Economist: In any country, inflation occurs when the money supply grows more than the production of goods and services grows. Similarly, deflation occurs when the production of goods and services grows more than does the money supply.
In my country, gold anchors the money supply, so the money supply is very stable. Hence, my country is very unlikely to experience significant inflation or deflation.
Which one of the following is an assumption on which the economist’s argument depends?Like Gold anchors the money supply in economist's country, the highlighted text anchors the whole passage. (A) Having stability in the production of goods and services is
the most effective means of preventing inflation or deflation. - WRONG. Leads us to believe in some sort of comparison but there's no such thing exists than can be deciphered from the passage. Superlative meaning is not at all there.
(B) Having an anchor such as gold is
necessary for the stability of a country’s money supply. - WRONG. Had 'sufficient' been there instead of 'necessary', the choice would have had some considerable weight of being the right answer, depending upon the other choices.
(C) The production of goods and services in the economist’s country is
unlikely to grow markedly. - CORRECT. Both 'unlikely' and 'markedly' are giving a balanced meaning(anchoring nicely eventually) to the passage.
(D) Inflation is
no more likely to occur in the economist’s country than is deflation. - WRONG. This is good as an inference rather than an assumption.
(E) A stable money supply is the
most effective means of preventing inflation. - WRONG. Yes, there's been two things - inflation and deflation - but bringing a comparison is not what passage suggests to make. Additionally, superlative words like 'most' would never give the balance that is required between the two. Just like A, this is wrong.
Answer C.
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