Section III Reading Comprehension( 60 minutes)

Part A

D．irections :

Read the following four texts. Answer the questions below each text by choosing A, B, C or D. Mark your answers on ANSWER SHEET1.

Text 1

Inflation has just exploded. The real problem is that we have an underlying rate of inflation-an impetus of wages chasing prices-of maybe 9 percent that is heading towards 10 percent. There also have been tremendous shocks in energy ,food and housing prices ,making it worse.

B．y the end of the year ,we will be in a situation where year in ,year out, we can look forward to at least 10 percent inflation. And the question will be: How much worse will oil ,food and housing prices make that?

The situation has degenerated to the point that the only way to turn it around is to think of some very extreme changes in policy. A policy of gradualism ,where you're talking about a mild re- cession and another l t0 2 million people unemployed ,won't make much difference. Postponing ac-tion just means that inflation presses further and is even more difficult to deal with.

You have to start with revenue and monetary restraint. All the burden now is on monetary poli-cy. We should shift to a much more restrictive revenue policy and an easier monetary policy. To be Significant ,the 1981 budget should be cut by at least 20 billion dollars from 616 billion President Carter proposed. That's a major cut in government programs-and very hard to do. It's impossible if you save defense and all the programs indexed for changes in the cost of living.

So it means cuts across the board in every area-including the indexed programs ,such as So-cial Security and food stamps. State and local-government revenue-sharing programs are another ma-jor candidate. You've also got to reopen the 1980 budget and cut that.

Then I would favor wage and price controls to break the impetus of the wage-price interaction .In order to get quick results ,l 'd set the standard around 5 0r 6 percent for both wages and prices .Basically ,you're aiming to cut the rate of inflation in half the first year. There would be no excep-tions ,but you would focus on large corporations and .major labor settlements.

F．or the special sectors where the big shocks have occurred ,controls won't work .lnstead ,you need additional policies in each one of those areas.

There are no cheap or easy solutions to the inflation problem. My answer is to take all the things that everybody wants to do ,and instead of choosing among them ,do all of them. We've got to think in terms of a comprehensive program.

41.ln the author's opinion ,the high inflation rate in the US was accompanied by

[ A] energy crises.

[ B ] mounting wages.

[ C] housing shortage.

[ D] shrinking market.