Macroeconomics and Policy

All of the following are ascribed by economists as reasons behind the Great Depression except:

Directions: Read the following passage and answer the question.
While historians focus mainly on the macro events that cause perceptible changes, the economists are more concerned with the minute details. It is a well known fact that many a time in history, the act of a single person has been responsible for a paradigm shift in the way the story is told. The economists go into the most exiguous detail possible to reach a conclusion. Also, the history is written by the victor, but economics thrives on various theories put forth by a multitude of experts. It therefore comes as no surprise that, even on an event of the magnitude of the Great Depression, the experts in the two subjects have conflicting views.
While the historians ascribe the meltdown to a host of macro factors like the cataclysmic crash of the stock market, the failure of the banks, and unemployment, the economists are more intent on finding the nuances and the recondite riff surrounding the turn of events. According to them, the rot in the system started much before and the Great Depression was actually a culmination of causative events rather than the starting point itself. They point towards the deflationary actions of the Federal Reserve, including regulating the currency in circulation in accordance to the Gold Standard and increasing the interest rates as some of the principal causes behind the fiasco. Also, the fact that Great Britain went back to pre World War Gold Standard also set in motion a set of protectionist policies that killed off trade between nations and added fuel to the fire. Although government spending, or rather the lack of it, is blamed for the crisis, a casual perusal of government spending in 1930 clearly points out that the governmental spending actually increased year on year in an effort to revive the economy. However, in a case of too little, too late, the actions failed to yield the desired results.
The historians cite bank failures and the reluctance of banks to lend money as a key factor. Blaming the lack of foresight by the financial regulators and the government, the economists contend that the stock market crash so frightened the common citizens that the they stopped spending. The decreased spending triggered off a chain of events that had far reaching repercussions. Businesses struggling to keep their heads above the water laid off employees to cut costs. This in turn, resulted in further reduction in consumer spending.
It is in our best interest if reconciliation between these two fields of study can be effected. It will allow us to sum up the findings with a degree of consensus that appeals not only to the scholars of economics but also to the historians who look for patterns in history.

How best can the organization of the passage be described?

Directions: Read the following passage and answer the question.
The Federal Reserve has announced that it will be further buying treasuries worth six hundred billion dollars in the form of long term bonds. In a statement released in the form of an article to one of the leading national dailies, the Chairman of the Federal Reserve defended his actions by stating that similar steps have successfully been used in United States as well as other nations in the past to promote healthy fiscal growth. According to the administration, the previous injection of liquidity had reversed the downward slide of the economy but had left a lot to be desired in terms of employment generation and spending stimulus. With this additional inflow, coupled with near zero short  term interest rates, the Fed hopes to boost fresh home buying and trigger off a prolonged bout of spending. The timing of the announcement, so close to the holiday season, cannot be termed as accidental, though, it remains to be seen if it will help spread the holiday cheer or if any of that cheer will come back to the beleaguered Chairman. Although it remains too premature to comment upon the long term effects of the multiple stimuli, initial signs, though not overtly encouraging, have not been depressing either, with the retail data showing an increase in spending and manufacturing data also showing a jump that is the most in the last half year.
However, the reaction in many emerging economies has been less than euphoric and from a strictly fiduciary point of view, there seems to be a lot of merit in the statements of these nations. Although no nation has come out openly and slammed the move, the strategists and analysts who function as governmental mouthpieces have been, without exception, critical of what they call ‘uncontrolled money printing’ by the United States. While the U.S.A. has been accusing China of artificially devaluing its currency, an advisor to the Central Bank of China has hit back at Washington by accusing it of employing tactics that would devalue the dollar. Even Japan, the traditional ally of America, has voiced similar concerns. Many fear that the additional liquidity will find its way into the developing nations’ capital markets and most likely create an asset bubble in the emerging markets where the capital markets have been outperforming the global indices. There are indications that the central banks of many of these nations are in touch with each other and are contemplating a collective action if a sudden surge in volumes in stock markets creates a scenario for galloping inflation. Many banks in Asia Pacific have increased interest rates or are mulling the same to curb inflation.

According to the passage, United States expects to accomplish everything with economic stimulus except

Directions: Read the following passage and answer the question.
The Federal Reserve has announced that it will be further buying treasuries worth six hundred billion dollars in the form of long term bonds. In a statement released in the form of an article to one of the leading national dailies, the Chairman of the Federal Reserve defended his actions by stating that similar steps have successfully been used in United States as well as other nations in the past to promote healthy fiscal growth. According to the administration, the previous injection of liquidity had reversed the downward slide of the economy but had left a lot to be desired in terms of employment generation and spending stimulus. With this additional inflow, coupled with near zero short  term interest rates, the Fed hopes to boost fresh home buying and trigger off a prolonged bout of spending. The timing of the announcement, so close to the holiday season, cannot be termed as accidental, though, it remains to be seen if it will help spread the holiday cheer or if any of that cheer will come back to the beleaguered Chairman. Although it remains too premature to comment upon the long term effects of the multiple stimuli, initial signs, though not overtly encouraging, have not been depressing either, with the retail data showing an increase in spending and manufacturing data also showing a jump that is the most in the last half year.
However, the reaction in many emerging economies has been less than euphoric and from a strictly fiduciary point of view, there seems to be a lot of merit in the statements of these nations. Although no nation has come out openly and slammed the move, the strategists and analysts who function as governmental mouthpieces have been, without exception, critical of what they call ‘uncontrolled money printing’ by the United States. While the U.S.A. has been accusing China of artificially devaluing its currency, an advisor to the Central Bank of China has hit back at Washington by accusing it of employing tactics that would devalue the dollar. Even Japan, the traditional ally of America, has voiced similar concerns. Many fear that the additional liquidity will find its way into the developing nations’ capital markets and most likely create an asset bubble in the emerging markets where the capital markets have been outperforming the global indices. There are indications that the central banks of many of these nations are in touch with each other and are contemplating a collective action if a sudden surge in volumes in stock markets creates a scenario for galloping inflation. Many banks in Asia Pacific have increased interest rates or are mulling the same to curb inflation.

The author uses the phrase 'uncontrolled money printing' to convey that

Directions: Read the following passage and answer the question.
The Federal Reserve has announced that it will be further buying treasuries worth six hundred billion dollars in the form of long term bonds. In a statement released in the form of an article to one of the leading national dailies, the Chairman of the Federal Reserve defended his actions by stating that similar steps have successfully been used in United States as well as other nations in the past to promote healthy fiscal growth. According to the administration, the previous injection of liquidity had reversed the downward slide of the economy but had left a lot to be desired in terms of employment generation and spending stimulus. With this additional inflow, coupled with near zero short  term interest rates, the Fed hopes to boost fresh home buying and trigger off a prolonged bout of spending. The timing of the announcement, so close to the holiday season, cannot be termed as accidental, though, it remains to be seen if it will help spread the holiday cheer or if any of that cheer will come back to the beleaguered Chairman. Although it remains too premature to comment upon the long term effects of the multiple stimuli, initial signs, though not overtly encouraging, have not been depressing either, with the retail data showing an increase in spending and manufacturing data also showing a jump that is the most in the last half year.
However, the reaction in many emerging economies has been less than euphoric and from a strictly fiduciary point of view, there seems to be a lot of merit in the statements of these nations. Although no nation has come out openly and slammed the move, the strategists and analysts who function as governmental mouthpieces have been, without exception, critical of what they call ‘uncontrolled money printing’ by the United States. While the U.S.A. has been accusing China of artificially devaluing its currency, an advisor to the Central Bank of China has hit back at Washington by accusing it of employing tactics that would devalue the dollar. Even Japan, the traditional ally of America, has voiced similar concerns. Many fear that the additional liquidity will find its way into the developing nations’ capital markets and most likely create an asset bubble in the emerging markets where the capital markets have been outperforming the global indices. There are indications that the central banks of many of these nations are in touch with each other and are contemplating a collective action if a sudden surge in volumes in stock markets creates a scenario for galloping inflation. Many banks in Asia Pacific have increased interest rates or are mulling the same to curb inflation.

Directions: A brief passage or a statement is given and a question is asked, based on the information provided in the passage/statement. Critically examine the five alternative answer options marked (1) to (5) and choose the best answer. There are fundamentally two possible changes in an economy that will each cause inflation unless other compensating changes also occur. These changes are either reductions in the supply of goods and services or increases in demand. In a pre banking economy the quantity of money available, and hence the level of demand, is equivalent to the quantity of gold available. If the statements above are true, then it is also true that in a pre banking economy

Directions: Read the passage/argument and answer the question that follows it.

Although the minutiae vary a lot, banking crisis follows the same story. The precursors to each such story are rising home and equity prices, a rise in capital inflows engineered by foreign investors, a boom in debt and 'just before the doom' an inverted V-shaped path for the economy, with growth first picking up and then faltering. The years just prior to the US sub prime meltdown fit this template remarkably well.

The author is primarily trying to convince us by

Directions: Read the following passage/information and answer the question that follows:

Government borrowing from RBI, viz. printing of notes, has substituted for other ways of increasing reserve money for keeping monetary growth from slowing excessively in the context of slowing growth of net forex assets. This increasing monetisation of government debt can act only as an interim solution.

Which of the following expresses an idea concurrent to the above?

Directions: The following passage is followed by a question with five options. Choose the best option.

The recent decline in the value of rupee was triggered by a prediction of slower economic growth in the coming year. This prediction would not have adversely affected the rupee but for the government's huge budget deficit. Budget deficit should, therefore, be decreased to prevent future currency declines.

Which of the following, if true, would most seriously weaken the conclusion about how to prevent future currency declines?