July 19, 2010

Verbal Ability-Question of the Day

The question below contains a paragraph followed by alternative summaries. Choose the option that best captures the essence of the paragraph.
One of the principal contributions for which Paul Krugman was awarded the Nobel prize in Economics was his modelling of the process by which geography and trade were correlated. In essence, the idea was that while we know trade is a function of geography, the notion that geography itself may be determined by trade was not well formalised. The second issue was, in fact, the subject matter of Krugman’s presentation during his Nobel-acceptance speech. Put simply, while historians have long studied the rise and fall of societies, Krugman put forward economic arguments why some cities (countries?) may decline and others emerge as trade patterns change over time.


1) Paul Krugman’s economic models demonstrate how geography and trade are interrelated and how changing trade patterns cause the decline and emergence cities and countries.

2) Paul Krugman, the Nobel laureate, showed how geography determined trade and trade determined geography and how trade patterns determined economic power centres.

3) Paul Krugman received the Nobel Prize (economics) for showing the interrelationship between geography and trade and the relationship between the rise and fall of societies due to changes in trade patterns.

4) Paul Krugman received the Nobel Prize (economics) for modelling the interdependence of geography and trade; his economic arguments link the rise and fall of societies to change in trade patterns.

5) Paul Krugman was awarded the Nobel Prize in economics for showing how trade determine geography; he argued that the rise and fall of societies are related to changing trade patterns.

The key idea in the paragraph is that Paul Krugman constructed an economic model showing the correlation between geography and trade. His economic arguments linked the rise and fall of societies to the changing trade patterns. Two things are crucial (especially because of the Noble Prize) Economic model and economic arguments – they are completely different things. A model is a mathematical construct, not a logical one. Economic arguments are logical arguments based on economics.
Only option 4 does justice to these ideas. And these ideas cannot be distorted.
Hence, the correct answer is option 4.


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