Hey Melanie,
What was your breakdown for this passage/question? It would help to see that to pinpoint exactly what you may have missed here.
Here's how I'd breakdown the passage on my scratch pad:
Topic: wages
Scope: how it affects competition in dev. countries
1st chunk: to explain a theory and refute it
2nd chunk: to discuss additional factor
POV: lower wages abroad won't hurt, should be allowed to rise
Purpose: to emphasis why higher wages aren't bad
Question-type: Inference
Question Rephrase: What's implied if capital restricted?
Our job is to go back to the passage and find PRECISELY what it says regarding the keywords "capital" and "restrict".
From the passage:
Furthermore, if wages are not allowed to rise, the value of the country's currency will appreciate, which (from the developed countries' point of view) is the equivalent of increased wages in the developing country. And although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely.
Prediction: When capital isn't free, currencies can be undervalued = increased wages
(D) is the best match for this. The currency does actually go up in value, yet there is an increase in wages/productivity.
Hope this helps!
