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Verbal Review 2 16th Ed- It is often said that high rates of inflation

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Verbal Review 2 16th Ed- It is often said that high rates of inflation [#permalink]

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It is often said that high rates of inflation tend to diminish people’s incentive to save and invest. This view must be incorrect, however, because people generally saved and invested more of their income in the 1970’s when inflation rates were high than they did in the 1980’s when inflation rates were low.Of the following, the best criticism of the argument above is that it overlooks the possibility that

A all people do not respond in the same way to a given economic stimulus
B certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest
C the population was larger in the 1980’s than it was in the 1970’s
D the proponents of the view cited would stand to gain if inflation rates become lower
E a factor that affects people's savings behavior in a certain way could affect people’s investment behavior quite differently
[Reveal] Spoiler: OA

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Verbal Review 2 16th Ed- It is often said that high rates of inflation [#permalink]

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It is often said that high rates of inflation tend to diminish people’s incentive to save and invest. This view must be incorrect, however, because people generally saved and invested more of their income in the 1970’s when inflation rates were high than they did in the 1980’s when inflation rates were low.

Of the following, the best criticism of the argument above is that it overlooks the possibility that

(A) all people do not respond in the same way to a given economic stimulus
(B) certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest
(C) the population was larger in the 1980’s than it was in the 1970’s
(D) the proponents of the view cited would stand to gain if inflation rates become lower
(E) a factor that affects people's savings behavior in a certain way could affect people’s investment behavior quite differently

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Re: Verbal Review 2 16th Ed- It is often said that high rates of inflation [#permalink]

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New post 24 Nov 2015, 21:53
Steinbeck wrote:
It is often said that high rates of inflation tend to diminish people’s incentive to save and invest. This view must be incorrect, however, because people generally saved and invested more of their income in the 1970’s when inflation rates were high than they did in the 1980’s when inflation rates were low.Of the following, the best criticism of the argument above is that it overlooks the possibility that

A all people do not respond in the same way to a given economic stimulus
B certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest
C the population was larger in the 1980’s than it was in the 1970’s
D the proponents of the view cited would stand to gain if inflation rates become lower
E a factor that affects people's savings behavior in a certain way could affect people’s investment behavior quite differently


Here we a continuity in the statement by finding a statement that gives us the reason for the anomaly.
Option B clearly does that by saying that "certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest" and is the correct continuation of the sentence.

Correct Option: B
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Re: Verbal Review 2 16th Ed- It is often said that high rates of inflation [#permalink]

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A all people do not respond in the same way to a given economic stimulus wE are not concerned about people's response
B certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest Looks good
C the population was larger in the 1980’s than it was in the 1970’s Population has nothing to do with savings and investments
D the proponents of the view cited would stand to gain if inflation rates become lower Out of scope
E a factor that affects people's savings behavior in a certain way could affect people’s investment behavior quite differently This is a generalization, can't be the answer
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Re: Verbal Review 2 16th Ed- It is often said that high rates of inflation [#permalink]

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New post 14 Apr 2016, 06:58
Correlation vs Causation. Inflation rate may not be the only factor influencing people's saving and investment behaviour. Other factor may have caused inflation and influenced people's behaviour.

Argument commits this fault.

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Re: Verbal Review 2 16th Ed- It is often said that high rates of inflation [#permalink]

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New post 22 Apr 2016, 13:34
This argument is an opinion. Argument assumes that the facts are sufficient to prove the conclusion.

Fallacy: Just because people saved and invested more in the 1970s than in 1980s is sufficient to prove the conclusion? Are there other possibilities that could have explained the observation?

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Re: Verbal Review 2 16th Ed- It is often said that high rates of inflation [#permalink]

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[Reveal] Spoiler:
It is often said that high rates of inflation tend to diminish people’s incentive to save and invest. This view must be incorrect, however, because people generally saved and invested more of their income in the 1970’s when inflation rates were high than they did in the 1980’s when inflation rates were low.Of the following, the best criticism of the argument above is that it overlooks the possibility that

A all people do not respond in the same way to a given economic stimulus
B certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest
C the population was larger in the 1980’s than it was in the 1970’s
D the proponents of the view cited would stand to gain if inflation rates become lower
E a factor that affects people's savings behavior in a certain way could affect people’s investment behavior quite differently


Situation
People generally saved and invested more in the 1970’s when inflation was high than in the 1980’s when inflation was low, despite the fact that it is commonly believed that high inflation discourages savings and investment.

Reasoning
Why does the observation about savings, investment, and inflation rates in the 1970’s and 1980’s not justify the conclusion that high inflation does not generally diminish people’s incentive to save and invest? The argument observes that over the course of two decades there was a positive rather than a negative correlation between inflation on the one hand and savings and investment on the other. It infers from this that high rates of inflation do not tend to diminish people’s incentive to save and invest. Is this inference justified? Note that the claim that this argument is trying to discredit is not that high rates of inflation always diminished people’s incentive to save and invest. Rather, the claim is merely that high rates of inflation tend to do this. The argument overlooks the possibility that during the two decades in question other factors may have caused a positive correlation to briefly appear even if in general the correlation is negative.

A The argument is compatible with the hypothesis that some people respond to inflation by saving and investing more, while others do not.
B Correct. If these other factors, unrelated to the inflation rate, that operated in the 1980’s but not the 1970’s, created an even greater disincentive to savings and investment than high inflation rates provide, then those trends do not provide evidence about the general relationship among savings, investment, and inflation.
C The argument appears to concern savings and investment per capita, so total population size should be irrelevant. But increasing population would not explain declining total amounts of savings and investment, either.
D If anything, the possibility that the proponents’ ulterior motives distorted their reasoning would help to support the argument’s conclusion that the proponents’ view is incorrect.
E The argument addresses this possibility by presenting evidence that inflation was positively correlated with both savings and investment during the 1970’s and 1980’s.

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Re: Verbal Review 2 16th Ed- It is often said that high rates of inflation [#permalink]

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New post 27 Jul 2017, 23:04
Merged topics. Please, search before posting questions!
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Re: Verbal Review 2 16th Ed- It is often said that high rates of inflation [#permalink]

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People saved and invested more in 1980s when the inflation rates were higher, than in 1970s when the inflation rates were lower. Dispite the common belief that high inflation discourages savings and investments. The correct choice is B.
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Re: Verbal Review 2 16th Ed- It is often said that high rates of inflation [#permalink]

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New post 16 Aug 2017, 10:53
keats wrote:
It is often said that high rates of inflation tend to diminish people’s incentive to save and invest. This view must be incorrect, however, because people generally saved and invested more of their income in the 1970’s when inflation rates were high than they did in the 1980’s when inflation rates were low.Of the following, the best criticism of the argument above is that it overlooks the possibility that

A all people do not respond in the same way to a given economic stimulus
B certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest
C the population was larger in the 1980’s than it was in the 1970’s
D the proponents of the view cited would stand to gain if inflation rates become lower
E a factor that affects people's savings behavior in a certain way could affect people’s investment behavior quite differently


A all people do not respond in the same way to a given economic stimulus We are not concerned about how people responded, rather we are interested in their investment strategy
B certain factors operating in the 1980’s but not in the 1970’s diminished people’s incentive to save and invest Correct. Could be the reason that there were other factors at play which affected the way the people behaved in a certain way in the 70s vs the 80s.
C the population was larger in the 1980’s than it was in the 1970’s we are not told about the proportion of the population who invested and saved in the 70s and 80s.
D the proponents of the view cited would stand to gain if inflation rates become lower a wishful thinking. the argument says nothing about the views of the proponents of the idea
E a factor that affects people's savings behavior in a certain way could affect people’s investment behavior quite differently we are told nothing about the differences between investment and saving behavior.

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Re: Verbal Review 2 16th Ed- It is often said that high rates of inflation   [#permalink] 16 Aug 2017, 10:53
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Verbal Review 2 16th Ed- It is often said that high rates of inflation

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