One of the key reasons that imports of certain finished goods of category A in country X have increased significantly is that it’s cheaper for country X’s retailers to import these goods than to purchase the same from local manufacturers. Hence, as it often happens, because of these increased imports, the value of country X’s currency has correspondingly decreased, making critical imports such as steel more expensive for the country.
The information above supports which of the following hypothesis about country X?
Option Elimination
A. An additional significant import tariff on goods in category A will likely help increase the value of the currency of country X in the coming future. - yes, it aligns. Still, the critical issue here is "will likely.' Hold on, "will likely" is not as strong as "will," as will likely take into account the possibility of not happening.
Will - strong. Definitive.
Will likely - strong probability but acknowledges the possibility that it may not occur.
Could - indicates possibility, but it's more uncertain or open-ended than "will likely."
So, ok.
B. Appropriately subsidizing industries that import steel is likely to negate any impact that country X's currency devaluation has had on its GDP. - The "impact that country X's currency devaluation has had on its GDP" is out of scope.
C. Due to increased imports of category A goods, many consumers in country X have experienced lower prices than they paid before. - Maybe the retailers are making huge profits and passing nothing to end consumers. It "might be a true category." Wrong.
D. The loss in local production of goods caused by corresponding increased imports has not had as severe an impact on the GDP of country X as has the increase in steel prices. - "An impact on the GDP of country X" is out of scope.
E. To prevent any further reduction in its currency's value, country X must restrict imports more severely than it currently does. - We have a minimum condition here: "restrict imports more severely than it currently does." - Y to achieve "any further reduction in its currency's value." - X. The argument states that as imports increase, the currency valuation decreases. However, there is no mention of how significantly imports impact the currency valuation. Say there are five other critical parameters: inflation (I), government debt(GD), trade balances (TB), interest rates (IR), and political stability (PS). The argument doesn't say that imports are the minimum condition. This may be why importing more is the currency devalues because Imports + I are usually present, or imports + GD, TB, IR, or PS are present. TB may be the minimum condition (without which currency devaluation will not occur). So we can't conclude from the argument that Imports is the minimum condition. Had the argument said that "only when imports increase, the currency devalues," or "imports are the primary reason for currency devaluation," we could have considered option E. However, in the absence of these criteria in the argument, there is no way we can establish this minimum condition. As discussed, the minimum conditions may be TB, GD, PS, or I. We don't know.