RBI OFFICER GRADE ‘B’ PHASE-I EXAM Held on : 21.11.2015(Part-I)

Brazil does not look like an economy on the verge of overheating. The IMF expects it to shrink by 3% this year, and 1% next (The country has not suffered two straight years of contraction since 1930-31). 1.2m jobs, vanished in September, unemployment has reached 7.6%, up from 4.9% a year ago. Those still in work are finding it harder to make ends meet real (i.e. adjusted for inflation) wages are down 4.3% year-on-year. Despite the weak economy inflation is nudging double digits. The central bank recently conceded that it will miss its 4.5% inflation target next year. Markets don't expect it to be met before 2019. If fastrising prices are simply a passing effect of the Brazilian real (R$) recent fall, which has pushed up the cost of imported goods, then they are not too troubling. But some economists have a more alarming explanation: that Brazil's budgetary woes are so extreme that they have undermined the central bank's power to fight inflation-a phenomenon known as fiscal dominance.

The immediate causes of Brazil's troubles are external: the weak world economy, and China's faltering appetite for oil and iron ore in particular, have enfeebled both exports and investment. But much of the country's pain is self inflicted. The president could have used the commodity windfall from the first term in 2011-14 to trim the bloated state, which swallows 36% of GDP in taxes despite offering few decent public services in return. Instead handouts, subsidised loans and costly tax breaks for favoured industries were splurged on. These fuelled a consumption boom, and with it inflation, while hiding the economy's underlying weaknesses: thick red tape, impenetrable taxes, an unskilled workforce and shoddy infrastructure. The government's profligacy also left the public finances in tatters.

The primary balance (before interest payments) went from a sur-plus of 3.1% of GDP in 2011 to a forcast deficit of 0.9% this year. In the same period public debt has swollen to 65% of GDP, an increase of 13 percentage points. That is lower than in many rich countries, but Brazil pays much higher interest on its debt. It will spend 8.5% of GDP this year servicing it, more than any other big country. In September it lost its investment-grade credit rating.

Stagflation of the sort Brazil is experiencing presents central bankers with a dilemma. Raising interest rates to quell inflation might push the economy deeper into recession; lowering them to foster growth might send inflation spiralling out of control. Between October last year and July this year, the country's rate-setters seemed to prioritise price stability, raising the benchmark Selic rate by three percentage points, to 14.25%, where it remains.

The alluring real rates of almost 5% ought to have made the Brazilian Real attractive to investors. Instead, the currency has weakened and rising inflation despite higher interest rates, combined with a doubling of debt-servicing costs in the past three years has led to the diagnosis of fiscal dominance. The cost of servicing Brazil's debts has become so high, that rates have to be set to keep it manageable rather than to rein in prices. That, in turn , leads to a vicious circle of a falling currency and rising inflation. There is no question, however, that Brazilian monetory policy is at best hobbled. State-owned banks have extended nearly half the country's credit at low, subsidised rates that bear little relation to the Selicat a cost of more than 40 billion R$ ($10 billion) a year to the taxpayer. As private banks have cut lending in the past year, public ones have continued to expand their loan books. All this hampers monetary policy and If left unchecked, this spurt of lending may itself threaten price stability.

Choose the word which is most opposite in meaning to the word PASSING given in bold as used in the Passage.

Brazil does not look like an economy on the verge of overheating. The IMF expects it to shrink by 3% this year, and 1% next (The country has not suffered two straight years of contraction since 1930-31). 1.2m jobs, vanished in September, unemployment has reached 7.6%, up from 4.9% a year ago. Those still in work are finding it harder to make ends meet real (i.e. adjusted for inflation) wages are down 4.3% year-on-year. Despite the weak economy inflation is nudging double digits. The central bank recently conceded that it will miss its 4.5% inflation target next year. Markets don't expect it to be met before 2019. If fastrising prices are simply a passing effect of the Brazilian real (R$) recent fall, which has pushed up the cost of imported goods, then they are not too troubling. But some economists have a more alarming explanation: that Brazil's budgetary woes are so extreme that they have undermined the central bank's power to fight inflation-a phenomenon known as fiscal dominance.

The immediate causes of Brazil's troubles are external: the weak world economy, and China's faltering appetite for oil and iron ore in particular, have enfeebled both exports and investment. But much of the country's pain is self inflicted. The president could have used the commodity windfall from the first term in 2011-14 to trim the bloated state, which swallows 36% of GDP in taxes despite offering few decent public services in return. Instead handouts, subsidised loans and costly tax breaks for favoured industries were splurged on. These fuelled a consumption boom, and with it inflation, while hiding the economy's underlying weaknesses: thick red tape, impenetrable taxes, an unskilled workforce and shoddy infrastructure. The government's profligacy also left the public finances in tatters.

The primary balance (before interest payments) went from a sur-plus of 3.1% of GDP in 2011 to a forcast deficit of 0.9% this year. In the same period public debt has swollen to 65% of GDP, an increase of 13 percentage points. That is lower than in many rich countries, but Brazil pays much higher interest on its debt. It will spend 8.5% of GDP this year servicing it, more than any other big country. In September it lost its investment-grade credit rating.

Stagflation of the sort Brazil is experiencing presents central bankers with a dilemma. Raising interest rates to quell inflation might push the economy deeper into recession; lowering them to foster growth might send inflation spiralling out of control. Between October last year and July this year, the country's rate-setters seemed to prioritise price stability, raising the benchmark Selic rate by three percentage points, to 14.25%, where it remains.

The alluring real rates of almost 5% ought to have made the Brazilian Real attractive to investors. Instead, the currency has weakened and rising inflation despite higher interest rates, combined with a doubling of debt-servicing costs in the past three years has led to the diagnosis of fiscal dominance. The cost of servicing Brazil's debts has become so high, that rates have to be set to keep it manageable rather than to rein in prices. That, in turn , leads to a vicious circle of a falling currency and rising inflation. There is no question, however, that Brazilian monetory policy is at best hobbled. State-owned banks have extended nearly half the country's credit at low, subsidised rates that bear little relation to the Selicat a cost of more than 40 billion R$ ($10 billion) a year to the taxpayer. As private banks have cut lending in the past year, public ones have continued to expand their loan books. All this hampers monetary policy and If left unchecked, this spurt of lending may itself threaten price stability.

Which of the following best describes the author's view of Brazil's banks?

Brazil does not look like an economy on the verge of overheating. The IMF expects it to shrink by 3% this year, and 1% next (The country has not suffered two straight years of contraction since 1930-31). 1.2m jobs, vanished in September, unemployment has reached 7.6%, up from 4.9% a year ago. Those still in work are finding it harder to make ends meet real (i.e. adjusted for inflation) wages are down 4.3% year-on-year. Despite the weak economy inflation is nudging double digits. The central bank recently conceded that it will miss its 4.5% inflation target next year. Markets don't expect it to be met before 2019. If fastrising prices are simply a passing effect of the Brazilian real (R$) recent fall, which has pushed up the cost of imported goods, then they are not too troubling. But some economists have a more alarming explanation: that Brazil's budgetary woes are so extreme that they have undermined the central bank's power to fight inflation-a phenomenon known as fiscal dominance.

The immediate causes of Brazil's troubles are external: the weak world economy, and China's faltering appetite for oil and iron ore in particular, have enfeebled both exports and investment. But much of the country's pain is self inflicted. The president could have used the commodity windfall from the first term in 2011-14 to trim the bloated state, which swallows 36% of GDP in taxes despite offering few decent public services in return. Instead handouts, subsidised loans and costly tax breaks for favoured industries were splurged on. These fuelled a consumption boom, and with it inflation, while hiding the economy's underlying weaknesses: thick red tape, impenetrable taxes, an unskilled workforce and shoddy infrastructure. The government's profligacy also left the public finances in tatters.

The primary balance (before interest payments) went from a sur-plus of 3.1% of GDP in 2011 to a forcast deficit of 0.9% this year. In the same period public debt has swollen to 65% of GDP, an increase of 13 percentage points. That is lower than in many rich countries, but Brazil pays much higher interest on its debt. It will spend 8.5% of GDP this year servicing it, more than any other big country. In September it lost its investment-grade credit rating.

Stagflation of the sort Brazil is experiencing presents central bankers with a dilemma. Raising interest rates to quell inflation might push the economy deeper into recession; lowering them to foster growth might send inflation spiralling out of control. Between October last year and July this year, the country's rate-setters seemed to prioritise price stability, raising the benchmark Selic rate by three percentage points, to 14.25%, where it remains.

The alluring real rates of almost 5% ought to have made the Brazilian Real attractive to investors. Instead, the currency has weakened and rising inflation despite higher interest rates, combined with a doubling of debt-servicing costs in the past three years has led to the diagnosis of fiscal dominance. The cost of servicing Brazil's debts has become so high, that rates have to be set to keep it manageable rather than to rein in prices. That, in turn , leads to a vicious circle of a falling currency and rising inflation. There is no question, however, that Brazilian monetory policy is at best hobbled. State-owned banks have extended nearly half the country's credit at low, subsidised rates that bear little relation to the Selicat a cost of more than 40 billion R$ ($10 billion) a year to the taxpayer. As private banks have cut lending in the past year, public ones have continued to expand their loan books. All this hampers monetary policy and If left unchecked, this spurt of lending may itself threaten price stability.

Choose the word which is most opposite in meaning to the word SPURT given in bold as used in the passage.

Brazil does not look like an economy on the verge of overheating. The IMF expects it to shrink by 3% this year, and 1% next (The country has not suffered two straight years of contraction since 1930-31). 1.2m jobs, vanished in September, unemployment has reached 7.6%, up from 4.9% a year ago. Those still in work are finding it harder to make ends meet real (i.e. adjusted for inflation) wages are down 4.3% year-on-year. Despite the weak economy inflation is nudging double digits. The central bank recently conceded that it will miss its 4.5% inflation target next year. Markets don't expect it to be met before 2019. If fastrising prices are simply a passing effect of the Brazilian real (R$) recent fall, which has pushed up the cost of imported goods, then they are not too troubling. But some economists have a more alarming explanation: that Brazil's budgetary woes are so extreme that they have undermined the central bank's power to fight inflation-a phenomenon known as fiscal dominance.

The immediate causes of Brazil's troubles are external: the weak world economy, and China's faltering appetite for oil and iron ore in particular, have enfeebled both exports and investment. But much of the country's pain is self inflicted. The president could have used the commodity windfall from the first term in 2011-14 to trim the bloated state, which swallows 36% of GDP in taxes despite offering few decent public services in return. Instead handouts, subsidised loans and costly tax breaks for favoured industries were splurged on. These fuelled a consumption boom, and with it inflation, while hiding the economy's underlying weaknesses: thick red tape, impenetrable taxes, an unskilled workforce and shoddy infrastructure. The government's profligacy also left the public finances in tatters.

The primary balance (before interest payments) went from a sur-plus of 3.1% of GDP in 2011 to a forcast deficit of 0.9% this year. In the same period public debt has swollen to 65% of GDP, an increase of 13 percentage points. That is lower than in many rich countries, but Brazil pays much higher interest on its debt. It will spend 8.5% of GDP this year servicing it, more than any other big country. In September it lost its investment-grade credit rating.

Stagflation of the sort Brazil is experiencing presents central bankers with a dilemma. Raising interest rates to quell inflation might push the economy deeper into recession; lowering them to foster growth might send inflation spiralling out of control. Between October last year and July this year, the country's rate-setters seemed to prioritise price stability, raising the benchmark Selic rate by three percentage points, to 14.25%, where it remains.

The alluring real rates of almost 5% ought to have made the Brazilian Real attractive to investors. Instead, the currency has weakened and rising inflation despite higher interest rates, combined with a doubling of debt-servicing costs in the past three years has led to the diagnosis of fiscal dominance. The cost of servicing Brazil's debts has become so high, that rates have to be set to keep it manageable rather than to rein in prices. That, in turn , leads to a vicious circle of a falling currency and rising inflation. There is no question, however, that Brazilian monetory policy is at best hobbled. State-owned banks have extended nearly half the country's credit at low, subsidised rates that bear little relation to the Selicat a cost of more than 40 billion R$ ($10 billion) a year to the taxpayer. As private banks have cut lending in the past year, public ones have continued to expand their loan books. All this hampers monetary policy and If left unchecked, this spurt of lending may itself threaten price stability.

Choose the word which is most nearly the same in meaning to the word FUELLED given in bold as used in the passage.

Brazil does not look like an economy on the verge of overheating. The IMF expects it to shrink by 3% this year, and 1% next (The country has not suffered two straight years of contraction since 1930-31). 1.2m jobs, vanished in September, unemployment has reached 7.6%, up from 4.9% a year ago. Those still in work are finding it harder to make ends meet real (i.e. adjusted for inflation) wages are down 4.3% year-on-year. Despite the weak economy inflation is nudging double digits. The central bank recently conceded that it will miss its 4.5% inflation target next year. Markets don't expect it to be met before 2019. If fastrising prices are simply a passing effect of the Brazilian real (R$) recent fall, which has pushed up the cost of imported goods, then they are not too troubling. But some economists have a more alarming explanation: that Brazil's budgetary woes are so extreme that they have undermined the central bank's power to fight inflation-a phenomenon known as fiscal dominance.

The immediate causes of Brazil's troubles are external: the weak world economy, and China's faltering appetite for oil and iron ore in particular, have enfeebled both exports and investment. But much of the country's pain is self inflicted. The president could have used the commodity windfall from the first term in 2011-14 to trim the bloated state, which swallows 36% of GDP in taxes despite offering few decent public services in return. Instead handouts, subsidised loans and costly tax breaks for favoured industries were splurged on. These fuelled a consumption boom, and with it inflation, while hiding the economy's underlying weaknesses: thick red tape, impenetrable taxes, an unskilled workforce and shoddy infrastructure. The government's profligacy also left the public finances in tatters.

The primary balance (before interest payments) went from a sur-plus of 3.1% of GDP in 2011 to a forcast deficit of 0.9% this year. In the same period public debt has swollen to 65% of GDP, an increase of 13 percentage points. That is lower than in many rich countries, but Brazil pays much higher interest on its debt. It will spend 8.5% of GDP this year servicing it, more than any other big country. In September it lost its investment-grade credit rating.

Stagflation of the sort Brazil is experiencing presents central bankers with a dilemma. Raising interest rates to quell inflation might push the economy deeper into recession; lowering them to foster growth might send inflation spiralling out of control. Between October last year and July this year, the country's rate-setters seemed to prioritise price stability, raising the benchmark Selic rate by three percentage points, to 14.25%, where it remains.

The alluring real rates of almost 5% ought to have made the Brazilian Real attractive to investors. Instead, the currency has weakened and rising inflation despite higher interest rates, combined with a doubling of debt-servicing costs in the past three years has led to the diagnosis of fiscal dominance. The cost of servicing Brazil's debts has become so high, that rates have to be set to keep it manageable rather than to rein in prices. That, in turn , leads to a vicious circle of a falling currency and rising inflation. There is no question, however, that Brazilian monetory policy is at best hobbled. State-owned banks have extended nearly half the country's credit at low, subsidised rates that bear little relation to the Selicat a cost of more than 40 billion R$ ($10 billion) a year to the taxpayer. As private banks have cut lending in the past year, public ones have continued to expand their loan books. All this hampers monetary policy and If left unchecked, this spurt of lending may itself threaten price stability.

Which of the following describes the global perception of Brazil's economy?

Brazil does not look like an economy on the verge of overheating. The IMF expects it to shrink by 3% this year, and 1% next (The country has not suffered two straight years of contraction since 1930-31). 1.2m jobs, vanished in September, unemployment has reached 7.6%, up from 4.9% a year ago. Those still in work are finding it harder to make ends meet real (i.e. adjusted for inflation) wages are down 4.3% year-on-year. Despite the weak economy inflation is nudging double digits. The central bank recently conceded that it will miss its 4.5% inflation target next year. Markets don't expect it to be met before 2019. If fastrising prices are simply a passing effect of the Brazilian real (R$) recent fall, which has pushed up the cost of imported goods, then they are not too troubling. But some economists have a more alarming explanation: that Brazil's budgetary woes are so extreme that they have undermined the central bank's power to fight inflation-a phenomenon known as fiscal dominance.

The immediate causes of Brazil's troubles are external: the weak world economy, and China's faltering appetite for oil and iron ore in particular, have enfeebled both exports and investment. But much of the country's pain is self inflicted. The president could have used the commodity windfall from the first term in 2011-14 to trim the bloated state, which swallows 36% of GDP in taxes despite offering few decent public services in return. Instead handouts, subsidised loans and costly tax breaks for favoured industries were splurged on. These fuelled a consumption boom, and with it inflation, while hiding the economy's underlying weaknesses: thick red tape, impenetrable taxes, an unskilled workforce and shoddy infrastructure. The government's profligacy also left the public finances in tatters.

The primary balance (before interest payments) went from a sur-plus of 3.1% of GDP in 2011 to a forcast deficit of 0.9% this year. In the same period public debt has swollen to 65% of GDP, an increase of 13 percentage points. That is lower than in many rich countries, but Brazil pays much higher interest on its debt. It will spend 8.5% of GDP this year servicing it, more than any other big country. In September it lost its investment-grade credit rating.

Stagflation of the sort Brazil is experiencing presents central bankers with a dilemma. Raising interest rates to quell inflation might push the economy deeper into recession; lowering them to foster growth might send inflation spiralling out of control. Between October last year and July this year, the country's rate-setters seemed to prioritise price stability, raising the benchmark Selic rate by three percentage points, to 14.25%, where it remains.

The alluring real rates of almost 5% ought to have made the Brazilian Real attractive to investors. Instead, the currency has weakened and rising inflation despite higher interest rates, combined with a doubling of debt-servicing costs in the past three years has led to the diagnosis of fiscal dominance. The cost of servicing Brazil's debts has become so high, that rates have to be set to keep it manageable rather than to rein in prices. That, in turn , leads to a vicious circle of a falling currency and rising inflation. There is no question, however, that Brazilian monetory policy is at best hobbled. State-owned banks have extended nearly half the country's credit at low, subsidised rates that bear little relation to the Selicat a cost of more than 40 billion R$ ($10 billion) a year to the taxpayer. As private banks have cut lending in the past year, public ones have continued to expand their loan books. All this hampers monetary policy and If left unchecked, this spurt of lending may itself threaten price stability.

Which of the following is the central idea of the passage?

Brazil does not look like an economy on the verge of overheating. The IMF expects it to shrink by 3% this year, and 1% next (The country has not suffered two straight years of contraction since 1930-31). 1.2m jobs, vanished in September, unemployment has reached 7.6%, up from 4.9% a year ago. Those still in work are finding it harder to make ends meet real (i.e. adjusted for inflation) wages are down 4.3% year-on-year. Despite the weak economy inflation is nudging double digits. The central bank recently conceded that it will miss its 4.5% inflation target next year. Markets don't expect it to be met before 2019. If fastrising prices are simply a passing effect of the Brazilian real (R$) recent fall, which has pushed up the cost of imported goods, then they are not too troubling. But some economists have a more alarming explanation: that Brazil's budgetary woes are so extreme that they have undermined the central bank's power to fight inflation-a phenomenon known as fiscal dominance.

The immediate causes of Brazil's troubles are external: the weak world economy, and China's faltering appetite for oil and iron ore in particular, have enfeebled both exports and investment. But much of the country's pain is self inflicted. The president could have used the commodity windfall from the first term in 2011-14 to trim the bloated state, which swallows 36% of GDP in taxes despite offering few decent public services in return. Instead handouts, subsidised loans and costly tax breaks for favoured industries were splurged on. These fuelled a consumption boom, and with it inflation, while hiding the economy's underlying weaknesses: thick red tape, impenetrable taxes, an unskilled workforce and shoddy infrastructure. The government's profligacy also left the public finances in tatters.

The primary balance (before interest payments) went from a sur-plus of 3.1% of GDP in 2011 to a forcast deficit of 0.9% this year. In the same period public debt has swollen to 65% of GDP, an increase of 13 percentage points. That is lower than in many rich countries, but Brazil pays much higher interest on its debt. It will spend 8.5% of GDP this year servicing it, more than any other big country. In September it lost its investment-grade credit rating.

Stagflation of the sort Brazil is experiencing presents central bankers with a dilemma. Raising interest rates to quell inflation might push the economy deeper into recession; lowering them to foster growth might send inflation spiralling out of control. Between October last year and July this year, the country's rate-setters seemed to prioritise price stability, raising the benchmark Selic rate by three percentage points, to 14.25%, where it remains.

The alluring real rates of almost 5% ought to have made the Brazilian Real attractive to investors. Instead, the currency has weakened and rising inflation despite higher interest rates, combined with a doubling of debt-servicing costs in the past three years has led to the diagnosis of fiscal dominance. The cost of servicing Brazil's debts has become so high, that rates have to be set to keep it manageable rather than to rein in prices. That, in turn , leads to a vicious circle of a falling currency and rising inflation. There is no question, however, that Brazilian monetory policy is at best hobbled. State-owned banks have extended nearly half the country's credit at low, subsidised rates that bear little relation to the Selicat a cost of more than 40 billion R$ ($10 billion) a year to the taxpayer. As private banks have cut lending in the past year, public ones have continued to expand their loan books. All this hampers monetary policy and If left unchecked, this spurt of lending may itself threaten price stability.

According to the passage; which of the following is/are a factor(s) that has/have impacted Brazil's economy?
(A) Weakening of Brazil's currency.
(B) Drop in demand for oil.
(C) Economic sanctions against it by the IMF.

Brazil does not look like an economy on the verge of overheating. The IMF expects it to shrink by 3% this year, and 1% next (The country has not suffered two straight years of contraction since 1930-31). 1.2m jobs, vanished in September, unemployment has reached 7.6%, up from 4.9% a year ago. Those still in work are finding it harder to make ends meet real (i.e. adjusted for inflation) wages are down 4.3% year-on-year. Despite the weak economy inflation is nudging double digits. The central bank recently conceded that it will miss its 4.5% inflation target next year. Markets don't expect it to be met before 2019. If fastrising prices are simply a passing effect of the Brazilian real (R$) recent fall, which has pushed up the cost of imported goods, then they are not too troubling. But some economists have a more alarming explanation: that Brazil's budgetary woes are so extreme that they have undermined the central bank's power to fight inflation-a phenomenon known as fiscal dominance.

The immediate causes of Brazil's troubles are external: the weak world economy, and China's faltering appetite for oil and iron ore in particular, have enfeebled both exports and investment. But much of the country's pain is self inflicted. The president could have used the commodity windfall from the first term in 2011-14 to trim the bloated state, which swallows 36% of GDP in taxes despite offering few decent public services in return. Instead handouts, subsidised loans and costly tax breaks for favoured industries were splurged on. These fuelled a consumption boom, and with it inflation, while hiding the economy's underlying weaknesses: thick red tape, impenetrable taxes, an unskilled workforce and shoddy infrastructure. The government's profligacy also left the public finances in tatters.

The primary balance (before interest payments) went from a sur-plus of 3.1% of GDP in 2011 to a forcast deficit of 0.9% this year. In the same period public debt has swollen to 65% of GDP, an increase of 13 percentage points. That is lower than in many rich countries, but Brazil pays much higher interest on its debt. It will spend 8.5% of GDP this year servicing it, more than any other big country. In September it lost its investment-grade credit rating.

Stagflation of the sort Brazil is experiencing presents central bankers with a dilemma. Raising interest rates to quell inflation might push the economy deeper into recession; lowering them to foster growth might send inflation spiralling out of control. Between October last year and July this year, the country's rate-setters seemed to prioritise price stability, raising the benchmark Selic rate by three percentage points, to 14.25%, where it remains.

The alluring real rates of almost 5% ought to have made the Brazilian Real attractive to investors. Instead, the currency has weakened and rising inflation despite higher interest rates, combined with a doubling of debt-servicing costs in the past three years has led to the diagnosis of fiscal dominance. The cost of servicing Brazil's debts has become so high, that rates have to be set to keep it manageable rather than to rein in prices. That, in turn , leads to a vicious circle of a falling currency and rising inflation. There is no question, however, that Brazilian monetory policy is at best hobbled. State-owned banks have extended nearly half the country's credit at low, subsidised rates that bear little relation to the Selicat a cost of more than 40 billion R$ ($10 billion) a year to the taxpayer. As private banks have cut lending in the past year, public ones have continued to expand their loan books. All this hampers monetary policy and If left unchecked, this spurt of lending may itself threaten price stability.

Which of the following is true in the context of the passage?

Brazil does not look like an economy on the verge of overheating. The IMF expects it to shrink by 3% this year, and 1% next (The country has not suffered two straight years of contraction since 1930-31). 1.2m jobs, vanished in September, unemployment has reached 7.6%, up from 4.9% a year ago. Those still in work are finding it harder to make ends meet real (i.e. adjusted for inflation) wages are down 4.3% year-on-year. Despite the weak economy inflation is nudging double digits. The central bank recently conceded that it will miss its 4.5% inflation target next year. Markets don't expect it to be met before 2019. If fastrising prices are simply a passing effect of the Brazilian real (R$) recent fall, which has pushed up the cost of imported goods, then they are not too troubling. But some economists have a more alarming explanation: that Brazil's budgetary woes are so extreme that they have undermined the central bank's power to fight inflation-a phenomenon known as fiscal dominance.

The immediate causes of Brazil's troubles are external: the weak world economy, and China's faltering appetite for oil and iron ore in particular, have enfeebled both exports and investment. But much of the country's pain is self inflicted. The president could have used the commodity windfall from the first term in 2011-14 to trim the bloated state, which swallows 36% of GDP in taxes despite offering few decent public services in return. Instead handouts, subsidised loans and costly tax breaks for favoured industries were splurged on. These fuelled a consumption boom, and with it inflation, while hiding the economy's underlying weaknesses: thick red tape, impenetrable taxes, an unskilled workforce and shoddy infrastructure. The government's profligacy also left the public finances in tatters.

The primary balance (before interest payments) went from a sur-plus of 3.1% of GDP in 2011 to a forcast deficit of 0.9% this year. In the same period public debt has swollen to 65% of GDP, an increase of 13 percentage points. That is lower than in many rich countries, but Brazil pays much higher interest on its debt. It will spend 8.5% of GDP this year servicing it, more than any other big country. In September it lost its investment-grade credit rating.

Stagflation of the sort Brazil is experiencing presents central bankers with a dilemma. Raising interest rates to quell inflation might push the economy deeper into recession; lowering them to foster growth might send inflation spiralling out of control. Between October last year and July this year, the country's rate-setters seemed to prioritise price stability, raising the benchmark Selic rate by three percentage points, to 14.25%, where it remains.

The alluring real rates of almost 5% ought to have made the Brazilian Real attractive to investors. Instead, the currency has weakened and rising inflation despite higher interest rates, combined with a doubling of debt-servicing costs in the past three years has led to the diagnosis of fiscal dominance. The cost of servicing Brazil's debts has become so high, that rates have to be set to keep it manageable rather than to rein in prices. That, in turn , leads to a vicious circle of a falling currency and rising inflation. There is no question, however, that Brazilian monetory policy is at best hobbled. State-owned banks have extended nearly half the country's credit at low, subsidised rates that bear little relation to the Selicat a cost of more than 40 billion R$ ($10 billion) a year to the taxpayer. As private banks have cut lending in the past year, public ones have continued to expand their loan books. All this hampers monetary policy and If left unchecked, this spurt of lending may itself threaten price stability.

What do the statements regarding Brazil's GDP, quoted in the passage convey?

Brazil does not look like an economy on the verge of overheating. The IMF expects it to shrink by 3% this year, and 1% next (The country has not suffered two straight years of contraction since 1930-31). 1.2m jobs, vanished in September, unemployment has reached 7.6%, up from 4.9% a year ago. Those still in work are finding it harder to make ends meet real (i.e. adjusted for inflation) wages are down 4.3% year-on-year. Despite the weak economy inflation is nudging double digits. The central bank recently conceded that it will miss its 4.5% inflation target next year. Markets don't expect it to be met before 2019. If fastrising prices are simply a passing effect of the Brazilian real (R$) recent fall, which has pushed up the cost of imported goods, then they are not too troubling. But some economists have a more alarming explanation: that Brazil's budgetary woes are so extreme that they have undermined the central bank's power to fight inflation-a phenomenon known as fiscal dominance.

The immediate causes of Brazil's troubles are external: the weak world economy, and China's faltering appetite for oil and iron ore in particular, have enfeebled both exports and investment. But much of the country's pain is self inflicted. The president could have used the commodity windfall from the first term in 2011-14 to trim the bloated state, which swallows 36% of GDP in taxes despite offering few decent public services in return. Instead handouts, subsidised loans and costly tax breaks for favoured industries were splurged on. These fuelled a consumption boom, and with it inflation, while hiding the economy's underlying weaknesses: thick red tape, impenetrable taxes, an unskilled workforce and shoddy infrastructure. The government's profligacy also left the public finances in tatters.

The primary balance (before interest payments) went from a sur-plus of 3.1% of GDP in 2011 to a forcast deficit of 0.9% this year. In the same period public debt has swollen to 65% of GDP, an increase of 13 percentage points. That is lower than in many rich countries, but Brazil pays much higher interest on its debt. It will spend 8.5% of GDP this year servicing it, more than any other big country. In September it lost its investment-grade credit rating.

Stagflation of the sort Brazil is experiencing presents central bankers with a dilemma. Raising interest rates to quell inflation might push the economy deeper into recession; lowering them to foster growth might send inflation spiralling out of control. Between October last year and July this year, the country's rate-setters seemed to prioritise price stability, raising the benchmark Selic rate by three percentage points, to 14.25%, where it remains.

The alluring real rates of almost 5% ought to have made the Brazilian Real attractive to investors. Instead, the currency has weakened and rising inflation despite higher interest rates, combined with a doubling of debt-servicing costs in the past three years has led to the diagnosis of fiscal dominance. The cost of servicing Brazil's debts has become so high, that rates have to be set to keep it manageable rather than to rein in prices. That, in turn , leads to a vicious circle of a falling currency and rising inflation. There is no question, however, that Brazilian monetory policy is at best hobbled. State-owned banks have extended nearly half the country's credit at low, subsidised rates that bear little relation to the Selicat a cost of more than 40 billion R$ ($10 billion) a year to the taxpayer. As private banks have cut lending in the past year, public ones have continued to expand their loan books. All this hampers monetary policy and If left unchecked, this spurt of lending may itself threaten price stability.

Choose the word which is most nearly the same in meaning to the word CONCEDED given in bold as used in the passage.