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Economic Model

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Economic Model

by ankit1383 » Sat Sep 19, 2009 5:02 pm
The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms to its domestic market. This strategy promised to help economic growth by incubating domestic industries. New Japanese industries could count on a known local demand and would be protected from competition by tariffs and other barriers. The program could reduce the amount of imports and therefore improve the nation's balance of trade.
Which of the following, based on the passage above, is a weakness in this economic strategy?

A) A protectionist policy will create animosity among other nations.
B) Fast growth of small industries will create a class of millionaires and increase the inequality of income.
C) Subsidies and import constraints keep domestic prices high and impose a burden on consumers.
D) Quotas are more regressive than tariffs.
E) The demand for the products made by the incubated industries would not be known.

[spoiler]New Japanese industries could count on a known local demand ....does this statement in the stimulas makes choice E as possible answer...[/spoiler]
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by singhag » Sat Sep 19, 2009 10:55 pm
[spoiler]IMO C

My contender were C and E but E directly attact the condition which already said to be true that the industry can bank on the known demand...where as C says even if the demand is known and subsidies increases the prices for the customer the industry may not be successful[/spoiler]

OA please
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by pandeyvineet24 » Mon Sep 21, 2009 9:59 am
I also agree with C. Its the best of the lot.
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by gmatmachoman » Mon Sep 21, 2009 10:21 am
singhag wrote:[spoiler]IMO C

My contender were C and E but E directly attact the condition which already said to be true that the industry can bank on the known demand...where as C says even if the demand is known and subsidies increases the prices for the customer the industry may not be successful[/spoiler]

OA please

I do go with C

Wrt E,the arg.says " demand is known ".So E wont be a strong contender.
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by PAB2706 » Thu Sep 24, 2009 12:30 pm
wht is the OA? I was stuck btwn C nd E
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by crackgmat007 » Thu Sep 24, 2009 1:50 pm
Conclusion: stragtegy helps economic growth.

To weaken: bring out a possibility that the conclusion will not hold true if the strategy is implemented. C does that.
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Re: Economic Model

by umaa » Thu Sep 24, 2009 5:44 pm
ankit1383 wrote:The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms to its domestic market. This strategy promised to help economic growth by incubating domestic industries. New Japanese industries could count on a known local demand and would be protected from competition by tariffs and other barriers. The program could reduce the amount of imports and therefore improve the nation's balance of trade.
Which of the following, based on the passage above, is a weakness in this economic strategy?

A) A protectionist policy will create animosity among other nations.
B) Fast growth of small industries will create a class of millionaires and increase the inequality of income.
C) Subsidies and import constraints keep domestic prices high and impose a burden on consumers.
D) Quotas are more regressive than tariffs.
E) The demand for the products made by the incubated industries would not be known.

[spoiler]New Japanese industries could count on a known local demand ....does this statement in the stimulas makes choice E as possible answer...[/spoiler]
IMO E.

If we don't know the demand, then we don't know about the exports. Hence, the balance of trade might get affected. OA pls.
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by gmatv09 » Thu Sep 24, 2009 5:53 pm
IMO C
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by DarkKnight » Fri Sep 25, 2009 5:48 am
I go with C;
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by gmatmachoman » Fri Sep 25, 2009 5:48 am
Let the OA be C..I need to celebrate my weekend!!

SOmebody ping him for oA
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by gmatmachoman » Fri Nov 13, 2009 11:01 am
Dear TestLuv,Could u plz post ur option!
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by palvarez » Fri Nov 13, 2009 11:14 am
Price increases would cause customers not to buy, thereby impacting the balance of trade. Without consumption, just domestic production wouldn't do much.
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must be C

by GMAT dreamer » Fri Nov 13, 2009 1:49 pm
it says "The program could reduce the amount of imports and therefore improve the nation's balance of trade" C attacks its conclusion saying that "Subsidies and import constraints keep domestic prices high",so how its prorgam can improve the economy if few people will be able to buy high price products.
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not E

by brick2009 » Sat Nov 14, 2009 11:03 am
E cannot be true: because it is clearly stated in the stimulus that the demand is known.. "dustries could count on a known local demand and "..

this is a classical GMAT trap.. beware;)

C : directly attacks the argument by saying: consumers will pay more as the costs will be high...as high prices will mean lower demand...thus directly impacting the success of the incubated companies.
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Re: not E

by gmatmachoman » Sat Nov 14, 2009 11:17 am
brick2009 wrote:E cannot be true: because it is clearly stated in the stimulus that the demand is known.. "dustries could count on a known local demand and "..

this is a classical GMAT trap.. beware;)

C : directly attacks the argument by saying: consumers will pay more as the costs will be high...as high prices will mean lower demand...thus directly impacting the success of the incubated companies.
Thx brick2009 for that explanation.
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