Directions (1-10): Read the following passage carefully and answer the questions. Certain words/phrases are given in bold to help you locate them while answering some of the questions.
Inequality is at the top of the agendas around the world. Hilary Clinton, The leading Democratic candidate to succeed Barack Obama as president of the United States, made inequality the centerpiece of a major campaign speech.Economists at the IMF to have recently released a study assessing the causes and consequences of rising inequality. Its authors reckon that while inequality could cause all sorts of problems, governments should be especially concerned about its effects on growth. They estimate that a one percentage point increase in the income share of the top 20% will drag down growth by 0.08% percentage points over five years, while a rise in the income share of the bottom 20% actually boosts growth. But how does inequality affect economic growth rates? Economists say that some inequality is needed to propel growth. Without the carrot of large financial rewards, risky entrepreneurship and innovation would grind to a halt. In 1975, an American economist argued that societies can not have both perfect equality and perfect efficiency, but must choose how much of one to sacrifice for the other. While most economists continue to hold that view, the recent rise in inequality has prompted a new look at its economic costs. Inequality could impair growth if those with low incomes suffer poor health and low productivity as a result, or if, as evidence suggests, the poor struggle to finance investments in education, inequality could also threaten public confidence in growth-boosting capitalist strategies like free trade.More recent work suggests that inequality could lead to economic or financial instability. The governor of the Reserve Bank of India argued that governments often respond to inequality by easing the flow of credit to poorer households, however, American households borrowed heavily prior to the crisis to prop up their consumption. But for this rise in household debt, consumption would have stagnated as a result of poor wage growth. Crafting a response to rising inequality is therefore tricky, he says. Some of the negative impact of inequality on growth can be blamed on poor government policies in highly unequal countries. In Latin America, for instance, populist pressure for excessive state economic control seems to shorten the average duration of growth spells. Yet in moderation, redistribution seems to benign effects perhaps by reducing dependence on risky borrowing among poorer households. Over the past generation or two inequality has risen most in places where progressive policies, such as high top tax rates, have been weakened. A little more redistribution now might improve the quality and quantity of economic growth and reduce the demand for more aggressive state interventions later.
Choose the word which is most nearly the same in meaning to the word Carrot given in bold as used in the passage?
Answer: (d) incentiveSolution: No description.
Which of the following best describes the opinion of experts regarding inequality?
The impact of inequality on growth is exaggerated by governments.
Inequality is a complex phenomenon and requires careful handling.
Governments should aim at achieving perfect equality.
State interventions such as redistribution cannot reduce inequality.
Easing the flow of credit to poor households in the way to reduce inequality.
Answer: (b) Inequality is a complex phenomenon and requires careful handling.Solution: No description.
Choose the word which is most nearly the same in meaning to the word Spells given in bold as used in the passage?
Answer: (c) periodsSolution: No description.
Choose the word which is most nearly the opposite in meaning to the word Benign given in bold as used in the passage?
Answer: (e) nastySolution: No description.
Choose the word which is most nearly the opposite in meaning to the word Free given in bold as used in the passage?
Answer: (a) restrictedSolution: No description.
According to the passage, which of the following is/are the possible impact of inequality?(A). It affects economic stability of a country.(B). The public may object to policies like free trade.(C). It discourages entrepreneurship and innovation.
Only (A) and (B)
Only (B) and (C)
All (A), (B) and (C)
Answer: (e) All (A), (B) and (C)Solution: No description.
What do the examples of Hilary Clinton and IMF economists cited in the passage convey?
Politicians misrepresent research depending on the message they they want to deliver.
Americans are not concerned with the impact of growing inequality.
Social issues are focused on prior to elections but not implimented thereafter.
The issue of inequality is getting a lot of attention at present.
America and the IMF disagree on the measures to be adopted to handle inequality.
Answer: (d) The issue of inequality is getting a lot of attention at present.Solution: No description.
What is the author's view regarding policies such as high top tax rates?
These are pointless as they drag down growth.
He is in favour of these as research shows they have a positive impact.
He believes they promote risky lending practice among the poor.
These are unfair as they impact less than 20% of the population.
Other than those given as options.
Answer: (c) He believes they promote risky lending practice among the poor.Solution: No description.
Which of the following is true in the context of the passage?
Governments and central bankers are in agreement on the measures needed to reduce inequality.
India and Latin America have the highest rates of inequality.
Government policies of redistribution of wealth serve no purpose whatsoever.
Inquality is on rise on account of the partial policies of the IMF.
None of the given options is true in the context of the passage.
Answer: (c) Government policies of redistribution of wealth serve no purpose whatsoever.Solution: No description.
Which of the following is the central idea of the passage?
Inequality impacts growth and cannot be eliminated.
Inequality is growing in developed countries not just developing ones.
Those in positions of power are unconcerned about the effects of inequality.
Economists in developed and developing countries disagree about managing inequality.
The IMF should take the lead and define acceptable norms of inequality.
Answer: (c) Those in positions of power are unconcerned about the effects of inequality.Solution: No description.