A law passed in Rockville three years ago allows a 30% tax : GMAT Critical Reasoning (CR)
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# A law passed in Rockville three years ago allows a 30% tax

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A law passed in Rockville three years ago allows a 30% tax [#permalink]

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19 Oct 2012, 09:47
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Question Stats:

57% (02:35) correct 43% (01:34) wrong based on 251 sessions

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A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design. However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

Which of the following must be true if the above conclusion is to be properly drawn?

a. New house sales are directly tied to personal income.
b. New house sales cannot increase by more than 6% next year.
c. If the tax credit had been 50%, there would have been a larger increase in new house sales
d. Without the tax credit, new house sales would not have been significantly lower.
e. Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.
[Reveal] Spoiler: OA
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Re: CR 700 level - 3 [#permalink]

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19 Oct 2012, 11:04
My way of thinking is the following -
I think that the question is actually an assumption type.
We have the conclusion - Obviously, this law has had little or no effect on the sale of newly constructed homes.

In assumption type of questions we need to find either contender or defender
Lets negate answ choice D -
Without the tax credit, new house sales would not have been significantly lower.
In this case the argument falls apart. I mean if the tax credit is not a reason of low sales, then the conclusion is erroneous

thats why D is ok
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Re: CR 700 level - 3 [#permalink]

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19 Oct 2012, 15:21
The conclusion says there is little or no effect, it means that law was not the reason for increase in sales.
So D.
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Re: A law passed in Rockville three years ago allows a 30% tax [#permalink]

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24 Oct 2012, 06:01
psdeol wrote:
A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design. However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

Which of the following must be true if the above conclusion is to be properly drawn?

a. New house sales are directly tied to personal income.
b. New house sales cannot increase by more than 6% next year.
c. If the tax credit had been 50%, there would have been a larger increase in new house sales
d. Without the tax credit, new house sales would not have been significantly lower.
e. Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.

the question costs me 2:26, and right shot.
tax credit ....by creating higher demand for new houses
Inference: thanks to tax credit, the sales declined but stoped decline at 5%, not lower
D says that point
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Re: A law passed in Rockville three years ago allows a 30% tax [#permalink]

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24 Oct 2012, 09:30
psdeol wrote:
A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design. However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

Which of the following must be true if the above conclusion is to be properly drawn?

a. New house sales are directly tied to personal income.
b. New house sales cannot increase by more than 6% next year.
c. If the tax credit had been 50%, there would have been a larger increase in new house sales
d. Without the tax credit, new house sales would not have been significantly lower.
e. Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.

With this MUST BE TRUE question, I approach it by POE.

A and E is irrelevant. Choice B and C have no reason for standing. Only choice D is remained.
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Re: A law passed in Rockville three years ago allows a 30% tax [#permalink]

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20 Feb 2016, 17:30
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Re: A law passed in Rockville three years ago allows a 30% tax [#permalink]

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14 Jul 2016, 23:26
D infact shows that the new law has some effect on the sales of new houses. option E shows that such tax credits dont have any effect on the sales of an item..why D is correct
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Re: A law passed in Rockville three years ago allows a 30% tax [#permalink]

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15 Jul 2016, 14:24
vishnu440 wrote:
D infact shows that the new law has some effect on the sales of new houses. option E shows that such tax credits dont have any effect on the sales of an item..why D is correct

D is correct because it shows that without the new law also, the sales of newly constructed homes would've been similar to what they are right now with the law. Hence, if the presence of law is also not increasing the sales, then the laws effectiveness is questionable.

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Re: A law passed in Rockville three years ago allows a 30% tax   [#permalink] 15 Jul 2016, 14:24
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