Question

29. Read the arguments given below and answer the questions that follow.
The principal monetary policy objective is to reduce substantially the import surplus in the coming years while resuming economic growth. Realization of this goal entails a structural market change of the economy, which can be brought about by freezing the standard of living (per capita private consumption plus public services) and restricting investments that do not further exports.
The writer of the above policy assumes that

• A. Economic growth will result in a structural change of the economy.
• B. Only if people consume less can the economy grow.
• C. All import surplus can be reduced if investment is restricted.
• D. People can be persuaded to maintain their consumption levels, for national good.

Answer 1

The correct option is D People can be persuaded to maintain their consumption levels, for national good.

If the principal monetary policy is to be attained – reducing the import surplus while resuming economic growth – per capita consumption will have to be frozen. Consumers will have to be persuaded to give up consumption: the assumption is that people will be willing to reduce their consumption.