Set 1: Command of Evidence (Advanced)

Explanation

Answer: B

PASSAGE

The 'Paradox of Thrift' suggests that while saving money is good for individuals, if everyone saves simultaneously, aggregate demand falls, leading to lower total income and potentially *less* total savings in the economy.

Which scenario best illustrates the negative outcome of the Paradox of Thrift?

A. A family saves for a vacation and stimulates the tourism industry.

B. Consumers stop spending during a recession, causing businesses to fire workers, which further reduces income.✓ Correct

C. High interest rates encourage foreign investment.

D. Banks have more money to lend to small businesses.

Detailed Explanation

This question requires you to identify evidence that supports a claim. The paradox is that collective saving hurts the economy. Option B shows this cycle: Saving (stop spending) -> Lower Demand -> Lower Income (firing) -> Worse outcome. The best evidence directly and explicitly supports the stated claim without requiring assumptions. Match specific textual details or data points to the claim being made. The correct answer provides clear, direct support. Strong evidence directly addresses the claim without requiring additional interpretation. When evaluating options, look for quotes or data that explicitly support the statement. Weak evidence may be tangentially related but doesn't provide direct proof.

Key Evidence:

• "aggregate demand falls"

• "leading to lower total income"

Why others are wrong: A (This is positive spending.), C (Unrelated.), D (This assumes the savings are lent out effectively, ignoring the 'demand fall' aspect.).

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