The IMF has pointed out that the fast growing economies of Asia face the risk of falling into ‘middle income trap’. It means that average income in these countries, which till now have been growing…
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The IMF has pointed out that the fast growing economies of Asia face the risk of falling into ‘middle income trap’. It means that average income in these countries, which till now have been growing rapidly, will stop growing beyond a point- a point that is well short of incomes in the developed west. The IMF identifies a number of causes of middle income trap- none of which is surprising, ranging from infrastructure to weak institutions, to less than favourable macroeconomic conditions. But the broad overall cause, says IMF, is a collapse in the growth of productivity.
Which of the following is the most logical, rational and critical inference that can be drawn from the given passage?
Which of the following is the most logical, rational and critical inference that can be drawn from the given passage?
- Once a country reaches middle income stage, it runs the risk of falling productivity which leads to stagnant incomes
- Falling into middle income trap is a general characteristic of fast growing economies
- There is no hope at all for the emerging Asian economies to sustain the growth momentum
- As regards growth of productivity, the performance of Asian economies is not satisfactory
Answer and explanation
Correct answer: A - Once a country reaches middle income stage, it runs the risk of falling productivity which leads to stagnant incomes
The passage says fast-growing economies reach a middle-income level and then stall, mainly because productivity growth collapses. The answer about falling productivity leading to stagnant incomes captures this. Calling the trap a general characteristic overgeneralises (the passage says 'risk', not that it always happens), 'no hope at all' is too extreme, and the claim about unsatisfactory Asian productivity states a present fact the passage does not assert.
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CUSAT CAT Five-Year LL.B.
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