Many economists believe that a high rate of business savings

i agree with your answer for 1, but are you a machine or a human being?

3. The author of the passage would be most likely to agree with which of the following statements regarding the economists mentioned in line 1?

(A) Their beliefs are contradicted by certain economic phenomena that occurred in the United States during the 1960's and the 1980's.
(B) Their theory fails to predict under what circumstances the prices of foreign and domestic goods are likely to increase.
(C) They incorrectly identify the factors other than savings and investment rates that affect real interest rates.
(D) Their belief is valid only for the United States economy and not necessarily for other national economies.
(E) They overestimate the impact of the real interest rate on the national savings and investment rates.

Why E can't be answer for Question =3 ?

i rejected A because their belief was high rate of business savings in the United States is a necessary precursor to investment. They didn't take into account other factors that could vary rate. So it means they over emphasized the impact of real interest rate on the national savings and investment rates.

GMATNinja VeritasKarishma

(A) [The economists'] beliefs are contradicted by certain economic phenomena that occurred in the United States during the 1960's and the 1980's.

(B) Their theory fails to predict under what circumstances the prices of foreign and domestic goods are likely to increase.

(C) They incorrectly identify the factors other than savings and investment rates that affect real interest rates.

(D) Their belief is valid only for the United States economy and not necessarily for other national economies.

(E) They overestimate the impact of the real interest rate on the national savings and investment rates.

Got the answer as BDE : Time 5.3 min.

Why is option E wrong. Can any one clarify pls

Hi workout ,
I narrowed it down to B and D but ended up selecting D for question no. 1

1. The passage is primarily concerned with

(A) contrasting trends in two historical periods
(B) presenting evidence that calls into question certain beliefs
(C) explaining the reasons for a common phenomenon
(D) criticizing evidence offered in support of a well-respected belief
(E) comparing conflicting interpretations of a theory



I believe that the author doesnt call any belief into question rather he is criticizing the belief by supporting it with and evidence.

Where am i wrong?

During the 1960's real interest rates were often higher when the national savings surplus was large. Counterintuitive behavior also occurred when real interest rates skyrocketed from 2 percent in 1980 to 7 percent in 1982, even though national savings and investments were roughly equal throughout the period. Clearly, real interest rates respond to influences other than the savings/investment nexus

Hello GMATNinja

I'm unable to eliminate option C for Q3 based on the following lines in para 3

'Clearly, real interest rates respond to influences other than the savings/investment nexus'

Can you please help me understand where my interpretation is wrong ?

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(C) They incorrectly identify the factors other than savings and investment rates that affect real interest rates.

KarishmaB GMATNinja

Hi Experts, apologies if I am asking a dumb question, but I am literally confused with question no. 2. Either I need to throw my SC understanding so far into the garbage, or I am seriously blindsided by some economic relationship that is so trivial and seemingly straightforward for others but not the case for me; thus, this question wasted a lot of time. Expert comments from your brain trust will be constructive. Here is my analysis.

If we look at this statement in the passage -
As real interest rates shot up after 1979, ("As" introducing a subordinate clause which is more of a cause or the reason for the list that'll follow). The list includes their items; the 3rd item (three clauses) is joined by comma + and (a typical construction for GMAT to introduce a list). So, three items are
1. foreign investors poured capital into the United States,
2. the price of domestic goods increased prohibitively abroad, and
3. the price of foreign-made goods became lower in the United States.

Now, question 2 asks:
According to the passage, which of the following resulted from foreign investment in the United States after 1979?
(A) An increase in real interest rates - "foreign investment" resulted from "An increase in real interest rates" and not the other way around. Wrong.
(B) A decrease in the savings rate of certain other nations - "other nations" we don't know as they are not mentioned. Yes, consumers have to spend more for US products, but that doesn't necessarily mean that the national savings rate, which comprises business and personal savings rates, is low. But the other way to look at it is that if the national savings rate comprises business and personal savings rates, at best, if either business or ordinary people spend more for buying US-made goods, there is a negative impact on the national savings rate. Yes, I am not happy with this option, but let me share my problem with other options.
(C) An increase in American investment abroad - We don't know and are not mentioned in the passage.
(D) An increase in the price of American goods abroad - Yes, this line "increase in the price of American goods abroad" is mentioned in the passage. But it includes the other two effects of "real interest rates shot up after 1979."
(E) A decrease in the price of domestic goods sold at home - Not mentioned.

Am I missing how to read this statement: "As real interest rates shot up after 1979, foreign investors poured capital into the United States, the price of domestic goods increased prohibitively abroad, and the price of foreign-made goods became lower in the United States."? Am I missing the cause and effect between "foreign investors poured capital into the United States" and "the price of domestic goods increased prohibitively abroad"? If so, then how can I improve to read such cause-effect statements?

Yes, the words mentioned in the option D are mentioned in some shape and form in the line of interest. Or is the question straightforward that we just need to shut off our brains, and as the other four are not mentioned, one is mentioned, whatever the relationship is? Let's choose that.

Please share your valuable insights.