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05 Apr 2021, 08:45
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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:
81% (01:25) correct
19%
(01:49)
wrong
based on 207
sessions
History
Date
Time
Result
Not Attempted Yet
Economist: The politician is trying to win over the hearts of the public by offering to lower taxes using money borrowed by the Federal Reserve from foreign banks. This is as sensible as borrowing money in the name of your children and giving it to them to convince them of your affluence.
The economist's statements, if true, best support which of the following as a conclusion?
A. The Federal Reserve is borrowing money that will not go to good use.
B. The ratio of debt to existing capital of the Federal Reserve is similar to the rate of debt to existing capital of the parents in a household.
C. The public will eventually have to pay for the debts of the Federal Bank.
D. The Federal Reserve should refrain from borrowing capital from foreign banks and raise resources, instead, from issuing bonds to the American public.
E. The continuing rise in the national debt may lead to the collapse of the American economy.
The economist's statements, if true, best support which of the following as a conclusion?
A. The Federal Reserve is borrowing money that will not go to good use.
B. The ratio of debt to existing capital of the Federal Reserve is similar to the rate of debt to existing capital of the parents in a household.
C. The public will eventually have to pay for the debts of the Federal Bank.
D. The Federal Reserve should refrain from borrowing capital from foreign banks and raise resources, instead, from issuing bonds to the American public.
E. The continuing rise in the national debt may lead to the collapse of the American economy.
09 Apr 2021, 11:00
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OFFICIAL EXPLANATION
Economist: The politician is trying to win over the hearts of the public by offering to lower taxes using money borrowed by the Federal Reserve from foreign banks. This is as sensible as borrowing money in the name of your children and giving it to them to convince them of your affluence.
The economist's statements, if true, best support which of the following as a conclusion?
A. The Federal Reserve is borrowing money that will not go to good use.
Incorrect.
This is an Inference Question, so it is made up of premises only; you need to find a conclusion which is based on them. In his or her statements, the economist draws a comparison:
- Premise A: The politician wants to be popular by lowering taxes using money borrowed by the Federal Bank from foreign banks.
+
Premise B: This is similar to parents who want to show affluence by giving their children money which was borrowed in the children's name.
=
Conclusion: ?
We are told nothing of what the public will do with the money, so we can't conclude anything in that direction.
B. The ratio of debt to existing capital of the Federal Reserve is similar to the rate of debt to existing capital of the parents in a household.
Incorrect.
We are told nothing of the ratio between existing capital and borrowed money in either the Federal Reserve or the average household, so any conclusion in that direction is impossible.
C. The public will eventually have to pay for the debts of the Federal Bank.
The economists compares the politician's plan to a situation in which the children will have to pay for the money they received; this means the economist's conclusion is that the public will eventually have to pay for the money it received in tax relief. This money is the Federal Bank's debt to foreign banks.
D. The Federal Reserve should refrain from borrowing capital from foreign banks and raise resources, instead, from issuing bonds to the American public.
Incorrect
This is an Inference Question, so it is made up of premises only; you need to find a conclusion which is based on them. In his or her statements, the economist draws a comparison:
- Premise A: The politician wants to be popular by lowering taxes using money borrowed by the Federal Bank from foreign banks.
+
Premise B: This is similar to parents who want to show affluence by giving their children money which was borrowed in the children's name.
=
Conclusion: ?
The question of an alternate path of action is not discussed and therefore, to conclude that money should be raised by issuing bonds is not a small step forward but rather a leap.
Remember, in Inference questions, your conclusion must only take a small step from the premises.
E. The continuing rise in the national debt may lead to the collapse of the American economy.
Incorrect.
The question of the stability of the American economy is not discussed and therefore, concluding that the proposed course of action may lead to the collapse of the American economy is not a small step forward but rather a giant leap.
Remember, in Inference questions, your conclusion must only take a small step from the premises.
General Discussion
05 Apr 2021, 09:48
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Eliminate A because the passage does not mention whether lowering the taxes is good or bad. It does indicate that lowering taxes using borrowed funds is foolish.
Eliminate B because the passage does not talk about ratio of debt to capital.
Eliminate D because there is no indication in the passage that issuing bonds to lower taxes is a good alternate option.
Eliminate E because, although it is true that continuing debt may lead to collapse, nothing in the passage suggests that there is a continuous rise in debt.
C remains and is the correct answer.
Eliminate B because the passage does not talk about ratio of debt to capital.
Eliminate D because there is no indication in the passage that issuing bonds to lower taxes is a good alternate option.
Eliminate E because, although it is true that continuing debt may lead to collapse, nothing in the passage suggests that there is a continuous rise in debt.
C remains and is the correct answer.
