Economist: Although prices of most precious metals have greatly increased in nominal terms (i.e., before adjustment for inflation) over the...

GMAT Critical Reasoning : (CR) Questions

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Critical Reasoning

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Economist: Although prices of most precious metals have greatly increased in nominal terms (i.e., before adjustment for inflation) over the past century, the inflation-adjusted prices have actually been falling. Since the price of a commodity generally decreases when supply grows relative to demand, and since demand for precious metals has been growing, the supply of these metals on the market must be currently growing.

Which of the following, if true, would most weaken the economist's argument?

Mining precious metals to put them on the market continuously lowers reserves in the earth.

Over the past century, the prices of some metals have risen dramatically after adjustment for inflation.

The prices of commodities, including precious metals, predictably increase when demand grows relative to supply.

Over the past decade, the prices of most precious metals have risen after adjustment for inflation.

Over the past century, inflation has made the prices of precious metals much higher in nominal terms than they would otherwise have been.

Solution

Passage Analysis:

Text from Passage	Analysis
Although prices of most precious metals have greatly increased in nominal terms (i.e., before adjustment for inflation) over the past century, the inflation-adjusted prices have actually been falling.	What it says: Precious metal prices look like they went up a lot, but when we account for inflation, they've actually been dropping What it does: Sets up a contrast between what we might think is happening versus what's really happening What it is: Author's factual observation Visualization: Nominal prices: $\$10 \rightarrow \$100$ over century, but inflation-adjusted: $\$10 \rightarrow \$8$
Since the price of a commodity generally decreases when supply grows relative to demand, and since demand for precious metals has been growing, the supply of these metals on the market must be currently growing.	What it says: When supply grows faster than demand, prices drop. Since demand is growing but prices are falling, supply must be growing even faster What it does: Uses the price drop from the first statement plus a general economic principle to reach a conclusion What it is: Author's reasoning and main conclusion Visualization: Demand growing: $100 \rightarrow 150$ units, but Supply growing faster: $100 \rightarrow 200$ units = Price drops

Argument Flow:

The economist starts with a surprising fact about precious metal prices, then applies basic supply and demand economics to explain what must be causing this pattern.

Main Conclusion:

The supply of precious metals on the market must be currently growing.

Logical Structure:

The argument uses a general economic principle (supply/demand affects price) combined with two specific facts (prices are falling, demand is growing) to deduce what must be happening with supply.

Prethinking:

Question type:

Weaken - We need to find information that would reduce our belief in the economist's conclusion that supply of precious metals must be currently growing

Precision of Claims

The economist makes precise claims about: (1) inflation-adjusted prices falling, (2) demand for precious metals growing, and (3) supply currently growing. We cannot question the first two facts but can attack the reasoning that leads to the third conclusion

Strategy

The economist's logic is: falling prices + growing demand = supply must be growing even faster. To weaken this, we need to find alternative explanations for why inflation-adjusted prices could be falling even if supply isn't growing faster than demand. We should look for other factors that could cause price drops besides the supply-demand relationship the economist assumes

Answer Choices Explained

Mining precious metals to put them on the market continuously lowers reserves in the earth.

This doesn't weaken the argument at all. The economist is talking about current market supply (metals being sold), not reserves still in the ground. Whether mining depletes underground reserves doesn't change the fact that current market supply could still be growing, which is what the economist concludes.

Over the past century, the prices of some metals have risen dramatically after adjustment for inflation.

This is too weak to meaningfully impact the argument. The economist specifically talks about 'most precious metals' having falling inflation-adjusted prices. The fact that 'some' metals bucked this trend doesn't contradict the overall pattern the economist is analyzing.

The prices of commodities, including precious metals, predictably increase when demand grows relative to supply.

This actually supports rather than weakens the economist's reasoning. This choice reinforces the supply-demand principle that the economist uses as the foundation for the entire argument. If anything, this makes the economist's logic stronger.

Over the past decade, the prices of most precious metals have risen after adjustment for inflation.

This significantly weakens the argument by directly contradicting the economist's key premise. If inflation-adjusted prices have been rising recently (past decade), then we can't conclude that supply is currently growing faster than demand. In fact, rising prices would suggest the opposite - that demand might be outpacing supply currently. This undermines the entire basis for the economist's conclusion.

Over the past century, inflation has made the prices of precious metals much higher in nominal terms than they would otherwise have been.

This doesn't weaken the argument because the economist already accounts for inflation by specifically focusing on inflation-adjusted prices, not nominal prices. This choice just restates what we already know about the difference between nominal and real prices.

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