Events & Promotions
|
|
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.
Customized
for You
Track
Your Progress
Practice
Pays
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Apr 1612:00 PM EDT
-11:59 PM EDT
You’re first to know: Save $200 on GMAT prep starting tomorrow, 4/13. Get 6 official practice tests and study with real questions. Be ready to save!
Apr 2212:30 AM EDT
-01:30 AM EDT
At one point, she believed GMAT wasn’t for her. After scoring 595, self-doubt crept in and she questioned her potential. But instead of quitting, she made the right strategic changes. The result? A remarkable comeback to 695. Check out how Saakshi did it.
Apr 2301:30 AM EDT
-02:30 AM EDT
Struggling with GMAT Verbal as a non-native speaker? Harsh improved his score from 595 to 695 in just 45 days—and scored a 99 %ile in Verbal (V88)! Learn how smart strategy, clarity, and guided prep helped him gain 100 points.
Apr 2308:00 PM PDT
-09:00 PM PDT
Video explanations + diagnosis of 10 weakest areas + 150+ short videos + study plan!
Apr 2610:00 AM EDT
-11:00 AM EDT
The Target Test Prep course represents a quantum leap forward in GMAT preparation, a radical reinterpretation of the way that students should study. Try before you buy with a 5-day, full-access trial of the course for FREE!
Apr 2711:00 AM EDT
-12:00 PM EDT
Prefer video-based learning? The Target Test Prep OnDemand course is a one-of-a-kind video masterclass featuring 400 hours of lecture-style teaching by Scott Woodbury-Stewart, founder of Target Test Prep and one of the most accomplished GMAT instructors
Apr 2808:00 AM PDT
-11:00 AM PDT
Whether you are just beginning your MBA journey or fine-tuning your path to a 700+ score, GMAT Day is designed to give you a competitive edge.
26 Dec 2025, 09:00
Kudos
Bookmarks
A
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
85%
(hard)
Question Stats:
64% (02:13) correct
36%
(02:42)
wrong
based on 226
sessions
History
Date
Time
Result
Not Attempted Yet
Economist: In response to prolonged inflationary pressure, several central banks have raised interest rates to their highest levels in over a decade. The intended effect is to curb inflation by reducing consumer demand. However, in Country X, core inflation has remained stubbornly high despite multiple rate hikes over the past year. Some policymakers now argue that raising rates further will have no effect. But that conclusion may be premature. Unlike in prior tightening cycles, consumers in Country X have unusually high cash reserves due to recent fiscal stimulus programs. Once those excess savings are depleted, current interest rates may begin to exert a stronger downward influence on inflation.
Which of the following, if true, most strengthens the economist’s argument?
A. In previous decades, interest rate hikes took up to 18 months to fully impact inflation, particularly in economies where household savings were low.
B. Inflation in Country X has recently shown signs of moderating in sectors unrelated to consumer demand, such as energy and commodities.
C. Surveys indicate that many consumers in Country X do not fully understand how interest rate changes affect their day-to-day expenses.
D. Businesses in Country X have begun raising prices primarily in response to wage pressures rather than increased demand.
E. Central banks in countries without recent stimulus programs have also struggled to bring down inflation through interest rate increases.
Which of the following, if true, most strengthens the economist’s argument?
A. In previous decades, interest rate hikes took up to 18 months to fully impact inflation, particularly in economies where household savings were low.
B. Inflation in Country X has recently shown signs of moderating in sectors unrelated to consumer demand, such as energy and commodities.
C. Surveys indicate that many consumers in Country X do not fully understand how interest rate changes affect their day-to-day expenses.
D. Businesses in Country X have begun raising prices primarily in response to wage pressures rather than increased demand.
E. Central banks in countries without recent stimulus programs have also struggled to bring down inflation through interest rate increases.
12 Days of Christmas Competition
This question is part of our holiday event
Win $40,000 in prizes: courses, tests, and more
26 Dec 2025, 10:00
Kudos
Bookmarks
Bunuel
GMAT Club Official Explanation:
A. In previous decades, interest rate hikes took up to 18 months to fully impact inflation, particularly in economies where household savings were low.
This supports the economist’s point. It shows that even in the past, rate hikes took a long time to work and it worked faster when savings were low. That fits perfectly with the idea that high savings are delaying the impact right now, and once those savings go down, inflation might respond more. Let's hold this for now.
B. Inflation in Country X has recently shown signs of moderating in sectors unrelated to consumer demand, such as energy and commodities.
This is irrelevant to the economist’s point. He’s talking about core inflation (which usually excludes volatile things like energy) and how consumer demand might eventually drop once savings run out. This option talks about unrelated sectors like energy or commodities, so it doesn’t strengthen the argument about savings and interest rates.
C. Surveys indicate that many consumers in Country X do not fully understand how interest rate changes affect their day-to-day expenses.
Interesting info, but not useful here. Even if people don’t understand interest rates, what matters is whether their behavior (spending or saving) actually changes when rates go up. The economist isn’t arguing about awareness but he’s talking about excess savings delaying the impact. So this doesn’t help the case.
D. Businesses in Country X have begun raising prices primarily in response to wage pressures rather than increased demand.
This actually weakens the economist’s argument a bit. Why? Because it suggests inflation is not being driven by consumer demand, which is the part rate hikes target. If businesses are hiking prices due to wages, not spending, then rate hikes might genuinely be less effective. That would support the opposite of what the economist is claiming.
E. Central banks in countries without recent stimulus programs have also struggled to bring down inflation through interest rate increases.
Sounds useful, but it weakens the economist’s specific reasoning. The economist is saying stimulus cash is what’s making the difference in Country X. But this option says even countries without stimulus are struggling. That suggests maybe the problem isn’t savings, which goes against the economist’s claim.
After reviewing all of the answer choices, it appears A) is the best answer option even though perhaps not the most satisfying but with others clearly wrong, A is our answer.
General Discussion
26 Dec 2025, 09:20
Kudos
Bookmarks
Economist here claims that the conclusion given by policymaker regarding further increasing the interest rate is premature
the reasoning has been given that: It will take time until the high cash reserves /high savings doesn't get depleted after this the interest rate will take its impact.
So for strength we need some evidence which might confirm this.
A) It gives us the evidence that it took 18 months for interest rate to take its effect, hence it strengthens Hence Keep
B) We don't know what method has worked in terms of controlling inflation in given sectors and its not in consumer demand then it also shows that it might not be the interest rate factor. eliminate
C) It doesn't help in any way after knowing that consumer don't have knowledge about interest rates as this is not a concern here. eliminate
D) It shows other factors and the idea here is to decrease demand with increase demand which is irrelevant here eliminate
E) It shows that the conclusion of policymaker were correct and it actually weakens hence eliminate
Hence answer (A) correct.
the reasoning has been given that: It will take time until the high cash reserves /high savings doesn't get depleted after this the interest rate will take its impact.
So for strength we need some evidence which might confirm this.
A) It gives us the evidence that it took 18 months for interest rate to take its effect, hence it strengthens Hence Keep
B) We don't know what method has worked in terms of controlling inflation in given sectors and its not in consumer demand then it also shows that it might not be the interest rate factor. eliminate
C) It doesn't help in any way after knowing that consumer don't have knowledge about interest rates as this is not a concern here. eliminate
D) It shows other factors and the idea here is to decrease demand with increase demand which is irrelevant here eliminate
E) It shows that the conclusion of policymaker were correct and it actually weakens hence eliminate
Hence answer (A) correct.
