Critical Reasoning

When Germany was asked to pay 132 billion gold marks in war reparations following World War I, the German government had to print money to pay its bills, drastically devaluing the currency. In response to this anticipated de- valuation, Germans began spending their money while it still had purchasing power, almost completely depleting the monetary stores of domestic banks.

Which of the following, if true and taken together with the information above, best supports the conclusion that the devaluation of the German mark was likely to continue?

(A) The recipient governments of the war reparations began to demand that the reparations be paid in goods and commodities, such as coal.
(B) The amount of 132 billion gold marks was the largest war reparations amount ever levied to that point.
(C) In the post-World War I period, the German government had only two options for preventing complete economic collapse: print money or take out loans from domestic banks.
(D) Printing currency causes inflation when the money is not based on hard assets such as gold or land.
(E) The more consumers make purchases, the more money is returned into a country's economy.

OA is C
Please explain why option E is incorrect?

Mechmeera wrote:Please explain why option E is incorrect?

Question: Which of the following, if true and taken together with the information above, best supports the conclusion that the devaluation of the German mark was likely to continue?

For devaluation of a currency, such as the German Mark, to occur, something has to occur that reduces the value of each unit of the currency.

For instance, printing money makes more units of the currency available without adding to the total underlying value of all such currency. As the number of units that combined represent the same total underlying value increases, the value of each unit decreases.

(E) The more consumers make purchases, the more money is returned into a country's economy.

What E says does not indicate that German people's making purchases would somehow change the value of the currency, because that purchasing returns money to the economy does not mean that purchasing changes the number of units of currency or reduce the total value of all such currency. It means that purchasing changes the flow and location of the currency.

IMO D

OA please

shona04 wrote:IMO D

OA please

OA is C