The increase in interest rates, coupled with significantly decreased

Official Explanation:

Read the Original Sentence Carefully, Looking for Errors:

The underlined portion ends with a verb, "are." The subject of that verb is "the increase," all the way back at the beginning of the sentence. The GMAT loves to disguise a subject-verb agreement error by placing the verb far away from the subject. Since "the increase" is singular (there is just one increase being discussed), the plural verb "are" is incorrect. The verb should be the singular "is." It's The increase ... is, not The increase ... are. By separating the subject and verb, the question is trying to trap students into thinking the subject is actually the plural "interest rates." But "interest rates" is the object of the prepositional phrase "in interest rates," and the object of a prepositional phrase is never the subject of the verb. Some students may also be tempted to include stock prices or consumer demand in the subject, but those things are inside the phrase that is set apart by commas, and they are joined to the subject by "coupled with" and "as well as." To include them as part of the subject, the sentence would have to create a list connected by and: The increase in interest rates, significantly decreased stock prices, and significantly decreased consumer demand are .... An easy way to see the subject and verb as written is by cutting out that long phrase to get "The increase ... are causing ...." This subject-verb agreement error must be corrected.

Scan and Group the Answer Choices:

A vertical scan reveals a variety of verb forms at the end of the choices. (A) uses “are,” (B) uses “have been,” (C) and (D) use “is,” and (E) uses “had been.” The scan also reveals a 3-2 split based on the first words of the choices, with (A), (C), and (D) saying “interest rates,” while (B) and (E) say “rates of interest.” Since these changes occur inside the prepositional phrase, "increase in ___," they don't change the fact that the subject of the sentence is the singular "increase." It should be easy to eliminate (A) and (B) for using plural verbs.

Eliminate Wrong Answer Choices:

(A) and (B) can be eliminated for pairing plural verbs ("are" and "have been," respectively) with a singular subject.

Look at (E), which uses "had been" at the end. (E)'s most obvious problem may be that it changes the meaning of the sentence to say there were increases, not decreases, in the stock prices and consumer demand. That alone is enough to eliminate this choice. But (E) also uses the incorrect past perfect tense with “had been.” Past perfect is used to indicate something that happened prior to another past event. That's not the case here. The original sentence correctly uses the present tense “are,” and there is no reason to change to another tense. Eliminate (E).

(D) uses the correct singular verb “is.” However, (D) uses “as well as” between "significantly decreased stock prices" and "consumer demand." This detaches "consumer demand" from the modifier “significantly decreased,” making it sound like only the stock prices decreased. According to (D), the increase in interest rates was coupled with two things: lower stock prices and some sort of consumer demand. Any choice that changes the meaning of the sentence is wrong, so eliminate (D).

(C) uses the correct singular verb “is.” (C) also makes it clear that the significant decreases are seen “in both” stock prices and consumer demand. (C) is the answer.

\(TAKEAWAY:\) When the underlined portion contains a verb, be clear about what the subject of that verb is. Be only the lookout for long phrases separating the subject from the verb. The GMAT could be trying to disguise a subject-verb agreement error.