Question 66·Hard·Command of Evidence
In an analysis of retail adoption of U.S.-dollar-pegged stablecoins, economists Laila Paredes and colleagues combined survey responses with transaction data to estimate what share of stablecoin inflows in two world regions was driven primarily by (1) inflation-hedging motives (people trying to protect savings from unpredictable domestic inflation) and what share was driven primarily by (2) payment-friction motives (people seeking faster or cheaper transfers). Paredes and colleagues propose that, absent other factors, as a region’s central bank becomes more credible at keeping inflation predictable, inflation-hedging motives should account for a smaller share of stablecoin inflows relative to payment-friction motives.
If true, this suggests the possibility that _____ Which choice most effectively uses data from the chart to support the proposal made by Paredes and colleagues?
For command-of-evidence questions with charts, restate the author’s claim as a concrete trend you should see in the data (for example, “if credibility rises, the hedging share falls”). Then compare the relevant bars across categories, focusing on changes over time (not whether a value seems ‘high’ in isolation), and pick the option whose inferences match both regions’ trends.
Hints
Focus on what should happen to the hedging share
Under the proposal, decide whether inflation-hedging motives should become a bigger share or a smaller share when credibility rises.
Compare the two time periods within each region
Look at how the inflation-hedging bar changes from 2006–2012 to 2013–2020 for Region 1, then do the same for Region 2.
Turn each trend into an inference
Rising hedging over time suggests decreasing credibility; falling hedging over time suggests increasing credibility.
Step-by-step Explanation
Translate the proposal into a data pattern
According to Paredes and colleagues, if a central bank becomes more credible, the share of stablecoin inflows attributed to inflation hedging should go down relative to payment frictions.
Compare changes in the hedging share by region
From 2006–2012 to 2013–2020, Region 1’s hedging share increases (from about 48% to about 60%), while Region 2’s hedging share decreases (from about 58% to about 46%).
Match each change to the proposal
An increase in hedging suggests lower credibility (Region 1), and a decrease in hedging suggests higher credibility (Region 2).
Select the choice that states both implications
Therefore, the statement best supported by the chart is: central banks in Region 1 likely became less credible from 2006–2012 to 2013–2020, while central banks in Region 2 likely became more credible over the same periods.