GWD 24-12

casualwalk

Is it possible to decrease inflation without causing a recession and its concomitant increase in unemployment? The orthodox answer is “no”. Whether they support the “inertia” theory of inflation(that today’s inflation rate is caused by yesterday’s inflation, the state of the economic cycle, and external influences such as import prices) or the “rational expectations” theory (that inflation is caused by workers’ and employers’ expectations, coupled with a lack of credible monetary and fiscal policies), most economists agree that tight monetary and fiscal policies, which cause recessions, are necessary to decelerate inflation. They point out that in the 1980’s, many European countries and the LACE>United StatesLACE> conquered high (by these countries’ standards) inflation, but only by applying tight monetary and fiscal policies that sharply increased unemployment. Nevertheless, some governments’ policymakers insist that direct controls on wages and process, without tight monetary and fiscal policies, can succeed in decreasing inflation. Unfortunately, because this approach fails to deal with the underlying causes of inflation, wage and price controls eventually collapse, the hitherto-repressed inflation resurfaces, and in the meantime, though the policy-makers succeed in avoiding a recession, a frozen structure of relative prices imposes distortions that do damage to the economy’s prospects for long-term growth.

24-12 The primary purpose of the passage is to

A) apply two conventional theories.

B) examine a generally accepted position.

C) support a controversial policy.

D) explain the underlying causes of a phenomenon.

E) propose an innovative solution.

answer: B. How about C?

The support for "generally accepted "in the answer B: most economists agree that tight monetary and fiscal policies, which cause recessions, are necessary to decelerate inflation

The support for"controversial" in the answer C: Nevertheless,some governments’ policymakers insist that direct controls on wages and process, without tight monetary and fiscal policies

So, who can help me out for the answer C?

thanks in advance

renprince

Most importantly, the author claims in the first couple of lines that "Is it possible to decrease inflation without causing a recession and its concomitant increase in unemployment? The orthodox answer is “no”. " It's quite an assertion. All other information provided in the argument has acutally led to this certain conclusion, including the "controversial policy" from most of the economics.

And, the policy is not so controversial either. In the argument. As you've pointed out, the argument asserts that "most economists agree that tight monetary and fiscal policies...", and, in my point, "some governments’ policymakers insist that direct controls on wages and process, without tight monetary and fiscal policies" is not so much as an adequate challenge against the point of most economists, that is, the control solution is at most an alternative, rather than a replacement, which could result the wording "controversial", to the monetary polocies. If we say something is controversial, in most cases, we mean that it is either wrong or right, either applicable or infeasible, or something like this.

This is my position. Wish it helps and open for discussion...

casualwalk

xie  xie !!!