Hi its_me,

Inference questions can be answered on the basis of specific information given in the passage without making any assumptions. So look at each answer choice separately and start eliminating.

(A) Countries with large national budget deficits tend to restrict foreign trade.
'Tend to restrict foreign trade'. Foreign trade and restriction are not mentioned anywhere in the argument. This makes it out of scope and can be eliminated.

(B) Reliable comparisons of the deficit figures of one country with those of another are impossible.
'Impossible'- EXTREME language and can be elimated

(C) Reducing a country’s national budget deficit will not necessarily result in a lowering of any trade deficit that country may have.
Well this sounds like reasonable answer as all the information is specifically given (As the argument mentions that there is no correlation). We will not eliminate it.We will continue our hunt for a better answer choice.

(D) When countries are ordered from largest to smallest in terms of population, the smallest countries generally have the smallest budget and trade deficits.
Introducing 'population' which is again out of scope. Eliminate it.

(E) Countries with the largest trade deficits never have similarly large national budget deficits.
'Never' - EXTREME language eliminate.

Since we did not find any better choice than C so we choose C. which is the correct answer

Well .. All has been stated nice and well about the usage of strong and extreme words on GMAT choices. It is correct that such choices are less probable of being correct.

However, there is another logical flaw in the option e.

The arguement says::

Large Budget deficits --> Large trade deficits.

This statement is an implication relationship. Or in simplistic terms a causal relationship.

Now, in such case of A --> B. The reverse is out of scope. Logically we can conclude nothing about B having a causal effect on A.

Hence, the case of large trade deficits causing large budget deficits stands incorrect.

C is the most suitable option in this case