It is often said that high rates of inflation tend to diminish people’

Here we a continuity in the statement by finding a statement that gives us the reason for the anomaly.
Option B clearly does that by saying that "certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest" and is the correct continuation of the sentence.

Correct Option: B

Correlation vs Causation. Inflation rate may not be the only factor influencing people's saving and investment behaviour. Other factor may have caused inflation and influenced people's behaviour.

Argument commits this fault.

This argument is an opinion. Argument assumes that the facts are sufficient to prove the conclusion.

Fallacy: Just because people saved and invested more in the 1970s than in 1980s is sufficient to prove the conclusion? Are there other possibilities that could have explained the observation?

Situation
People generally saved and invested more in the 1970’s when inflation was high than in the 1980’s when inflation was low, despite the fact that it is commonly believed that high inflation discourages savings and investment.

Reasoning
Why does the observation about savings, investment, and inflation rates in the 1970’s and 1980’s not justify the conclusion that high inflation does not generally diminish people’s incentive to save and invest? The argument observes that over the course of two decades there was a positive rather than a negative correlation between inflation on the one hand and savings and investment on the other. It infers from this that high rates of inflation do not tend to diminish people’s incentive to save and invest. Is this inference justified? Note that the claim that this argument is trying to discredit is not that high rates of inflation always diminished people’s incentive to save and invest. Rather, the claim is merely that high rates of inflation tend to do this. The argument overlooks the possibility that during the two decades in question other factors may have caused a positive correlation to briefly appear even if in general the correlation is negative.

A The argument is compatible with the hypothesis that some people respond to inflation by saving and investing more, while others do not.
B Correct. If these other factors, unrelated to the inflation rate, that operated in the 1980’s but not the 1970’s, created an even greater disincentive to savings and investment than high inflation rates provide, then those trends do not provide evidence about the general relationship among savings, investment, and inflation.
C The argument appears to concern savings and investment per capita, so total population size should be irrelevant. But increasing population would not explain declining total amounts of savings and investment, either.
D If anything, the possibility that the proponents’ ulterior motives distorted their reasoning would help to support the argument’s conclusion that the proponents’ view is incorrect.
E The argument addresses this possibility by presenting evidence that inflation was positively correlated with both savings and investment during the 1970’s and 1980’s.

People saved and invested more in 1980s when the inflation rates were higher, than in 1970s when the inflation rates were lower. Dispite the common belief that high inflation discourages savings and investments. The correct choice is B.

A all people do not respond in the same way to a given economic stimulus We are not concerned about how people responded, rather we are interested in their investment strategy
B certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest Correct. Could be the reason that there were other factors at play which affected the way the people behaved in a certain way in the 70s vs the 80s.
C the population was larger in the 1980’s than it was in the 1970’s we are not told about the proportion of the population who invested and saved in the 70s and 80s.
D the proponents of the view cited would stand to gain if inflation rates become lower a wishful thinking. the argument says nothing about the views of the proponents of the idea
E a factor that affects people's savings behavior in a certain way could affect people’s investment behavior quite differently we are told nothing about the differences between investment and saving behavior.

Hi
thanks for the explanation
Can you tell me where in the argument is it mentioned that they are talking about per capita income?

Can someone please help me to understand what is D saying and its OG explanation ? Thank you.

(D)  the proponents of the view cited would stand to gain if inflation rates become lower 

OG explanation  If anything, the possibility that the proponents’ ulterior motives distorted their reasoning would help to support the argument’s conclusion that the proponents’ view is incorrect. The possibility would help to support the conclusion .

Official Answer:

Argument Evaluation

Situation People generally saved and invested more in the 1970's when inflation was high than in the 1980s when inflation was low, despite the fact that it is commonly believed that high inflation discourages savings and investment.

Reasoning Why does the observation about savings, investment, and inflation rates in the 1970's and 1980's not justify the conclusion that high inflation does not generally diminish people's incentive to save and invest? The argument observes that over the course of two decades there was a positive rather than a negative correlation between inflation on the one hand and savings and investment on the other. It infers from this that high rates of inflation do not tend to diminish people's incentive to save and invest. Is this inference justified? Note that the claim that this argument is trying to discredit is not that high rates of inflation always diminished people's incentive to save and invest. Rather, the claim is merely that high rates of inflation tend to do this. The argument overlooks the possibility that during the two decades in question other factors may have caused a positive correlation to briefly appear even if in general the correlation is negative.

Option A is incorrect because The argument is compatible with the hypothesis that some people respond to inflation by saving and investing more, while others do not.

Option B is Correct. If these other factors, unrelated to the inflation rate, that operated in the 1980's but not the 1970's, created an even greater disincentive to savings and investment than high inflation rates provide, then those trends do not provide evidence about the general relationship among savings, investment, and inflation.

Option C is incorrect because The argument appears to concern savings and investment per capita, so total population size should be irrelevant. But increasing population would not explain declining total amounts of savings and investment, either.

Option D is incorrect because If anything, the possibility that the proponents' ulterior motives distorted their reasoning would help to support the argument's conclusion that the proponents' view is incorrect.

Option E is incorrect because The argument addresses this possibility by presenting evidence that inflation was positively correlated with both savings and investment during the 1970's and 1980's.

"because people generally saved and invested more of their income in the 1970’s when inflation rates were high than they did in the 1980’s when inflation rates were low."
The author is of the opinion that people invest and save more when inflation is low. But that did not happen in 1980. We need to find criticism of this argument.

(A) all people do not respond in the same way to a given economic stimulus - Author never mentions All people. All people will always behave differently.
(B) certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest - This directly hits the argument. And hence is the right answer.
(C) the population was larger in the 1980’s than it was in the 1970’s - Irrelevant
(D) the proponents of the view cited would stand to gain if inflation rates become lower - Irrelevant
(E) a factor that affects people's savings behavior in a certain way could affect people’s investment behavior quite differently - May be true. But we are specifically looking for inflation.

Dear AjiteshArun VeritasKarishma DmitryFarber,

I have one question on the correct choice B.
(B) certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest

In order to arrive at choice B., do we need to assume that those certain factos in 1980's had to OUTWEIGH the high inflation rates in 1970's ?
In other words, we have to assume that those factors in 1980's had to disincentivize MORE than the high inflation rates in 1970's disincentivized right?
I think that choice B. works under quite specific circumstances. That's why I am not 100% confident in selecting choice B.

Thank you in advance Sir!
Varot

VeritasKarishma MentorTutoring GMATNinjaTwo

Could you assist to help me understand question stem better:

I understand that to criticize means to weaken.
How do I interpret: it overlooks the possibility

Hello, adkikani. Thank you for tagging me. The question is asking what the argument does not consider or leaves out that would make it most vulnerable to criticism. To overlook something is not to see it.

I hope that helps. If not, I can add some examples.

- Andrew

Thank you MentorTutoring

Understood. I guess that was a fancy phrase for: the argument is susceptible to criticism that ___
(In other words., how can I weaken the claim?)

Precisely, adkikani. Of the five answers, which one draws attention to a logical flaw in the argument? There are only so many ways to express that notion. I think placing the question under the weaken umbrella or family of CR questions is good enough. Once you cut through the intimidation factor of GMAT™ questions, you can get to work and get something done.

- Andrew

AndrewN

Can you please help me to understand the meaning of D?
(D) the proponents of the view cited would stand to gain if inflation rates become lower

Thanks in advance!

Sure, Sneha2021. How about we look at the passage and answer choice for reference?


Since the second line starts with this view, we can deduce that the view in question is that high rates of inflation tend to diminish people's incentive to save and invest. Further, the view cited in answer choice (D) must be the same view. A proponent is someone who supports something. Finally, stand to gain most likely refers to some financial gain, given the context of the answer choice. Altogether, then, we can reasonably interpret answer choice (D) in the following manner (I will underline any alterations):

supporters of the view that high rates of inflation tend to diminish people's incentive to save and invest would stand to gain financially if inflation rates become lower

Even though this statement is lengthier than the original answer choice, perhaps it clarifies matters a bit more. (If not, feel free to follow up.) Thank you for thinking to ask.

- Andrew