover, me too was on the verge of dropping a post on similar lines.
It seems you joined gmatclub recently and i assume that you are in the preliminary stage of preperation.
So a small piece of advice.
In the question above,

The currency of Country A has been strengthening against other worldwide currencies for the past year, - the question specifically starts by discussing about currency of country A. You may call this a premise or Intermediate conclusion.

and economists have observed that the worldwide demand for products manufactured in Country A has been rapidly growing. - a premise aka additional information.

Thus, the economists reason that Country A’s currency is strengthening because of classic supply and demand factors. - the conclusion.

Also keep the main conclusion's aim in the back of the mind when reading thru the choices.
The whole argument is revolving around country's A Currency. So keep a eye open for any option which refers to the same.
You shall find this beneficial especially in the sub-600 and 600-700 range of questions.

Hope its clear.

Now the reason i underlined intermediate conclusion, consider the following argument -

"Economists have observed that the worldwide demand for products manufactured in Country A has been rapidly growing. They reason that Country A’s currency is strengthening because of classic supply and demand factors. Thus it can be concluded that the currency of Country A has been strengthening against other worldwide currencies for the past year."

Re-read the answers.

:idea:


The jump from demand of a currency going high to currency getting stronger needs some outside knowledge. We are withdrawing this question for further review.

Kudos [?]: 3107 [0], given: 22

Expert Post
Founder
Founder
User avatar
P
Joined: 04 Dec 2002
Posts: 15456

Kudos [?]: 27970 [0], given: 5052

Location: United States (WA)
GMAT 1: 750 Q49 V42
GMAT ToolKit User Premium Member CAT Tests
Re: V10-11 [#permalink]

Show Tags

New post 26 Oct 2016, 21:39
Thank you for bringing this up to our attention. We have evaluated this question and though there are some arguments about currency supply demand being a more technical/economics related concept, it is still falling under the basic principle of supply and demand - the greater the demand, the higher the price. At this time we will keep this question in the active database.

Best Regards
BB
_________________

Founder of GMAT Club

GMAT Club's Special offer for Student Loans only through Aug 31 - New!
Just starting out with GMAT? Start here... or use our Daily Study Plan


Co-author of the GMAT Club tests

Kudos [?]: 27970 [0], given: 5052

Expert Post
Verbal Expert
User avatar
S
Joined: 14 Dec 2013
Posts: 3139

Kudos [?]: 3107 [0], given: 22

Location: Germany
Schools: HHL Leipzig
GMAT 1: 780 Q50 V47
WE: Corporate Finance (Pharmaceuticals and Biotech)
GMAT ToolKit User Premium Member Reviews Badge
V10-11 [#permalink]

Show Tags

New post 28 Oct 2016, 08:34
bb wrote:
Thank you for bringing this up to our attention. We have evaluated this question and though there are some arguments about currency supply demand being a more technical/economics related concept, it is still falling under the basic principle of supply and demand - the greater the demand, the higher the price. At this time we will keep this question in the active database.

Best Regards
BB


Sneha Jaiswal wrote:
Hi Nightfury,
Thanks for the reply. Its quite funny but I have my GMAT in 1 week. :|

Regarding the question, I wouldnt categorise the 1st statement (The currency of Country A has been strengthening against other worldwide currencies for the past year, ) as an intermediate conclusion but as a fact or evidence (which cannot be disputed). ICs by the author can be disputed.

I get your point of looking for main subject in the choices but the correct answer choice here says that payment in the same currency creates demand for the currency and hence brings in more currency. This increase in currency in the country is again assumed to strengthen the currency against other currencies. Isnt this possible even if the payment is in any other currency. I am sorry it might be silly but I am quite unaware of all this. Kindly explain.

Thanks for your patience and help in advance. :)


Sneha Jaiswal

After our internal discussions, it was agreed by our team (including myself, on second thoughts) that the law of supply and demand is a basic concept that a business school aspirant is expected to understand.

So, in response to your query, following is the explanation:
If the medium of purchase for country A's goods is the the currency of country A, then more the purchase, more is the currency required in the world market. In other words, more of country A's currency is required in the world market and hence the demand of country A'S currency would be increasing in the world market. As per supply and demand law, higher the demand, higher is the price. So the price of the currency of country A would go high. In other words more currency in other country's terms is required to buy country A's currency - i.e., country A's currency is strengthened.

Kudos [?]: 3107 [0], given: 22

Intern
Intern
avatar
B
Joined: 28 Jun 2015
Posts: 7

Kudos [?]: 5 [0], given: 0

Location: India
WE: Information Technology (Energy and Utilities)
CAT Tests
Re: V10-11 [#permalink]

Show Tags

New post 15 Aug 2017, 20:56
Hi All,

Please take my understanding into consideration -

Like if i think " it's a cause and effect scenario " . Here because of classic supply and demand factors led to strengthening Country A's Currency " so here we can pretty well assume that
1. Nothing apart from Supply and demand led to strengthening of Country A's Currency ( Assuming because of cause and effect relation)

why I am doubting option " E" is that some other reason apart from "Supply and demand" has led to increase in strengthening of Country A's Currency . please explain on the lines of my understanding ??

Thanks
Amit

Kudos [?]: 5 [0], given: 0

Re: V10-11   [#permalink] 15 Aug 2017, 20:56
Display posts from previous: Sort by

V10-11

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  

Moderators: Bunuel, Vyshak



GMAT Club MBA Forum Home| About| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.