This is a formal logic question, as signaled by “if/then” and “only if,” which means we
need to translate the statements into similar form and go on to make whatever deduction is
available to us.
Sentence 1 says that a weak economy is sufficient to bring about two effects: constant prices
and rising unemployment. Okay for now. Sentence 2’s “only if” signals a necessary
condition, so we can translate the sentence into if/then terms, to wit:
If unemployment rises, then investment decreases.
Now formulate the contrapositive:
If investment is not decreasing, then unemployment is not rising.
And look!—sentence 3 confirms the latter “if” to be the case: Investment, indeed, is not
decreasing. Hence, from sentence 2’s contrapositive, we can deduce that unemployment
indeed is not rising. And that has an impact on sentence 1, whose contrapositive must
If either prices are not constant or unemployment is not rising, then the economy is not weak.
And that leads us to a final deduction. The latter “if” has just been confirmed—it is a fact
that unemployment isn’t rising—hence we must conclude that the economy is not weak.
So of the four factors in the stimulus—economy, prices, unemployment, and investment—
we are sure of the status of three of them. Only prices is up for grabs; they may or may not
remain constant. Now: Keep in mind that the right answer must be false, so the four wrong
choices either could or must be true. And no sooner do we start looking that we see that:
(A) is impossible. Its second clause is flatly contradicted by stimulus sentence 3, and its
first clause is contradicted by our final deduction that “the economy is not weak.” Neither
of (A)’s conditions is possible, so (A) is what we are looking for. For the record:
(B) is possible, because unemployment’s rise has no effect, as far as we’re told, on the
constancy of prices.
(C) must be true. A weak economy means a rise in unemployment, which in turn means
decreased investment. Hence (C) is deducible when sentences 1 and 2 are combined. This
one is selected by students who forget what they’re being asked for.
(D) The first clause in (D) can’t be true—we deduced that the economy is NOT weak.
However, the second clause could be true, as we saw that prices may or may not remain
constant. So overall, (D) contains a statement that could be true and is therefore not what
we seek here.
(E) Again, as in (D), the first clause cannot be true (unemployment is NOT rising), but the
second clause must be true—the economy indeed is not weak, as we deduced above. (E) is
therefore a statement that must be true.