Reading Passage Question

The projection in the latest quarterly inflation report is for growth to pick up to 2.8 percent. For this forecast to be realized, household spending and domestic consumption would need to increase noticeably from its current lackluster level. The economy has grown below its long-term trend for three out of the last four quarters. Wage growth was under control and the retail and housing markets, while not getting worse, were not getting any better either. Import prices had started to add to inflation after years of deflation in the wake of the $25 jump in the barrel price of crude. But most economists were for ignoring the first-round impact of this rise and waiting for any domestic second effect – higher prices in the shops – before taking action.That action will almost certainly involve interest rate increases, the effect of which would be to squeeze household spending and knock back inflation. The economy would then have to wait for the stable job market and increases in incomes and wage growth to diminish the effect of the rate increase over the medium term. Eventually these factors would give rise to domestic growth on or above the long-term trend. In the meantime, the risk of a full-scale consumer recession or a collapse in house prices are both very unlikely.

“The projection in the latest quarterly inflation report is for growth”- is a reading comprehension passage with answers for the GMAT. Candidates must have a strong understanding of English GMAT reading comprehension. This GMAT Reading Comprehension section contains 4 comprehension questions. The GMAT Reading Comprehension questions are intended to assess candidates' abilities to comprehend, analyze, and apply information or concepts. GMAT Reading Comprehension Practice Questions can help candidates actively prepare.

Solutions and Explanation

1. Which of the following is stated as a factor that would give rise to growth on or above the long-term trend?

1. pay deal inflation
2. consumer confidence
3. consumer spending
4. house price increases
5. import price deflation

2. Which of the following statements would the author of the passage most likely agree with?

1. The wider community of economists are split over whether monetary policy should pay heed to the immediate price impact from oil.
2. Broadly speaking, economists agree that no immediate action should be taken over inflationary effects of the $25 jump in the price of crude.
3. The wider community of economists are against the view that monetary policy should take no action over the immediate price impact from oil.
4. The wider community of economists are against taking no action at all over the inflationary effect of the $25 jump in the price of crude.
5. Most economists are for ignoring any rise in non-oil inflation.

3. For the projection in the latest quarterly inflation report to be realized the author would expect:

1. expenditure to get no worse
2. spending to pick up
3. import inflation to continue
4. interest rates to rise notably
5. the economy to grow faster than in the first half

4. For the author, the 64 million dollar question is:

1. In the short term do interest rates have to rise?
2. Will the price of crude continue to increase?
3. Must oil price inflation lead to higher wages and shop prices?
4. Is labor market inflation sufficiently sustainable to eventually counter any interest rate increase?
5. At what rate over the short, medium and long term will the economy grow?

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