Critical Reasoning

Source: Knewton

Economist: Periodic economic instability invariably leads to calls from politicians for the abolition of the federal reserve system. These representatives baselessly assert that, without the interest rate manipulation of the federal reserve banks, cyclical recessions would be significantly shorter and less severe. In fact, the reverse is true; the most recent period of depressed economic activity finally ended only after the federal reserve chairman made a series of adjustments to the discount rate, which led to increased consumer spending and normalization of the stock market.

Which of the following, if true, most seriously calls into question the reasoning employed by the economist?

A: Many economists disagree with the idea that the federal reserve chairman is the prime mover of economic activity during a recession.
B: The most recent recession was caused by mismanagement of interest rates by the former federal reserve chairman.
C: Federal reserve chairmen cannot know all of the variables that may influence the market at any given moment.
D: Recessions are not always cyclical, as bad economic policies can both lead to several consecutive "mini" recessions or indefinitely prolong an existing recession into a decades-long malaise.
E: The chairman of the federal reserve always makes interest rate adjustments once there are clear economic signals indicating that stock prices have stabilized and that aggregate consumer spending has risen. *

Argument: The Fed chairman actions are important to reverse bad economic conditions
Reasoning: The most recent recession ended when the Fed made adjustments to the rate which increased consumer spending and normalized the stock market.

A. Incorrect. The fact that other economists disagree with this one does not question his reasoning

B. Incorrect. That fact that the recession was caused by the chairman does not mean that the recession could be stopped without the Feds intervention

C. Incorrect. Has nothing to do with his reasoning.

D. Incorrect. His argument has nothing to do with the cyclical nature of recessions or that bad policies can also have bad consequences.

E. Correct. This information tells us that the chairman will always make adjustments once the signals indicate that the stocks have normalized and spending has risen. This information now calls into question his reasoning that the Feds actions saved the economy. If the Fed always makes adjustments when they see these signals it is logical to think that the chairman only acted in response to signals indicating the end of the recession. If he did then the reasoning is flawed. The economy was already improved and its improvement would have had nothing to do with the Fed.

YellowSapphire wrote:Source: Knewton

Economist: Periodic economic instability invariably leads to calls from politicians for the abolition of the federal reserve system. These representatives baselessly assert that, without the interest rate manipulation of the federal reserve banks, cyclical recessions would be significantly shorter and less severe. In fact, the reverse is true; the most recent period of depressed economic activity finally ended only after the federal reserve chairman made a series of adjustments to the discount rate, which led to increased consumer spending and normalization of the stock market.

Which of the following, if true, most seriously calls into question the reasoning employed by the economist?

A: Many economists disagree with the idea that the federal reserve chairman is the prime mover of economic activity during a recession.
B: The most recent recession was caused by mismanagement of interest rates by the former federal reserve chairman.
C: Federal reserve chairmen cannot know all of the variables that may influence the market at any given moment.
D: Recessions are not always cyclical, as bad economic policies can both lead to several consecutive "mini" recessions or indefinitely prolong an existing recession into a decades-long malaise.
E: The chairman of the federal reserve always makes interest rate adjustments once there are clear economic signals indicating that stock prices have stabilized and that aggregate consumer spending has risen. *

E here too,
the economist says that with the interest rate manipulation of the federal reserve banks, the depressed economy activity ended shorter because of the chairman made decision of adjustment to discount rate which leads to inceasing in spending and normalize the stock market....

( here the chairman's decision make an important step in promote economy)

and we have to weaken that.
E says " no, in fact the chairman's decision does nothing in helping improve the economic because he just makes decision in interest rates when the economic is already stable or increasing.