The following text is from an economics article.
Monetary policy operates through multiple transmission channels. Interest rate changes affect borrowing costs and thus investment and consumption decisions. Exchange rate effects influence net exports. Wealth effects arise as asset prices respond to policy signals. Credit channels shape bank lending behaviors. Understanding these interconnected mechanisms is essential for predicting policy outcomes, yet the relative importance of each channel varies across economic contexts.
Which choice best describes the function of the last sentence?
It provides specific numerical data about monetary policy effects.
It notes the practical importance and contextual variability of the mechanisms.
It contradicts the earlier description of transmission channels.
It introduces a new topic about fiscal policy.
Correct Answer: B
Choice B is the best answer. The last sentence notes practical importance (predicting outcomes) and contextual variability (relative importance varies).
- Evidence: The sentence states: "Understanding these interconnected mechanisms is essential... yet the relative importance of each channel varies across economic contexts."
- Reasoning: It explains why the mechanisms matter (prediction) and adds a nuance (context matters).
- Conclusion: The function is to note importance and variability.
💡 Strategy: Look for "essential... yet... varies."
Choice A is incorrect because no numerical data is given. Choice C is incorrect because it extends rather than contradicts. Choice D is incorrect because fiscal policy isn't introduced.