Economist: In Any Country, Inflation Occurs When The Money Supply Grows GMAT Critical Reasoning

Question: Economist: In any country, inflation occurs when the money supply grows more than the production of goods and services grows. Similarly, deflation occurs when the production of goods and services grows more than does the money supply. In my country, gold anchors the money supply, so the money supply is very stable. Hence, my country is very unlikely to experience significant inflation or deflation.

Which one of the following is an assumption on which the economist’s argument depends?

(A) Having stability in the production of goods and services is the most effective means of preventing inflation or deflation.
(B) Having an anchor such as gold is necessary for the stability of a country’s money supply.
(C) The production of goods and services in the economist’s country is unlikely to grow markedly.
(D) Inflation is no more likely to occur in the economist’s country than deflation.
(E) A stable money supply is the most effective means of preventing inflation.

“Economist: In any country, inflation occurs when the money supply grows”- is a question of critical reasoning in a section of GMAT Verbal Reasoning. It examines the logical reasoning of the candidate in the test. The Critical Reasoning question type is used to measure critical business skills. GMAT Critical Reasoning questions assess a distinct set of qualities associated with logic. The students preparing for the GMAT will experience the argument analysis of Critical Reasoning for the first time to substantiate their logic.

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