Most economists agree that an international trade agreement that was

Question

﻿Most economists agree that an international trade agreement that was recently signed will strengthen the economies of those countries participating in it. This benefit is expected to be noticeable even in the short term. Nevertheless, despite the fact that the number of business bankruptcies generally declines in a country when its economic performance improves, these same economists expect that countries participating in the agreement will experience an increase in business bankruptcies shortly after it takes effect.

Which of the following, if true, most helps to justify the economists' expectation about business bankruptcies?

A. In the years before the new trade agreement was signed, major political parties in some of the countries that eventually signed it had opposed it.

B. The new trade agreement will eliminate tariffs that have protected businesses in participating countries from foreign competition.

C. More countries are expected to sign the new trade agreement in the years after it takes effect.

D. Improved economic performance among the countries participating in the new agreement is unlikely to have a significant impact on their near neighbors that are not participating.

E. The economies of the countries participating in the new trade agreement are much stronger than the economies of most other countries in the world.

Paras96 · Answer

The economists' expectation that countries participating in the trade agreement will experience an increase in business bankruptcies shortly after it takes effect can be best justified by option:

B. The new trade agreement will eliminate tariffs that have protected businesses in participating countries from foreign competition.

This option provides a plausible reason for the increase in business bankruptcies. When tariffs that protect domestic businesses from foreign competition are eliminated, businesses may face tougher competition from international counterparts. This can lead to a higher likelihood of bankruptcy for businesses that were previously shielded by the tariffs. The increased competition could impact their ability to compete effectively in the international market, potentially leading to financial distress and bankruptcies.

gmatophobia · Answer

Paradox  : The International Trade Agreement will strengthen the economies of those countries participating in it. Despite the fact that the number of business bankruptcies generally declines in a country when its economic performance improves, the countries participating in the agreement will experience an increase in business bankruptcies shortly after it takes effect.

We have to find an option that resolves the paradox.

Answer choice elimination  :

A. In the years before the new trade agreement was signed, major political parties in some of the countries that eventually signed it had opposed it.

Two issues with this option-
1) The information presented in option A targets only a subset of the countries (  ...major political parties in some of the countries...  ), while the conclusion is regarding all the countries participating in the agreement will experience an increase in business bankruptcies shortly after it takes effect.
2) The option doesn't present us with any valuable information that points out why the countries will experience an increase in business bankruptcies. Hence we can eliminate Option A.

B. The new trade agreement will eliminate tariffs that have protected businesses in participating countries from foreign competition.

Alright, so after the new trade agreement comes into effect, domestic businesses will experience increased competition. Hence, it is likely that because of this change, businesses may experience bankruptcy. We can keep this option.

C. More countries are expected to sign the new trade agreement in the years after it takes effect.

Not relevant to the paradox that we are trying to resolve. We need a piece of information that helps us understand whether something changes as a part of the international trade agreement for which the businesses may experience bankruptcy. We can eliminate this option.

D. Improved economic performance among the countries participating in the new agreement is unlikely to have a significant impact on their near neighbors that are not participating.

The paradox is centered around the countries participating in the new agreement. The effect on their neighbors is irrelevant. Eliminate D.

E. The economies of the countries participating in the new trade agreement are much stronger than the economies of most other countries in the world.

This option deepens the paradox. We need a piece of information that helps us understand whether something changes as a part of the international trade agreement for which the businesses may experience bankruptcy. We can eliminate this option.

Option B

MartyMurray · Answer

The question asks us to find the choice that "most helps to justify the economists' expectation about business bankruptcies."

That expectation is the following:

countries participating in the agreement will experience an increase in business bankruptcies shortly after it takes effect

The passage provides no support for that expectation. So, the correct answer will provide a reason why "countries participating in the agreement will experience an increase in business bankruptcies shortly after it takes effect" even though, as the passage says, economists agree that the agreement "will strengthen the economies of those countries participating in it," "this benefit is expected to be noticeable even in the short term," and "the number of business bankruptcies generally declines in a country when its economic performance improves."

A. In the years before the new trade agreement was signed, major political parties in some of the countries that eventually signed it had opposed it.

It could be that the reason why major political parties in some of the countries that eventually signed the agreement had opposed it was that members of those parties expected the agreement to cause an increase in business bankruptcies.

At the same time, we have no clear reason to believe that that reasoning underlies the opposition to the agreement by the major political parties.

Furthermore, even if members of those parties expected signing the agreement to result in bankruptcies, the simple fact that they expected that outcome does not justify that expectation. After all, the fact that someone expects something does not mean that that expectation is valid.

Eliminate.

B. The new trade agreement will eliminate tariffs that have protected businesses in participating countries from foreign competition.

This choice justifies the economists' expectation. After all, if the agreement will "eliminate tariffs that have  protected  businesses in participating countries," then, even though the agreement "will strengthen the economies of those countries participating in it" overall, it makes sense that it will also cause some businesses in those countries to go bankrupt. After all, if a business is no longer protected from foreign competition, it may lose it's ability to operate profitably.

So, this choice provides reason to believe that economists' expectation is correct.

Keep.

C. More countries are expected to sign the new trade agreement in the years after it takes effect.

The fact that "more countries are expected to sign the new trade agreement " does not indicate that the agreement will cause business bankruptcies.

Eliminate.

D. Improved economic performance among the countries participating in the new agreement is unlikely to have a significant impact on their near neighbors that are not participating.

The fact that "neighbors that are not participating" are unlikely to be impacted by "improved economic performance among the countries participating in the new agreement" does not indicate that business bankruptcies will result from the new agreement.

Simply put, a lack of impact would not cause bankruptcies or anything else.

Eliminate.

E. The economies of the countries participating in the new trade agreement are much stronger than the economies of most other countries in the world.

Simply put, the fact that the economies of the countries participating in the new trade agreement are stronger than others clearly would not cause business bankruptcies in those countries.

If anything this choice is a reason why the economists' expectation would not be justified.

Eliminate.

The correct answer is  B

GmatKnightTutor · Answer

﻿Most economists agree that an international trade agreement that was recently signed will strengthen the economies of those countries participating in it. This benefit is expected to be noticeable even in the short term. Nevertheless, despite the fact that the number of business bankruptcies generally declines in a country when its economic performance improves, these same economists expect that countries participating in the agreement will experience an increase in business bankruptcies shortly after it takes effect.

Which of the following, if true, most helps to justify the economists' expectation about business bankruptcies?

A. In the years before the new trade agreement was signed, major political parties in some of the countries that eventually signed it had opposed it.

B. The new trade agreement will eliminate tariffs that have protected businesses in participating countries from foreign competition.

C. More countries are expected to sign the new trade agreement in the years after it takes effect.

D. Improved economic performance among the countries participating in the new agreement is unlikely to have a significant impact on their near neighbors that are not participating.

E. The economies of the countries participating in the new trade agreement are much stronger than the economies of most other countries in the world.

The passage talks about how a certain international trade agreement will help countries who take part - even in the short term. And that when an economy does well, bankruptcies decline. That being said, economists who say this ALSO say that bankruptcies will increase shortly after the agreement takes effect in a country.

We're asked to look for something that supports what the economists are saying.

(B) is the answer. If local companies that sell shoes were competitive because foreign shoe companies had to pay a 500% tariff (and were therefore expensive/harder for customers to purchase), these local companies may go bankrupt if those tariffs were lifted by a trade agreement.

-contact: gmatknight site | gmatclub dm

VerbalBot · Answer

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Most economists agree that an international trade agreement that was

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