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17 Aug 2015, 10:28
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The currency of Country A has been strengthening against other worldwide currencies for the past year. This occurs when demand for the currency outpaces its supply and is reversed when there is more supply than demand. Simultaneously, economists have noted a rapid growth in worldwide demand for products manufactured in Country A. This increase in product demand means more buyers need Country A's currency to make purchases, thereby driving up its demand. Therefore, economists conclude that the strengthening of Country A’s currency is a result of classic supply and demand factors.
Which of the following is an assumption made by the economists in reaching their conclusion?
A. It is not difficult to ship products made in Country A to other countries
B. Country A has lower manufacturing costs than other markets
C. The demand for products manufactured in Country A has been increasing
D. Country A has a regulatory system that ensures its manufactured products meet high quality standards
E. Manufacturing companies in Country A receive payment in Country A’s local currency
Which of the following is an assumption made by the economists in reaching their conclusion?
A. It is not difficult to ship products made in Country A to other countries
B. Country A has lower manufacturing costs than other markets
C. The demand for products manufactured in Country A has been increasing
D. Country A has a regulatory system that ensures its manufactured products meet high quality standards
E. Manufacturing companies in Country A receive payment in Country A’s local currency
17 Aug 2015, 10:28
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Official Solution:
The currency of Country A has been strengthening against other worldwide currencies for the past year. This occurs when demand for the currency outpaces its supply and is reversed when there is more supply than demand. Simultaneously, economists have noted a rapid growth in worldwide demand for products manufactured in Country A. This increase in product demand means more buyers need Country A's currency to make purchases, thereby driving up its demand. Therefore, economists conclude that the strengthening of Country A’s currency is a result of classic supply and demand factors.
Which of the following is an assumption made by the economists in reaching their conclusion?
A. It is not difficult to ship products made in Country A to other countries
B. Country A has lower manufacturing costs than other markets
C. The demand for products manufactured in Country A has been increasing
D. Country A has a regulatory system that ensures its manufactured products meet high quality standards
E. Manufacturing companies in Country A receive payment in Country A’s local currency
General Approach
When approaching GMAT Critical Reasoning questions, it's important to first understand the argument that's being made. Identify the conclusion, evidence, and any assumptions that are being made. In this case, the conclusion is that Country A’s currency is strengthening because of classic supply and demand factors. The evidence is that the currency has been strengthening and demand for Country A's products has been rapidly growing. Once the argument is understood, examine each answer choice and ask: If this statement weren't true, would the argument fall apart? The correct answer will be the statement that the argument relies on.
Correct Answer
E) Manufacturing companies in Country A receive payment in Country A’s local currency. This is an assumption that underpins the economists' argument. If manufacturers in Country A did not require payment in the local currency, the rising demand for Country A's goods wouldn't necessarily lead to a strengthening of the currency. This statement has to be true for the argument to hold, which is why it's the correct answer.
Incorrect Answers
A) The difficulty of shipping products from Country A to other countries is irrelevant because the economists' argument is based on the demand for products from Country A, not the feasibility of delivering these products.
B) Lower manufacturing costs in Country A might contribute to a rise in demand for its products, but it's not a necessary condition for the economists' argument to be valid. The argument is based on an observed increase in demand, not on the reasons why this demand might be increasing.
C) The demand for products from Country A has been increasing is a premise and a fact mentioned in the passage. This is not an unstated assumption and any assumption that is stated is a fact. Assumption can be simple but it cannot be stated.
D) The quality of Country A's regulatory system is also irrelevant to the economists' argument. The argument is based on an observed increase in demand, which could occur regardless of the quality standards of Country A's products.
Answer: E
The currency of Country A has been strengthening against other worldwide currencies for the past year. This occurs when demand for the currency outpaces its supply and is reversed when there is more supply than demand. Simultaneously, economists have noted a rapid growth in worldwide demand for products manufactured in Country A. This increase in product demand means more buyers need Country A's currency to make purchases, thereby driving up its demand. Therefore, economists conclude that the strengthening of Country A’s currency is a result of classic supply and demand factors.
Which of the following is an assumption made by the economists in reaching their conclusion?
A. It is not difficult to ship products made in Country A to other countries
B. Country A has lower manufacturing costs than other markets
C. The demand for products manufactured in Country A has been increasing
D. Country A has a regulatory system that ensures its manufactured products meet high quality standards
E. Manufacturing companies in Country A receive payment in Country A’s local currency
General Approach
When approaching GMAT Critical Reasoning questions, it's important to first understand the argument that's being made. Identify the conclusion, evidence, and any assumptions that are being made. In this case, the conclusion is that Country A’s currency is strengthening because of classic supply and demand factors. The evidence is that the currency has been strengthening and demand for Country A's products has been rapidly growing. Once the argument is understood, examine each answer choice and ask: If this statement weren't true, would the argument fall apart? The correct answer will be the statement that the argument relies on.
Correct Answer
E) Manufacturing companies in Country A receive payment in Country A’s local currency. This is an assumption that underpins the economists' argument. If manufacturers in Country A did not require payment in the local currency, the rising demand for Country A's goods wouldn't necessarily lead to a strengthening of the currency. This statement has to be true for the argument to hold, which is why it's the correct answer.
Incorrect Answers
A) The difficulty of shipping products from Country A to other countries is irrelevant because the economists' argument is based on the demand for products from Country A, not the feasibility of delivering these products.
B) Lower manufacturing costs in Country A might contribute to a rise in demand for its products, but it's not a necessary condition for the economists' argument to be valid. The argument is based on an observed increase in demand, not on the reasons why this demand might be increasing.
C) The demand for products from Country A has been increasing is a premise and a fact mentioned in the passage. This is not an unstated assumption and any assumption that is stated is a fact. Assumption can be simple but it cannot be stated.
D) The quality of Country A's regulatory system is also irrelevant to the economists' argument. The argument is based on an observed increase in demand, which could occur regardless of the quality standards of Country A's products.
Answer: E
Updated on: 25 Oct 2016, 11:56
Originally posted by Sneha Jaiswal on 25 Oct 2016, 07:32.
Last edited by Sneha Jaiswal on 25 Oct 2016, 11:56, edited 1 time in total.
Last edited by Sneha Jaiswal on 25 Oct 2016, 11:56, edited 1 time in total.
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Hi bb, thanks for the question. The question demands prior knowledge of how the trade and currency valuation are related.
I took a different approach of understanding that 'demand and supply has led to increase in the currency value' and 'the international demand has been high' is explicitly given as a premise. So the assumption could only be that Country A has been able to successfully supply to the demand. So anything related to the ease of supply could be considered. Hence chose A.
. Probably A is irrelevant because if we negate the statement, i.e., If shipping is difficult, still supply could be made through difficult routes.
Also, 'the classic demand and supply' seems to refer to demand and supply of products manufactured in the country and not the currency. Payment made in any currency would increase the country's reserves to strengthens its currency. Pls correct me if I m wrong.
I took a different approach of understanding that 'demand and supply has led to increase in the currency value' and 'the international demand has been high' is explicitly given as a premise. So the assumption could only be that Country A has been able to successfully supply to the demand. So anything related to the ease of supply could be considered. Hence chose A.
. Probably A is irrelevant because if we negate the statement, i.e., If shipping is difficult, still supply could be made through difficult routes. Also, 'the classic demand and supply' seems to refer to demand and supply of products manufactured in the country and not the currency. Payment made in any currency would increase the country's reserves to strengthens its currency. Pls correct me if I m wrong.
