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Verbal Diagnostic Test No : 6 – CR Q No: 2

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Verbal Diagnostic Test No : 6 – CR Q No: 2 [#permalink]

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New post 13 Mar 2014, 10:18
3
6
00:00
A
B
C
D
E

Difficulty:

  95% (hard)

Question Stats:

38% (01:53) correct 62% (02:02) wrong based on 243 sessions

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The Central Banks mostly depend upon tinkering with interest rates for regulating the money supply and thereby inflation, momentarily ignoring the importance of growth and judicious supply of goods. They also cite rapid ballooning of the money supply and black money because of globalization as reasons for inclining toward interest rate cuts as the chief tools for smoothening a dented economy

Which of the following, if true, most weakens the argument above?

A: Economists across the world have proposed that in the near medium term the rate cuts will minimize the fiscal deficit than do higher exports.
B: Greenspan used effective rate- management for the successful re-vitalisation of the US economy
C: Franklin Roosevelt indulged in massive growth orientation of the economics even though he burdened the country with massive debts, but still pulled the country out of woods
D: Rate manoeuvres have an instant impact and rattle many vital sectors of the economy
E: Central Banks silently adhere to the politics of the governments rather than follow principles of Economics these days

OA: C
OE:
A: Near medium term is out of scope.
B: This is a strengthener
C: Correct answer; This precedence helps to deny the effectual impact of rate cuts in buttressing a lame economy
D: This is a strengthener
E: Out of scope

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Re: Verbal Diagnostic Test No : 6 – CR Q No: 2 [#permalink]

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New post 13 Mar 2014, 18:14
A weaken statement attacks any part of the argument. The conclusion is "inclining toward interest rate cuts as the chief tools for smoothening a dented economy." If central banks adhere differently, then interest rate cuts are not the chief tools for smoothing an economy, but politicizing. Furthermore, interest rate cuts are synonymous to massive growth orientation because both are expansionary policies, thereby strengthening the argument in general. Respectfully speaking, if a weakening argument were made from a precedent, at least detail the move by Volcker's Federal Reserve in which they raised rates in order to restore a lame economy. IMO E.
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Re: Verbal Diagnostic Test No : 6 – CR Q No: 2 [#permalink]

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New post 13 Mar 2014, 23:04
I was stuck between C and D, and I chose D over C.

Can somebody explain why is D wrong?
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Re: Verbal Diagnostic Test No : 6 – CR Q No: 2 [#permalink]

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New post 26 Oct 2015, 09:13
Picked D. Not sure how C helps weaken.
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Re: Verbal Diagnostic Test No : 6 – CR Q No: 2 [#permalink]

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New post 27 Oct 2015, 09:09
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The Central Bank’s arguments hinge on one single factor that containment of money supply and thereby inflation is the means of achieving prosperity. This is a debatable point. There are other ways through which growth can be spurred. For example, Roosevelt proved in the 1930’s when the country was going through the Great depression that by massive development, one can stoke growth. The ignoring of other viable alternative causes is what weakens the Central Bank’s narrow perspective relative to money supply.

It must be noted that the issue is about interest rate maneuvers in general and not about exclusive reference to either increases or decreases in rate. While lowering the rate may aid an already flourishing economy, it may not assist that much a dented economy. That is the reason many developing nations have to create wealth through growth, even at the risk of some inflation.

D is silent on the core issue of bailing out a weak economy; it is just scratching the surface of problem, akin to treating the symptoms of a disease rather than the cause of the disease by admitting that the effect is temporary.

May be this is a bit of discourse on Economics, though essential to deal with critical reasoning. This was my perception honestly when I formatted the answer choices
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Re: Verbal Diagnostic Test No : 6 – CR Q No: 2 [#permalink]

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New post 21 Sep 2017, 00:08
This is not related to answering the question itself, but isn't interest cut an expansionary monetary policy - I imagine interest cut would have the opposite effect of containing ballooning of money supply (and hence inflation).

While I am aware that GMAT questions do not require outside knowledge, I find the logic in the question stem to be misleading and questionable.

Please correct me if I am wrong.
Re: Verbal Diagnostic Test No : 6 – CR Q No: 2   [#permalink] 21 Sep 2017, 00:08
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Verbal Diagnostic Test No : 6 – CR Q No: 2

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