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Placement Materials & Answers-Free Download

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Directions—(Q. 1–15) Read the following passage carefully and answer the questions given below it.Certain words have been printed in bold to help you locate them while answering some of the questions. Goldman Sachs predicted that crude oil price would hit $200 and just as it appeared that alternativerenewable energy had a chance of becoming an economically viable option, the international price ofoil fell by over 70%. After hitting the all-time high of $147 a barrel, a month ago, crude oil fell to lessthan $40 a barrel. What explains this sharp decline in the international price of oil? There has not beenany major new discovery of a hitherto unknown source of oil or gas. The short answer is that thedemand does not have to fall by a very sizeable quantity for the price of crude to respond as it did. In the short run, the price elasticity of demand for crude oil is very low. Conversely, in the short run, evena relatively big change in the price of oil does not immediately lower consumption. It takes months, oryears, of high oil price to inculcate habits of energy conservation. World crude oil price had remainedat over $60 a barrel for most of 2005-2007 without making any major dent in demand.

The long answer is more complex. The economic slowdown in the US, Europe and Asia along withdollar depreciation and commodity speculation have all had some role in the downward descent in theinternational price of oil. In recent years, the supply of oil has been rising but not enough to catch upwith the rising demand, resulting in an almost vertical escalation in its price. The number of crude oilfutures and options contracts have also increased manifold which has led to significant speculation inthe oil market. In comparison, the role of the Organization of Petroleum Exporting Countries (OPEC) in fixing crude price has considerably weakened. OPEC is often accused of operating as a cartelrestricting output thus keeping prices artificially high. It did succeed in setting the price of crude duringthe 1970s and the first half of the 80s. But, with increased futures trading and contracts, the control ofcrude pricing has moved from OPEC to banks and markets that deal with futures trading and contracts.It is true that most oil exporting regions of the world have remained politically unstable fuelling speculation over the price of crude. But there is little evidence that the geopolitical uncertainties in westAsia have improved to weaken the price of oil. Threatened by the downward slide of oil price, OPEChas, in fact, announced its decision to curtail output. However most oil importers will heave a sigh of relief as they find their oil import bills decline except for those who bought options to import oil at prices higher than market prices. Exporting nations, on the other hand, will see their economic prosperity slip. Relatively low price of crude is also bad newsfor investments in alternative renewable energy that cannot compete with cheaper and non-renewable

sources of energy.

1. Why are oil importing countries relieved ?

(A) Price of crude reached $ 147 not $ 200 as was predicted

(B) Discovery of oil reserves within their own territories

(C) Demand for crude has fallen sharply

(D) There is no need for them to invest huge amounts of money in alternative sources of energy

(E) None of these

Ans : (E)

2. Which of the following factors is responsible for rise in speculation in crude oil markets ?

1. OPEC has not been able to restrict the oil output and control prices

2. The supply of oil has been rising to match demand

3. Existence of large number of oil futures and oil contracts

(A) Only 1

(B) Both 1 & 2

(C) Only 3

(D) All 1, 2 & 3

(E) None of these

Ans : (C)

3. What does the phrase “the price elasticity of demand for crude oil is very low” imply ?

(A) When the price rises the demand for crude oil falls immediately

(B) A small change in demand will result in a sharp change in the price of crude

(C) Within a short span of time the price of crude oil has fluctuated sharply

(D) Speculation in oil does not have much of an impact on its price

(E) None of these

Ans : (E)

4. Which of the following is/are TRUE in the context of the passage ?

1. The decline in oil prices has benefited all countries

2. Renewable energy sources are costlier than non-renewable ones

3. Lack of availability of alternative renewable energy resulted in rise in demand for crude

(A) Only 2

(B) Both 1 & 2

(C) Both 2 & 3

(D) Only 3

(E) None of these

Ans : (D)

5. What has been the impact of the drop in oil prices ?

(A) Exploration for natural gas resources has risen

(B) The dollar has fallen sharply

(C) OPEC has decided to restrict its production of oil

(D) Economic depression in oil importing countries

(E) Drastic fall in demand for crude oil

Ans : (C)

Read each sentence to find out whether there is any grammatical error or

idiomatic error in it. The error, if any, will be in one part of the sentence. The letter of that part is the answer. If there is no error, the answer is (E) (Ignore errors of punctuation, if any.)

31. He has taken care to (A) / compliance with the norms (B) / so he expects the proposal (C) / to beapproved without delay. (D) No error (E)

Ans : (B)

32. Under the terms of the new deal (A) / the channel can broadcast (B) / the next cricket tournament tobe (C) / played among India and Australia. (D) No error (E)

Ans : (D)

33. Our equipment gets damage (A) / very often in summer (B) / because there are (C) / frequent powercuts. (D) No error (E)Ans : (A)

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