Large national budget deficits do not cause large trade deficits. If they did, countries with the largest budget deficits would also have the largest trade deficits. In fact, when deficit figures are adjusted so that different countries are reliably comparable to each other, there is no such correlation.

If the statements above are all true, which of the following can properly be inferred on the basis of them?


(A) Countries with large national budget deficits tend to restrict foreign trade.

(B) Reliable comparisons of the deficit figures of one country with those of another are impossible.

(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have.

(D) When countries are ordered from largest to smallest in terms of population, the smallest countries generally have the smallest budget and trade deficits.

(E) Countries with the largest trade deficits never have similarly large national budget deficits.

Premise : there is no such correlation between budget deficit and trade deficit

So we can infer that reducing budget deficit will NOT necessarily reduce the trade deficit.
C is correct.

(A) Countries with large national budget deficits tend to restrict foreign trade. >> Foreign trade is Out of scope
(B) Reliable comparisons of the deficit figures of one country with those of another are impossible. >> Impossible here is wrong. It cannot be inferred from this passage.
(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have. Answer
(D) When countries are ordered from largest to smallest in terms of population, the smallest countries generally have the smallest budget and trade deficits. >> The size of the country has no bearing on the argument. Irrelevant
(E) Countries with the largest trade deficits never have similarly large national budget deficits. >> Never is wrong. This cannot be inferred.

I chose C for this question:

A. This answer may or may not be true - there is not enough information within the stimulus to say that this answer is true.

B. This answer choice directly counters a statement within the stimulus. The stimulus says "when deficit figures are adjusted so that different countries are reliably comparable to each other..."

C. This is a good inference. The reason is because it essentially restates that large national budget deficits and large trade deficits have no correlation.

D. We are not concerned with ordering countries from largest to smallest population - this answer choice is irrelevant. Also, the smallest countries may or may not have the smallest budget and trade deficits - there is nothing within the stimulus to suggest this answer.

E. Firstly, the word "never have" is very strong - I was a bit suspicious of this. Also, I knew that this wasn't true because there is actually no correlation between large national budget deficits and large trade deficits as stated in the last sentence. Therefore, this answer choice can't be correct.

The argument tells us that budget deficit is not correlated with trade deficit. Does this imply that countries with large trade deficit can never have large budget deficit? If you say that, you are saying that the two deficits are correlated in some way. The point is that they are not related so if one is large, the other could be small or large. A country with a large budget deficit may have a small or a large trade deficit - apparently, the trade deficit depends on factors other than budget deficit. Hence we cannot say that the country with a large budget deficit can not have a large trade deficit.
As for the extreme words, you cannot ignore an option just because it has an extreme word in it. Usually, "every", "all", "never" etc rarely work in real life and hence our conclusions will usually not have such words but an argument could be easily worded such that an extreme word appears in the correct answer.

The correct answer here would be (C)
(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have.
The argument tells us that the two deficits are not correlated so reducing one will not necessarily result in lowering of the other. The other may or may not reduce depending on other factors.
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Hello mneeti.

The 2nd line of the stimulus says: when deficit figures are adjusted so that different countries are reliably comparable to each other, there is no such correlation.

It means when deficit figures are adjusted to a comparable levels --> there is NO correlation "countries with the largest budget deficits would also have the largest trade deficits".

Do not be confused the term "such correlation".

Option B, however, says the deficit figures of one country with those of another can't be compared. That's wrong. They are different, but can be adjusted to a comparable levels.

Hope it helps.
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According to the author, "large national budget deficits do not cause large trade deficits." The rest of the passage supports this claim:

• If large national budget deficits DID cause large trade deficits, then "countries with the largest budget deficits would also have the largest trade deficits."
• However, when countries are reliably compared (by adjusting deficit figures), "there is no such correlation."

Thus, the evidence suggests that TRADE deficits do not necessary go up as BUDGET deficits go up. This, in turn, suggests that trade deficits would not necessarily go DOWN as BUDGET deficits go down. So we need an answer choice that fits with these inferences.

See if that helps!
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