GMAT Verbal Reading Comprehension
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Author:  Robert.Delane [ Thu Apr 26, 2012 1:54 am ]
Post subject:  GMAT Verbal Reading Comprehension

The news of 2003 is that Japan is making a comeback. After 15 years in a weak state, its economy is finally beginning to show signs of life. Deflation is over; prices are no longer falling.

Japan has the second largest economy in the world and its recent growth is very good news. Manufacturers in the rest of Asia and America will undoubtedly benefit. American consumers had been carrying the majority of the responsibility for keeping the global economy moving. Now Tokyo appears to be engaging in real consumption, an indicator that renewal is upon the Japanese economy.

Japan's economy barely grew at all in the 1990s. Deflation plagued the country for years, which reduced prices, wages and corporate income, and made debt all the more heavy. Real estate values fell for 14 years in a row, amounting to a decline of about 60 percent over that time. The Nikkei index of stock prices fell from an all-time high of 39,000 to below 8,000 before climbing back to about 17,000.

It was a bizarre time. Japan lowered interest rates again and again until they hit zero in 2001. Bond prices fell so low that by 2003 that even 30-year government bonds yielded less than one percent. Economic historians were known for saying that the cost of borrowing money had never been so low -- not in the financial transactions of ancient Greece, Rome, China, or anywhere else in recorded history. Even so, zero interest rates continued. Only now are Japan's bankers talking about the possibility of lifting rates by a quarter of a percent in the coming months.

This month, Japan's central bank finally put a stop to "quantitative easing," a 50-year-old policy of pushing excess money into the financial system. Japan was able to do so because consumer prices have recently begun to rise, slowly but surely. Japan's population is aging and its public debt will continue to trouble the country in the long term. But, in the short term, American politicians will almost certainly once again begin fussing about the miracle of the Japanese, and complaining about Japan grabbing up U.S. properties.

The passage suggests that, Japan:
I. has ended the zero interest rate.
II. used to have a lauded economy
III. has higher inflation than it has had for years

A. I only
B. III only
C. I and II only
D. II and III only
E. I, II, and III


I don't think response II (that Japan used to have a lauded economy) is an appropriate answer. Wouldn't one argue, by virtue of Japan still having the 2nd largest economy in the world, that its economy is STILL lauded?

Author:  Nick [ Thu Apr 26, 2012 2:11 am ]
Post subject:  Re: GMAT Verbal Reading Comprehension

This is an example of why it is so important to only use the passage when answering questions, and not pull in any outside assumptions.

The general message of the passage is that Japan's economy is getting better than it was before. The first line literally says "Japan is making a comeback." The passage concludes by saying "American politicians will almost certainly once again begin fussing about the miracle of the Japanese." In other words, Japan's economy used to be lauded, then it had some trouble, but now it's making a comeback and will be lauded again.

Your logic is that people should always laud the world's second largest economy, regardless of its troubles. That is a judgement you are making, but it is not suggested by the exact text in the passage.

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