PrepTest 65, Section 2, Question 17
Economist: Some critics of the media have contended that negative news reports on the state of the economy can actually harm the economy because such reports damage people's confidence in it, and this lack of confidence in turn adversely affects people's willingness to spend money. But studies show that spending trends correlate very closely with people's confidence in their own immediate economic situations. Thus these media critics are mistaken.
Economist: Some critics of the media have contended that negative news reports on the state of the economy can actually harm the economy because such reports damage people's confidence in it, and this lack of confidence in turn adversely affects people's willingness to spend money. But studies show that spending trends correlate very closely with people's confidence in their own immediate economic situations. Thus these media critics are mistaken.
Economist: Some critics of the media have contended that negative news reports on the state of the economy can actually harm the economy because such reports damage people's confidence in it, and this lack of confidence in turn adversely affects people's willingness to spend money. But studies show that spending trends correlate very closely with people's confidence in their own immediate economic situations. Thus these media critics are mistaken.
Economist: Some critics of the media have contended that negative news reports on the state of the economy can actually harm the economy because such reports damage people's confidence in it, and this lack of confidence in turn adversely affects people's willingness to spend money. But studies show that spending trends correlate very closely with people's confidence in their own immediate economic situations. Thus these media critics are mistaken.
The economist's argument is flawed in that it fails to consider the possibility that
one's level of confidence in one's own economic situation affects how one perceives reports about the overall state of the economy
news reports about the state of the economy are not always accurate
people who pay no attention to economic reports in the media always judge accurately whether their own economic situation is likely to deteriorate or improve
people who have little confidence in the overall economy generally take a pessimistic view concerning their own immediate economic situations
an economic slowdown usually has a greater impact on the economic situations of individuals if it takes people by surprise than if people are forewarned
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