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# A proposal has recently been floated by the government to increase

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Director
Joined: 08 Jun 2013
Posts: 558
Location: France
GMAT 1: 200 Q1 V1
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WE: Consulting (Other)
A proposal has recently been floated by the government to increase  [#permalink]

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10 Sep 2018, 19:18
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Difficulty:

45% (medium)

Question Stats:

63% (01:56) correct 37% (01:38) wrong based on 106 sessions

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A proposal has recently been floated by the government to increase road use tax rates across the country. This will lead to an increase in operating costs for trucking companies, who will then most likely increase their freight rates. The higher freight rates will, in turn, lead to a consequent increase in the prices of goods and commodities of daily use such as vegetable and grocery items. Thus, if the proposal is passed, it will actively contribute to inflation in the country.

Which of the following, if true, most strongly indicates that the logic of the prediction above is flawed?

(A) It assumes that there is no other way in which inflation can increase apart from increased road use taxes.
(B) It mistakes a likely outcome for a confirmed outcome.
(C) It resorts to addressing peripheral issues while ignoring the deeper fundamental problems with the economy.
(D) It assumes that inflation will not increase if the road tax is not increased.
(E) It mistakes a correlation for a cause and effect relation.

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Re: A proposal has recently been floated by the government to increase  [#permalink]

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10 Sep 2018, 20:54
Harshgmat wrote:
A proposal has recently been floated by the government to increase road use tax rates across the country. This will lead to an increase in operating costs for trucking companies, who will then most likely increase their freight rates. The higher freight rates will, in turn, lead to a consequent increase in the prices of goods and commodities of daily use such as vegetable and grocery items. Thus, if the proposal is passed, it will actively contribute to inflation in the country.

Which of the following, if true, most strongly indicates that the logic of the prediction above is flawed?

(A) It assumes that there is no other way in which inflation can increase apart from increased road use taxes.
(B) It mistakes a likely outcome for a confirmed outcome.
(C) It resorts to addressing peripheral issues while ignoring the deeper fundamental problems with the economy.
(D) It assumes that inflation will not increase if the road tax is not increased.
(E) It mistakes a correlation for a cause and effect relation.

B.

The argument states that upon increase of operating costs for trucking companies, truck companies will most likely increase freight rates, and then goes on to conclude proposal will definitely lead to inflation.

Proposal -> high operating costs -> most likely increase in freight rates -> increase in price of goods -> definitely inflation

Please correct me if my understanding is incorrect.
Re: A proposal has recently been floated by the government to increase   [#permalink] 10 Sep 2018, 20:54
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