Forum Home > GMAT > Quantitative > Problem Solving (PS)
Events & Promotions
|
|
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
Track
Your Progress
Practice
Pays
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Dec 1410:00 AM EST
-12:00 PM EST
Think a 100% GMAT Verbal score is out of your reach? Target Test Prep will make you think again! Our course uses techniques such as topical study and spaced repetition to maximize knowledge retention and make studying simple and fun.
Dec 1411:00 AM IST
-01:00 PM IST
Attend this session to learn how to Deconstruct arguments, Pre-Think Author’s Assumptions, and apply Negation Test.- Dec 15
11:00 AM IST
-01:00 PM IST
Attend this free GMAT Algebra Webinar and learn how to master the most challenging Inequalities and Absolute Value problems with ease. 
Dec 1608:00 AM PST
-11:59 PM PST
GMAT Club 12 Days of Christmas is a 4th Annual GMAT Club Winter Competition based on solving questions. This is the Winter GMAT competition on GMAT Club with an amazing opportunity to win over $40,000 worth of prizes!- Dec 17
09:00 AM PST
-10:00 AM PST
Join Manhattan Prep instructor Whitney Garner for a fun—and thorough—review of logic-based (non-math) problems, with a particular emphasis on Data Sufficiency and Two-Parts. - Dec 18
10:00 AM PST
-11:00 AM PST
Here is the essential guide to securing scholarships as an MBA student! In this video, we explore the various types of scholarships available, including need-based and merit-based options.
souvik101990
Alum
Joined: 19 Mar 2012
Last visit: 09 Nov 2024
Posts: 4,327
Own Kudos:
Given Kudos: 2,326
Location: United States (WA)
Concentration: Leadership, General Management
Schools: Ross '20 (M)
GMAT 1: 760 Q50 V42
GMAT 2: 740 Q49 V42 (Online)
GMAT 3: 760 Q50 V42 (Online)
GPA: 3.8
WE:Marketing (Non-Profit and Government)
Products:
Expert reply
26 Apr 2018, 03:05
Kudos
Bookmarks
E
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
15%
(low)
Question Stats:
88% (01:43) correct
12%
(01:11)
wrong
based on 25
sessions
History
Date
Time
Result
Not Attempted Yet
The causal relationship between economic growth and financial market development has been the subject of intensive theoretical and empirical studies. The question is whether financial market development produces economic growth or the arrow of causation points in the other direction.
The recent revival of interest in the link between financial development and growth stems mainly from the insights and techniques of internally originated growth models, which have shown that there can be self-sustaining growth without externally originated technical progress and that the growth rate can be related to preferences, technology, income distribution and institutional arrangements. This provides the theoretical underpinning that early contributors lacked: financial intermediation can be shown to have not only level effects but also growth effects.
Pagano suggests three ways in which, under the basic internally fueled growth model, the development of the financial sector might affect economic growth. First, it can increase the productivity of investments. Second, an efficient financial sector reduces transaction costs and thus increases the share of savings channeled into productive investments. (An efficient financial sector improves the liquidity of investments.) Third, financial sector development can either promote or reduce savings.
According to the passage, Pagano believes that developments in the financial sector can decrease
A. the productivity of investments
B. the liquidity of investments
C. the efficiency of economic growth
D. the number of transactions
E. savings
The recent revival of interest in the link between financial development and growth stems mainly from the insights and techniques of internally originated growth models, which have shown that there can be self-sustaining growth without externally originated technical progress and that the growth rate can be related to preferences, technology, income distribution and institutional arrangements. This provides the theoretical underpinning that early contributors lacked: financial intermediation can be shown to have not only level effects but also growth effects.
Pagano suggests three ways in which, under the basic internally fueled growth model, the development of the financial sector might affect economic growth. First, it can increase the productivity of investments. Second, an efficient financial sector reduces transaction costs and thus increases the share of savings channeled into productive investments. (An efficient financial sector improves the liquidity of investments.) Third, financial sector development can either promote or reduce savings.
According to the passage, Pagano believes that developments in the financial sector can decrease
A. the productivity of investments
B. the liquidity of investments
C. the efficiency of economic growth
D. the number of transactions
E. savings
souvik101990
Alum
Joined: 19 Mar 2012
Last visit: 09 Nov 2024
Posts: 4,327
Own Kudos:
Given Kudos: 2,326
Location: United States (WA)
Concentration: Leadership, General Management
Schools: Ross '20 (M)
GMAT 1: 760 Q50 V42
GMAT 2: 740 Q49 V42 (Online)
GMAT 3: 760 Q50 V42 (Online)
GPA: 3.8
WE:Marketing (Non-Profit and Government)
Products:
Expert reply
26 Apr 2018, 03:05
Kudos
Bookmarks
Official Solution:
The causal relationship between economic growth and financial market development has been the subject of intensive theoretical and empirical studies. The question is whether financial market development produces economic growth or the arrow of causation points in the other direction.
The recent revival of interest in the link between financial development and growth stems mainly from the insights and techniques of internally originated growth models, which have shown that there can be self-sustaining growth without externally originated technical progress and that the growth rate can be related to preferences, technology, income distribution and institutional arrangements. This provides the theoretical underpinning that early contributors lacked: financial intermediation can be shown to have not only level effects but also growth effects.
Pagano suggests three ways in which, under the basic internally fueled growth model, the development of the financial sector might affect economic growth. First, it can increase the productivity of investments. Second, an efficient financial sector reduces transaction costs and thus increases the share of savings channeled into productive investments. (An efficient financial sector improves the liquidity of investments.) Third, financial sector development can either promote or reduce savings.
According to the passage, Pagano believes that developments in the financial sector can decrease
A. the productivity of investments
B. the liquidity of investments
C. the efficiency of economic growth
D. the number of transactions
E. savings
(A) Actually, the author says that the productivity of investments can be increased.
(B) Pagano connects increases in financial sector efficiency can lead to greater liquidity of investments.
(C) The efficiency of growth is not discussed.
(D) The cost of transactions, not the number of them, is discussed.
(E) This is the correct choice. The final sentence says that Pagano believes that "financial sector development can either promote or reduce savings."
Answer: E
The causal relationship between economic growth and financial market development has been the subject of intensive theoretical and empirical studies. The question is whether financial market development produces economic growth or the arrow of causation points in the other direction.
The recent revival of interest in the link between financial development and growth stems mainly from the insights and techniques of internally originated growth models, which have shown that there can be self-sustaining growth without externally originated technical progress and that the growth rate can be related to preferences, technology, income distribution and institutional arrangements. This provides the theoretical underpinning that early contributors lacked: financial intermediation can be shown to have not only level effects but also growth effects.
Pagano suggests three ways in which, under the basic internally fueled growth model, the development of the financial sector might affect economic growth. First, it can increase the productivity of investments. Second, an efficient financial sector reduces transaction costs and thus increases the share of savings channeled into productive investments. (An efficient financial sector improves the liquidity of investments.) Third, financial sector development can either promote or reduce savings.
According to the passage, Pagano believes that developments in the financial sector can decrease
A. the productivity of investments
B. the liquidity of investments
C. the efficiency of economic growth
D. the number of transactions
E. savings
(A) Actually, the author says that the productivity of investments can be increased.
(B) Pagano connects increases in financial sector efficiency can lead to greater liquidity of investments.
(C) The efficiency of growth is not discussed.
(D) The cost of transactions, not the number of them, is discussed.
(E) This is the correct choice. The final sentence says that Pagano believes that "financial sector development can either promote or reduce savings."
Answer: E
16 Jul 2022, 02:12
Kudos
Bookmarks
How are we inferring a reduction in savings when passage is saying 'promote or reduce savings'?
Isn't promote here contrasting reduce and thus, meaning increase?
GMATNinja @Experts please help
Isn't promote here contrasting reduce and thus, meaning increase?
GMATNinja @Experts please help
