Austerity Measures - IELTS Reading Sample with Explanation

The IELTS reading test spans 60 minutes. It has 40 questions. IELTS reading passages are based on different topics like science, technology, arts, humanities. A variety of question formats are used to assess reading ability. Skimming, grasping logical argumentation, recognizing writers' perspectives, attitudes, and intent are all examples of reading for gist. The IELTS reading sample article - Austerity Measures consists of passages along with the answers and explanations.

The following passage contains following types of questions:

• Choose the correct answer
• No more than three words
• Complete the sentence

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Section 1

Read the Passage to Answer the Following Questions

Austerity Measures IELTS Reading Sample

1. Austerity measures are actions that a state undertakes in order to pay back its creditors. Those measures typically involve slashing government expenditure and hiking taxes, and most of the time, these are imposed on a country when its national deficit is believed to have become unsustainable. In this situation, banks may lose trust in the government’s ability or willingness to repay existing debts, and in return can refuse to roll over current loans and demand cripplingly excessive interest rates on new lending. Governments frequently then turn to the International Monetary Fund (IMF), an intergovernmental organization that functions as a lender of last resort. In return, the IMF typically demands austerity measures so that the indebted country is able to curtail its budget deficit and fulfill their loan obligations.
2. A wave of austerity measures across Europe in 2010 has seen cuts and freezes to pensions, welfare and public sector salaries as well as hikes to some taxes and excises. The Greek program attempts to narrow its budget shortfall from 8.1 percent of GDP in 2010 to 2.6 percent of GDP in 2014 primarily by freezing public sector incomes during that period and reducing public sector allowances by 8 percent. Additionally, VAT – the Greek sales tax – will be elevated to 23 percent, and excises on fuel, tobacco, and alcohol are also subject to an increase. The statutory retirement age for women will be raised to 65, matching it with the current retirement age for men. These reforms have been deeply unpopular in Greece, prompting a succession of general strikes that have further dented the economy.
3. IMF-imposed austerity measures have been indicted for encouraging the deep recession following the Asian financial crisis of 1997. Starting from the early 1990s, international investors from wealthier countries such as Japan and the United States began pouring money into Southeast Asia, looking to make some quick returns and the soaring economies of Thailand. Philippines, Malaysia and others earned themselves the title “the Asian tigers”. When things started to turn sour, however, the foreign investors panicked and retracted their investments in masses decimating Asian currencies and turning millions of employees out of work. The IMF’s role in the recovery was to impose austerity measures that kept interest rates high while driving down wages and the labor standards at a time when workers were already suffering. According to one former IMF economist, these interventions on a global scale have caused the deaths of 6 million children every year.
4. Many economists consequently view austerity measures as a terrible blunder. John Maynard Keynes was the first to propose an alternative method, long before the Asian financial crisis. Governments, he attempted to demonstrate, could conceivably spend their national economy out of debt. Although logically implausible at first blush, this argument is based on the notion that recessions deepen from a persistent cycle of low incomes, low consumer spending, and low business growth. A government can theoretically reverse this downward spiral by injecting the economy with much needed (albeit borrowed) capital. This is not equivalent to an indebted consumer spending further into the red, Keynes argued, because while the consumer gains no further income on that expenditure, the government’s dollar goes into the economy and then partially boomerangs later on in the form of taxation.
5. Nobel Prize-winning economist Joseph Stiglitz follows up on this approach by noting that households across the world are currently burdened with debt. For businesses to grow, he argues, government and consumer expenditure must kick in first. Austerity measures lower the spending capacity of households, and are, therefore, considered under-productive. Another recipient of the Nobel Prize, Paul Krugman points to the recent experiences of countries such as Ireland, Latvia and Estonia. Countries that implement austerity are the “good soldiers” of the crisis, he notes, implementing savage spending cuts. “But their reward has been a slump, and financial markets continue to treat them as serious default risk.”
6. In the United Kingdom, Prime Minister David Cameron defended the necessity of austerity measures for his country by denouncing the frivolity of governments that ratchet up spending at a time the economy is contracting. This is in line with the counter-Keynesian viewpoint, known broadly as the neoclassical position. Neoclassical economists argue that business is “inspired” by fiscally conservative governments, and this “confidence” helps re-ignite the economy. A British think-tank economist, Marshall Auerback, questions this line of thinking, wondering if Cameron suggests governments should only “ratchet up spending when the economy is growing”. This, Auerback warns, should be avoided because it presents genuine inflationary dangers.

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Section 2

Solution With Explanation
Questions 27-31
Complete the summary below.
Choose NO MORE THAN TWO WORDS from the passage for each answer.
Write your answers in blank spaces next to 27- 31 on your answer sheet.

A government can undergo austerity measures by cutting spending and/or raising 27…………………….. If banks do not believe that a government will settle their debts, they may ask for 28……………… that is too high to pay back. In these cases, the IMF is sometimes prepared to lend money to these governments. One of the conditions of IMF loans is that recipient countries undergo austerity measures to reduce their 29………………… and repay any debts. The IMF has attracted criticism for its role in Asia after the 1997 financial crisis. The crisis was caused when international investors pulled their money out of the region at once, causing 30……………….to foil and unemployment to rise. The IMF’s austerity measures set conditions that lowered incomes and 31…………………. These policies have caused great suffering internationally.

Answer 27: taxes

Supporting sentence: Austerity measures are actions that a state undertakes in order to pay back its creditors. Those measures typically involve slashing government expenditure and hiking taxes, and most of the time, these are imposed on a country when its national deficit is believed to have become unsustainable.

Keywords: national deficit, unsustainable

Keyword Location: Paragraph 1, line 1-2

Explanation: basically Austerity measures are acts taken by a government in order to repay its debtors. These approaches entail cutting government spending and raising taxes.

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Answer 28: interest rates

Supporting sentence: in this situation, banks may lose trust in the government’s ability or willingness to repay existing debts, and in return can refuse to roll over current loans and demand cripplingly excessive interest rates on new lending.

Keywords: existing debts, cripplingly

Keyword Location: Paragraph 1, line 4-6

Explanation: Banks may lose faith in the government's capacity or desire to repay previous debts in this circumstance, and as a result, refuse to roll over existing loans and demand cripplingly high interest rates on new financing. Governments regularly look to international organizations for help.in cases where banks lose faith in governments, they switch to extreme measures to get their money

Answer 29: budget deficit

Supporting sentence: In return, the IMF typically demands austerity measures so that the indebted country is able to curtail its budget deficit and fulfill their loan obligations.

Keywords: austerity measures, indebted country

Keyword Location: Paragraph 1, line 9-11

Explanation: The IMF frequently requires austerity measures in order for a debtor country to reduce its budget deficit and meet its loan obligations.

Answer 30: Asian currencies

Supporting sentence: When things started to turn sour, however, the foreign investors panicked and retracted their investments en masse, decimating Asian currencies and turning millions of employees out of work.

Keywords: foreign investors, decimating

Keyword Location: Paragraph 3, line 6-7

Explanation: Foreign investors panic and withdraw their money in droves. Asian currencies have deteriorated, putting millions of people out of work. The IMF's part in depreciating Asian currencies and displacing millions of people. The IMF's involvement in the recovery was to enforce austerity policies that drove down salaries and labor standards at a time when workers were already suffering.

Answer 31: labor standards

Supporting sentence: According to one former IMF economist, these interventions on a global scale have caused the deaths of 6 million children every year.

Keywords: intervention, global scale

Keyword Location: Paragraph 3, line 8-9

Explanation: The IMF's involvement in the recovery was to enforce austerity policies that drove down salaries and labor standards at a time when workers were already suffering. According to a former IMF economist, these worldwide initiatives result in the deaths of 6 million infants each year.

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Questions 32-35
Choose FOUR letters A—G. Write the correct letters in boxes 32-35 on your answer sheet.
Which FOUR items are identified as features of the Greek government’s austerity measure program in 2010?

1. reducing public sector wages between 2010 and 2014
2. cutting allowances for public sector workers
3. raising the sales tax
4. making the compulsory retirement age the same for both genders
5. multiple general strikes
6. making cigarettes more expensive
7. eliminating the budget deficit

32 ____

33 ____

34 ____

35 ____

Answer 32: B

Supporting sentence: The Greek programme attempts to narrow its budget shortfall from 8.1 percent of GDP in 2010 to 2.6 percent of GDP in 2014 primarily by freezing public sector incomes during that period and reducing public sector allowances by 8 per cent.

Keywords: freezing public sector

Keyword Location: Paragraph 2, line 4-6

Explanation: The Greek programme aims to reduce the country's budget deficit from 8.1% of GDP in 2010 to 2.6% of GDP in 2014, largely by freezing public sector wages and lowering public sector allowances by 8% over that time. Additionally. The Greek sales tax, VAT, will be raised to 23%, and excises on petrol, cigarettes, and alcohol will be increased as well. Women's statutory retirement age will be raised to 65, bringing it in line with men's existing retirement age. These measures have sparked widespread opposition in Greece, resulting in a series of general strikes that have exacerbated the country's economic woes.

Answer 33: C

Supporting sentence: The Greek programme attempts to narrow its budget shortfall from 8.1 percent of GDP in 2010 to 2.6 percent of GDP in 2014 primarily by freezing public sector incomes during that period and reducing public sector allowances by 8 per cent.

Keywords: freezing public sector

Keyword Location: Paragraph 2, line 4-6

Explanation: The Greek programme aims to reduce the country's budget deficit from 8.1% of GDP in 2010 to 2.6% of GDP in 2014, largely by freezing public sector wages and lowering public sector allowances by 8% over that time. Additionally. The Greek sales tax, VAT, will be raised to 23%, and excises on petrol, cigarettes, and alcohol will be increased as well. Women's statutory retirement age will be raised to 65, bringing it in line with men's existing retirement age. These measures have sparked widespread opposition in Greece, resulting in a series of general strikes that have exacerbated the country's economic woes.

Answer 34: D

Supporting sentence: The Greek programme attempts to narrow its budget shortfall from 8.1 percent of GDP in 2010 to 2.6 percent of GDP in 2014 primarily by freezing public sector incomes during that period and reducing public sector allowances by 8 per cent.

Keywords: freezing public sector, reducing public sector

Keyword Location: Paragraph 2, line 4-6

Explanation: The Greek programme aims to reduce the country's budget deficit from 8.1% of GDP in 2010 to 2.6% of GDP in 2014, largely by freezing public sector wages and lowering public sector allowances by 8% over that time. Additionally. The Greek sales tax, VAT, will be raised to 23%, and excises on petrol, cigarettes, and alcohol will be increased as well. Women's statutory retirement age will be raised to 65, bringing it in line with men's existing retirement age. These measures have sparked widespread opposition in Greece, resulting in a series of general strikes that have exacerbated the country's economic woes.

Answer 35: F

Supporting sentence: The Greek programme attempts to narrow its budget shortfall from 8.1 percent of GDP in 2010 to 2.6 percent of GDP in 2014 primarily by freezing public sector incomes during that period and reducing public sector allowances by 8 per cent.

Keywords: reducing public sector

Keyword Location: Paragraph 2, line 4-6

Explanation: The Greek programme aims to reduce the country's budget deficit from 8.1% of GDP in 2010 to 2.6% of GDP in 2014, largely by freezing public sector wages and lowering public sector allowances by 8% over that time. Additionally. The Greek sales tax, VAT, will be raised to 23%, and excises on petrol, cigarettes, and alcohol will be increased as well. Women's statutory retirement age will be raised to 65, bringing it in line with men's existing retirement age. These measures have sparked widespread opposition in Greece, resulting in a series of general strikes that have exacerbated the country's economic woes.

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Questions 36-40

Look at the following people (Questions 36-40) and the list of statements below.
Match each person with an appropriate statement, A—F.
Write the correct letter A-F in boxes 36-40 on your answer sheet.

36. John Maynard Keynes
37. David Cameron
38. Marshall Auerback
39. Joseph Stiglitz
40. Paul Kingman

Answer 36: C

Supporting sentence: Although logically implausible at first blush, this argument is based on the notion that recessions deepen from a persistent cycle of low incomes, low consumer spending, and low business growth.

Keywords: logically implausible

Keyword Location: Paragraph 4, line 3-4

Explanation: Long before the Asian financial crisis, John Maynard Keynes was the first to offer an alternate way. He tried to show that governments could spend their way out of debt by spending their way out of debt.

Answer 37: E

Supporting sentence: In the United Kingdom, Prime Minister David Cameron defended the necessity of austerity measures for his country by denouncing the frivolity of governments that ratchet up spending at a time the economy is contracting.

Keywords: contracting, frivolity

Keyword Location: Paragraph 6, line 1-3

Explanation: Prime Minister David Cameron of the United Kingdom justified the necessity of austerity measures for his country by criticizing administrations that increase expenditure at a time when the economy is declining.

Answer 38: d

Supporting sentence: Cameron suggests governments should only “ratchet up spending when the economy is growing”. This, Auerback warns, should be avoided because it presents genuine inflationary dangers.

Keywords: genuine inflationary dangers

Keyword Location: Paragraph 6, line 7-8

Explanation: Marshall Auerback criticizes Cameron's logic, asking whether he believes governments should only "ratchet up expenditure when the economy is expanding." This, according to Auerback, should be avoided since it poses real inflationary risks.

Answer 39: A

Supporting sentence: For businesses to grow, he argues, government and consumer expenditure must kick in first. Austerity measures lower the spending.

Keywords: Paragraph 5, line 2-3

Keyword Location: government and consumer expenditure

Explanation: He contends that government and consumer spending must come first in order for companies to prosper. Austerity tactics reduce government spending.

Answer 40: B

Supporting sentence: Paul Krugman, points to the recent experiences of countries such as Ireland, Latvia and Estonia. Countries that implement austerity are the “good soldiers” of the crisis,

Keywords: implement austerity

Keyword Location: Paragraph 5, line 5-6

Explanation: Paul Krugman, the Nobel Laureate, cites the recent experiences of Ireland, Latvia, and Estonia. Countries that embrace austerity are the crises' "good warriors," he says.