Bunuel wrote:
When the value of the stock market is in a period of general decline, people eat more of their meals at home. However, when the value of the stock market is going up, people spend more money eating at restaurants. Clearly the fear of an economic recession decreases people’s willingness to spend money eating at
restaurants.
---{______A_________}-----{___________B___________}
(1) Stock market decline------People eat more meals at home
(2) Stock market value up-------people spend more money in eating at restaurant
-------------{_________C__________}------------------{_________________B___________________}
Conclusion:
Fear of economic recession decreases willingness to spend money eating at restarauntQuote:
The argument above assumes which of the following?
Argument: A=B (premise/fact), for C=B (conclusion) to hold, we need to show A=C
Now we have to find the assumption. Clearly, there is a missing link between stock market behaviour and economic recession. Lets see the answer choices that explains this link.
Quote:
A. An economic recession is a slowdown of the economy while an economic depression is a more severe collapse of the economy.
We don't want to know the definition of economic recession, we want the relation between stock market and economic recession. Also economic depression is not discussed, hence out of scopeQuote:
B. People’s perception of the likelihood of economic recession is dependent on the performance of the stock market.
Here, the authour says "economic recession is dependent on the performance of the stock market". So we got the relation that we need, hence correct answerQuote:
C. Restaurants offer more specials when the market does well.
Ok, but do we know if people are interested in specials? Also what is the relationship between "market does well" and the stock market behaviour. This choice makes an incomplete link. Quote:
D. Restaurants raise their prices when they fear an economic recession is imminent.
Ok, but again, how do we relate economic recession to stock market ? This does nothing to add valueQuote:
E. Eating well-prepared meals is comforting to most people during times of economic hardship.
Ok, but how do we explain the link between economic hardship and the stock market? This does nothing to add valueTherefore B is the answer according to me.