Businesses are suffering because of a lack of money available for development loans. To help businesses, the
government plans to modify the income-tax structure in order to induce individual taxpayers to put a larger
portion of their incomes into retirement savings accounts, because as more money is deposited in such
accounts, more money becomes available to borrowers.
Conclusion: More money becomes available to borrowers.
Assumption: The money is used by businesses only.
Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's
plan to increase the amount of money available for development loans for businesses?
(A) When levels of personal retirement savings increase, consumer borrowing always increases
correspondingly.Yes. suppose bank has 1000 bucks in the fund. It is planning to give to 500 to businesses. It possible that many normal people applied for loans and eaten into the share of businesses.
(8) The increased tax revenue the government would receive as a result of business expansion would not
offset the loss in revenue from personal income taxes during the first year of the plan.We are not even bother about losses during the first year of plan. out of scope
(e) Even with tax incentives, some people will choose not to increase their levels of retirement savings.This is the most tricky and misleading answer to the question. Be extra careful with some. Inorder for a plan to work it is not mandatory for everyone to agree. There will always be some outliers. As long as majority agree the plans get along. (Welcome to democracy )
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are
insufficient to meet their loan repayment schedules.Some people reason this way. There is money with business but businesses are not good enough to get that money. The conclusion is about more money will be available or not, but not about how banks grant money. These is play of words. One can write many such answer choices such as business fritter away money after taking loans. The scope is conclusion money is available or not
(E) The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for
a given increase in their retirement savings.Sorry i'm not looking into tax slabs here. Out of scope.