Most economists agree that an international trade agreement that was recently signed will strengthen the economies of those countries participating...

GMAT Critical Reasoning : (CR) Questions

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Critical Reasoning

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Most economists agree that an international trade agreement that was recently signed will strengthen the economies of those countries participating in it. This benefit is expected to be noticeable even in the short term. Nevertheless, despite the fact that the number of business bankruptcies generally declines in a country when its economic performance improves, these same economists expect that countries participating in the agreement will experience an increase in business bankruptcies shortly after it takes effect.

Which of the following, if true, most helps to justify the economists' expectation about business bankruptcies?

In the years before the new trade agreement was signed, major political parties in some of the countries that eventually signed it had opposed it.

The new trade agreement will eliminate tariffs that have protected businesses in participating countries from foreign competition.

More countries are expected to sign the new trade agreement in the years after it takes effect.

Improved economic performance among the countries participating in the new agreement is unlikely to have a significant impact on their near neighbors that are not participating.

The economies of the countries participating in the new trade agreement are much stronger than the economies of most other countries in the world.

Solution

Passage Analysis:

Text from Passage	Analysis
Most economists agree that an international trade agreement that was recently signed will strengthen the economies of those countries participating in it.	What it says: Economists think this new trade deal will make participating countries' economies stronger What it does: Sets up the basic premise that the trade agreement is economically beneficial What it is: Expert consensus/opinion Visualization: Countries A, B, C sign trade deal → Economic strength increases from level 5 to level 8
This benefit is expected to be noticeable even in the short term.	What it says: The economic improvement will happen quickly, not just over many years What it does: Reinforces and clarifies the previous claim by adding a timeline element What it is: Additional detail about expert prediction Visualization: Timeline: Trade deal signed → Within months (not years) → Economic benefits visible
Nevertheless, despite the fact that the number of business bankruptcies generally declines in a country when its economic performance improves, these same economists expect that countries participating in the agreement will experience an increase in business bankruptcies shortly after it takes effect.	What it says: Even though better economies usually mean fewer bankruptcies, economists predict MORE bankruptcies will happen after this trade deal What it does: Creates a puzzling contradiction with the earlier claims about economic benefits What it is: Seemingly contradictory expert prediction Visualization: Normal pattern: Strong economy → Fewer bankruptcies (from 100 to 60) BUT Trade deal prediction: Strong economy → MORE bankruptcies (from 100 to 140)

Argument Flow:

The argument starts by establishing that economists believe a trade agreement will strengthen economies quickly. It then introduces a general rule that stronger economies lead to fewer bankruptcies. Finally, it presents the puzzling expectation that despite economic improvement, bankruptcies will actually increase after this trade deal.

Main Conclusion:

Economists expect that countries in the trade agreement will see more business bankruptcies shortly after the agreement takes effect, even though the agreement will strengthen their economies.

Logical Structure:

This creates a paradox that needs explanation. We have two premises that seem to contradict each other: (1) trade deal strengthens economies + (2) strong economies usually reduce bankruptcies, but the conclusion is that bankruptcies will increase. The question asks us to find what could justify this seemingly contradictory expectation.

Prethinking:

Question type:

Strengthen - We need to find information that makes the economists' seemingly contradictory prediction about increased bankruptcies more believable and logical.

Precision of Claims

The key claims involve: (1) Quality - economic strengthening from trade agreement, (2) Frequency - general pattern that fewer bankruptcies occur when economies improve, (3) Activity - expected increase in bankruptcies despite economic benefits, (4) Timeline - all effects happening in short term.

Strategy

We need to find a reason that explains why this trade agreement would cause MORE bankruptcies even though it strengthens the economy. The answer should bridge this apparent contradiction by showing how the specific nature of this trade agreement or its immediate effects could logically lead to increased business failures in the short term, despite overall economic benefits.

Answer Choices Explained

In the years before the new trade agreement was signed, major political parties in some of the countries that eventually signed it had opposed it.

This tells us about past political opposition to the trade agreement, but it doesn't explain why bankruptcies would increase after the agreement takes effect. Political opposition in the past doesn't create any mechanism that would cause business failures once the agreement is implemented. This doesn't help justify the economists' expectation about increased bankruptcies.

The new trade agreement will eliminate tariffs that have protected businesses in participating countries from foreign competition.

This perfectly explains the paradox! If the trade agreement eliminates protective tariffs, then domestic businesses that previously relied on this protection will suddenly face foreign competition they may not be prepared for. Many of these businesses could fail in the short term, causing increased bankruptcies. Meanwhile, the overall economy still strengthens because consumers get better products at lower prices and more efficient businesses thrive. This directly justifies why economists expect both economic improvement AND increased bankruptcies.

More countries are expected to sign the new trade agreement in the years after it takes effect.

The fact that more countries might join later doesn't explain why current participating countries would see increased bankruptcies right after the agreement takes effect. Future expansion of the agreement doesn't create any immediate mechanism for business failures. This is irrelevant to the economists' prediction about short-term bankruptcy increases.

Improved economic performance among the countries participating in the new agreement is unlikely to have a significant impact on their near neighbors that are not participating.

This focuses on the impact on non-participating neighboring countries, but we need to explain what will happen within the participating countries themselves. Whether or not the agreement affects neighbors doesn't help us understand why businesses inside participating countries would experience more bankruptcies despite economic strengthening.

The economies of the countries participating in the new trade agreement are much stronger than the economies of most other countries in the world.

The relative strength of participating countries compared to other world economies doesn't explain the internal contradiction we're trying to resolve. Knowing that these countries are already strong economically makes it even more puzzling why their businesses would face increased bankruptcies, rather than helping to justify this expectation.

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