Directions(Q1. – Q10.) : Read the following passage carefully and answer the questions given below it. Certain words/phrases have been given in bold to help you locate them while answering some of the questions.
Four years ago, some of us watched with a mixture of incredulity and horror as elite discussion of economic policy went completely off the rails. Over the course of just a few months, influential people all over the Western world convinced themselves and each other that budget deficits were an existential threat, trumping any and all concern about mass unemployment. The result was a turn to fiscal austerity that deepened and prolonged the economic crisis, inflicting immense suffering.
And now it’s happening again. Suddenly, it seems as if all the serious people are telling each other that despite high unemployment there’s hardly any “slack” in labour markets – as evidenced by a supposed surge in wages – and that the Federal Reserve needs to start raising interest rates very soon to head off the danger of inflation.
To be fair, those making the case for monetary tightening are more thoughtful and less overtly political than the archons of austerity who drove the last wrong turn in policy. But the advice they’re giving could be just as destructive.
O.K., where is this coming from?
The starting point for this turn in elite opinion is the assertion that wages, after stagnating for years, have started to rise rapidly. And it’s true that one popular measure of wages has indeed picked up, with an especially large bump last month.
But that bump is probably a snow-related statistical illusion. As economists at Goldman Sachs have pointed out, average wages normally jump in bad weather – not because anyone’s wages actually rise,
but because the workers idled by snow and storms
tend to be less well-paid than those who aren’t affected.
but because the workers idled by snow and storms
tend to be less well-paid than those who aren’t affected.
Beyond that, we have multiple measures of wages, and only one of them is showing a notable uptick. It’s far from clear that the alleged wage acceleration is even happening.
And what’s wrong with rising wages, anyway? In the past, wage increases of around 4 percent a year – more than twice the current rate – have been consistent with low inflation. And there’s a very good
case for raising the Fed’s inflation target, which would mean seeking faster wage growth, say 5 percent or 6 percent per year. Why? Because even the International Monetary Fund now warns against the dangers of “lowflation”: too low an inflation rate puts the economy at risk of Japanification, of getting caught in a trap of economic stagnation and intractable debt.
case for raising the Fed’s inflation target, which would mean seeking faster wage growth, say 5 percent or 6 percent per year. Why? Because even the International Monetary Fund now warns against the dangers of “lowflation”: too low an inflation rate puts the economy at risk of Japanification, of getting caught in a trap of economic stagnation and intractable debt.
Over all, then, while it’s possible to argue that we’re running out of labour slack, it’s also possible to argue the opposite, and either way the prudent thing would surely be to wait: Wait until there’s solid evidence of rising wages, then wait some more until wage growth is at least back to precrisis levels and preferably higher.
Yet for some reason there’s a growing drumbeat of demands that we not wait, that we get ready to
demands that we not wait, that we get ready to raise interest rates right away or at least very soon. What’s that about ?
demands that we not wait, that we get ready to raise interest rates right away or at least very soon. What’s that about ?
Part of the answer, is that for some people it’s always 1979. That is, they’re eternally vigilant against the danger of a runaway wage-price spiral, and somehow they haven’t noticed that nothing like that has happened for decades. May be it’s a generational thing. May be it’s because a 1970s style crisis fits their ideological preconceptions, but the phantom menace of stagflation still has an outsized influence on economic debate.
Then there’s sado-monetarism: the sense, all too
common in banking circles, that inflicting pain is ipso facto good. There are some people and institutions – for example, the Basel-based Bank for International Settlements – that always want to see interest rates go up. Their rationale is ever-changing – it’s commodity prices : no, it’s financial stability : no, it’s wages – but the recommended policy is always the same.
common in banking circles, that inflicting pain is ipso facto good. There are some people and institutions – for example, the Basel-based Bank for International Settlements – that always want to see interest rates go up. Their rationale is ever-changing – it’s commodity prices : no, it’s financial stability : no, it’s wages – but the recommended policy is always the same.
Finally, although the current monetary debate isn’t
as openly political as the previous fiscal debate, it’s
hard to escape the suspicion that class interests are playing a role. A fair number of commentators seem oddly upset by the notion of workers getting raises, especially while returns to bondholders remain low. It’s almost as if they identify with the investor class, and feel uncomfortable with anything that brings us close to full employment, and there by gives workers more bargaining power.
as openly political as the previous fiscal debate, it’s
hard to escape the suspicion that class interests are playing a role. A fair number of commentators seem oddly upset by the notion of workers getting raises, especially while returns to bondholders remain low. It’s almost as if they identify with the investor class, and feel uncomfortable with anything that brings us close to full employment, and there by gives workers more bargaining power.
Whatever the underlying motives, tightening the monetary screws anytime soon would be a very, very
bad idea. We are slowly, painfully, emerging from the worst slump since the Great Depression. It wouldn’t take much to abort the recovery, and, if that were to happen, we would almost certainly be Japanified, stuck in a trap that might last decades.
bad idea. We are slowly, painfully, emerging from the worst slump since the Great Depression. It wouldn’t take much to abort the recovery, and, if that were to happen, we would almost certainly be Japanified, stuck in a trap that might last decades.
Is wage growth actually taking off? That’s far from clear. But if it is, we should see rising wages as a development to cheer and promote, not a threat to be squashed with tight money.
Q1. As mentioned in the passage, four years ago, the influential people of the western world got convinced about the fact that
1. budget deficits are an existing threat, trumping any and all concern about mass unemployment.
2. budget deficits are non existing threat and there will be mass employment soon.
3. budget deficits decline rapidly and give sign of flourishing economy.
4. there is good sign of employment, despite long standing budget deficits.
5. None of these
1. budget deficits are an existing threat, trumping any and all concern about mass unemployment.
2. budget deficits are non existing threat and there will be mass employment soon.
3. budget deficits decline rapidly and give sign of flourishing economy.
4. there is good sign of employment, despite long standing budget deficits.
5. None of these
Q2. Why do the serious people seem to be of the opinion that despite high unemployment there is hardly any slack in labour markets ?
1. They have evidenced a supposed surge in wages
2. Federal Reserve needs to start raising interest rates
3. A decline in wages has been expected
4. Demand for labourers has increased
5. None of these
1. They have evidenced a supposed surge in wages
2. Federal Reserve needs to start raising interest rates
3. A decline in wages has been expected
4. Demand for labourers has increased
5. None of these
Q3. According to an economist at Goldman Sachs, average wages normally jump in bad weather because
1. workers are paid handsomely in bad weather.
2. the worker idled by snow and storms tend to be less well paid than those who are not affected.
3. workers in bad weather are humanly treated and paid well at home.
4. workers idled by storm tend to be more well-paid than those who aren’t affected
5. None of these
1. workers are paid handsomely in bad weather.
2. the worker idled by snow and storms tend to be less well paid than those who are not affected.
3. workers in bad weather are humanly treated and paid well at home.
4. workers idled by storm tend to be more well-paid than those who aren’t affected
5. None of these
Q4. What does the writer mean by the phrase ‘risk of Japanification’ ?
1. Getting caught in economic inflation
2. Getting encouraging growth like Japan
3. Getting caught in a trap of economic stagnation and intractable debt
4. Getting a growth rate of 5 per cent or 6 percent per annum like Japan.
5. None of these
1. Getting caught in economic inflation
2. Getting encouraging growth like Japan
3. Getting caught in a trap of economic stagnation and intractable debt
4. Getting a growth rate of 5 per cent or 6 percent per annum like Japan.
5. None of these
Q5. What, according to the passage, sado-monetarism means?
1. Inflicting pain is not good.
2. Inflicting gain is painful.
3. Inflicting higher taxes is good for economic health.
4. Inflicting pain is ipso facto good.
5. None of these
1. Inflicting pain is not good.
2. Inflicting gain is painful.
3. Inflicting higher taxes is good for economic health.
4. Inflicting pain is ipso facto good.
5. None of these
Q6. How does the writer see the rising wages?
1. He sees it as a threat to economy
2. He sees it as a development to cheer and promote, not a threat to be squashed
3. He sees it as an obstacle to development
4. He is of the view that unemployment will grow intensely
5. None of these
1. He sees it as a threat to economy
2. He sees it as a development to cheer and promote, not a threat to be squashed
3. He sees it as an obstacle to development
4. He is of the view that unemployment will grow intensely
5. None of these
Q7. Bank for International settlements is located in
1. Basel
2. Tokyo
3. London
4. New York
5. Berne
1. Basel
2. Tokyo
3. London
4. New York
5. Berne
Q8. What is the central idea of the passage?
1. Rising wages is a bad omen for development
2. Rising wages is a good omen for development
3. Lowering wages is good for a developing economy
4. Stagnation is an existing feature of world economy
5. None of these
1. Rising wages is a bad omen for development
2. Rising wages is a good omen for development
3. Lowering wages is good for a developing economy
4. Stagnation is an existing feature of world economy
5. None of these
Q9. Choose the word/group of words which is most similar in meaning to the word/group of words given in bold as used in the passage.Head off
1. promote
2. act to prevent
3. encourage
4. feel headache
5. ameliorate
1. promote
2. act to prevent
3. encourage
4. feel headache
5. ameliorate
Q10. Choose the word / group of words which is most opposite in meaning to the word / group of words given in bold as used in the passage.Slack
1. lull
2. lukewarm
3. quiet period
4. period of activity
5. lump
1. lull
2. lukewarm
3. quiet period
4. period of activity
5. lump
Answers:
Q1. 1) Refer to the second sentence of the first paragraph. The other options are factually incorrect in the context of the passage.
Q2. 1) Refer to the second sentence of the second paragraph. The other options given are either out of scope or too narrow.
Q3. 2) Refer to the second sentence of the sixth paragraph. The other options are factually incorrect.
Q4. 3) Refer to the last sentence of the eighth paragraph. The other options are incorrect and cannot be verified from the passage.
Q5. 4) Refer to the twelfth paragraph. The other options are incorrect.
Q6. 2) Refer to the last sentence of the passage. The other options are factually incorrect.
Q7. 1) The Bank for International Settlements is located in Basel. The information is provided in the twelfth paragraph.
Q8. 2) The author repeatedly states that rising wages is a sign of improvement. His final assertion can be found in the last paragraph. The other options given are either narrow or out of scope.
Q9. 2) The phrasal verb “head off” means to prevent or block a crisis. Hence, option (2) is the answer.
Q10. 4) “Slack” means “without any activity.” Hence, option (4) is the antonym of “slack.”
Q3. 2) Refer to the second sentence of the sixth paragraph. The other options are factually incorrect.
Q4. 3) Refer to the last sentence of the eighth paragraph. The other options are incorrect and cannot be verified from the passage.
Q5. 4) Refer to the twelfth paragraph. The other options are incorrect.
Q6. 2) Refer to the last sentence of the passage. The other options are factually incorrect.
Q7. 1) The Bank for International Settlements is located in Basel. The information is provided in the twelfth paragraph.
Q8. 2) The author repeatedly states that rising wages is a sign of improvement. His final assertion can be found in the last paragraph. The other options given are either narrow or out of scope.
Q9. 2) The phrasal verb “head off” means to prevent or block a crisis. Hence, option (2) is the answer.
Q10. 4) “Slack” means “without any activity.” Hence, option (4) is the antonym of “slack.”
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