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# Businesses are suffering because of a lack of money

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29 Aug 2012, 09:53
so the author says that the money in form of taxes shall be used for the business

but as the money collected as taxes will again reach the people
as their demand for the loans will increase proportionately with the increased taxex the money available for business shall not increase and hence
the govt fails
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08 Feb 2013, 06:00
the argument of this type: if x increase/decrease, y will increase/decrease

prethink : assumption is y depends only x

weakener: y depends on other factor z which can change y

look for other factor

A match.
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28 Mar 2013, 09:38
I'm still struggling to figure out why A.

Is it because A states the word "correspondingly"? Without this word is A still valid?
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13 Apr 2013, 12:33
Lets compare

Inorder to weakening the conclusion , need to attack any of the following

giving tax incentives => no increase in borrowing => helping business
1 2 3

(A) When levels of personal retirement savings increase, consumer borrowing always increases
correspondingly.
this attacks 2 , directly .
DONT think that consumer borrowing is not same as business borrowing . DONT APPLY YOUR LOGIC. Consumer can be running business . He is as consumer of the borrowed money.

(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
Why this is wrong?
simply because of 'some' . If is was 'all' instead of some then this is more likely ans then A (but this is unlikely on GMAT)

wow, question was raised in 2009 and im ans in 2013
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14 Sep 2013, 08:34
sagarsabnis wrote:
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.
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.
(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.
(e) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are
insufficient to meet their loan repayment schedules.
(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.

Please some one explain this...as i am not convinced with the explanation from OG

A it is....

But E too got a effect....Since the tax benefit is same for everyone regardless of their income...It will only encourage people who have less salary than to people who are in the highest slab...

Because they might think that what is the use to put the money in this plan since we are not getting any extra benefit...

But we dont have to choose the correct answer, we need to choose the best out of it..
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05 Jan 2014, 16:23
garimavyas wrote:
C states 'Even with tax incentives, some people will choose not to increase their levels of retirement savings.'

but that also means some people will choose to increase their levels of retirement savings, hence funds available for borrowing will still increase. and that increase amount will be available for businesses to borrow.

so C doesn't weaken the conclusion .

A states that number of borrowers will increase , this may result in even lesser funds for businesses to borrow than were previously available.

hence A seriously weakens the conclusion
Nice explanation. I understand that A is correct. I have another question for you all.. Will this modified version of B act as a weakener for this question?
B) 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.
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05 Jan 2014, 16:55
sagarsabnis wrote:
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.
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.
(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.
(e) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are
insufficient to meet their loan repayment schedules.
(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.

Please some one explain this...as i am not convinced with the explanation from OG

The negated conclusion is: More money is NOT available to the borrowers

Choice A offers the best explanation for this because it says that now there are more borrowers and so more money would actually not be available to the borrowers.
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23 Aug 2014, 19:04
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.
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06 Sep 2014, 12:06
We have here 2 points:
1) Money amount in the pot increases
2) This increased money amount reaches the right group of borrowers

--> We have 1) Money amount in the pot increases BUT we miss here 2) as consumer borrowing increases CORRESPONDINGLY so it +/- 0 for business borrowers, the don't get more money --> This argument most weakens the intended plan
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24 Sep 2014, 07:56
Fact1: Businesses are suffering because of a lack of money available for development loans.
Fact 2: 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
Conclusion: Because as more money is deposited in such accounts, more money becomes available to borrowers.

If we can prove that even if govt plan implemented successfully, the no of borrowers increase or intended saving money not increase then it weakens the conclusion.
Option A does it.

Option C is wrong that even if some people chose not to save, still other people will be saving money
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28 Oct 2014, 04:46
Whats wrong with D?
If more money is put into the retirement savings, the effective money to be available for use by the business will be less. He would then reach bank for loan, and the bank denies his loan sanction because he can't repay the loan with his effective monthly earning. Thus no borrowing even when saving! :/

Any explanations?
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26 Nov 2014, 19:40
Good question. +1. Let me attempt a good explanation now!

I've made some key words in each option in bold and have entered my comments inline in blue as to why each wrong answer is wrong and why the correct one is correct.
F2: Govt thinks --> more retirement savings causes more money available for borrowers (just borrowers and not only business borrowers)
C: If more money is available to lend, more money will be available for development loans for businesses (which are suffering)

NOTE:
a) Whenever we have a X will cause Y weakener, in 99.99% of the cases, we just have to prove that Y won't happen
b) Whenever we have a X causes/may cause Y weakener, in 99.99% of the cases, we just have to prove that either Y caused X or that Z caused Y

We have case (b) here. We just have to prove that X will not cause Y (more money will be available for businesses which are suffering for development)

Now let's skim!

sagarsabnis wrote:
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.

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. This looks like a match to our pre phase. X will not cause Y because it causes Z. HOLD

(B) 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.Nothing to do with our pre phrase. OUT

(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings. Only some people won't. Still if majority invest that might help the Government. This probably strengthens the argument. OUT

(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules. Increased savings leads to more money available for lending. But that doesn't mean that the bank will lend money just for the sake of lending. There is no incentive for the bank to lend for a poor business too. Possible trap answer. We have a clear A so far. Let's HOLD to it IF we find a flaw in A

(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. Okay I am interested in money available for lending and not savings. SCOPE SHIFT. OUT

Please some one explain this...as i am not convinced with the explanation from OG

So now between A & D. A fits my pre phrase amazingly well and has no flaws in my eyes whereas D does. So A it is!
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26 Nov 2014, 22:10
(A) When levels of personal retirement savings increase, consumer borrowing always increases
correspondingly.
If people borrow more then there might not be anymore money to give out for loans

(B) 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.
The revenue is irrelevant folks investing more into their personal retirement savings.

(e) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
Even with some the businesses can still achieve their goal.

(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are
insufficient to meet their loan repayment schedules.
They don't have to loan more money. They just need to have the funds to back up the loans they do give out.

(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.
This can still add more funds to the loans.
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17 Mar 2015, 20:42
Explanation for choice A

Type: weaken

Conclusion: increase personal retirement taxes => give more money available for loan.

Assumption: increase retirement taxes cause more money available

Break assumption: increase retirement taxes do not cause redundance in loans or do cause money available for loan reduced. Hence choice A is the most logical option.
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23 Mar 2015, 17:59
The logic of the argument:
+ Fact: Lack of money available for development loans --> Businesses are suffering.
+ Goverment plan: Modify the tax income structure --> Increase retirement savings --> More money available for loans.
The effectiveness of the plan depends on the assumption that more retirement savings mean more money available for loans.
The answer should weaken the assumption.
A - It implies that even more money is put on retirement saving accounts, this amount of money will be shared for consumer borrowings and there is no guarantee that money left for businesses loans will increase.
B - No impact on the conclusion.
C - The conclusion deals w the majority, not w some.
D - The matter in the argument is the lack of money to lend general businesses, not the problematic businesses.
E - No impact.
so, A is CORRECT.
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16 Jul 2015, 01:29
ykaiim wrote:
Even I marked C but I doubt the OA in OG. The last line of argument says that -

because as more money is deposited in such accounts, more money becomes available to borrowers.

While A says that -
(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.

This is ambiguous. I think to make this a correct argument, the last line of the passage should have been -
because as more money is deposited in such accounts, more money becomes available to bankers/lenders.

You were on the right track with this thinking. With more deposits, more money is available for borrowers.
The money increases uniformly for all borrowers - businesses and consumers.

We want to find a doubt regarding the plans effectiveness to increase the amount of money available for developmental loans for businesses.

A) says, with higher savings, consumer borrowings increase.

Hence:

1) Increase in savings = more money for borrowers
2) More money = increased consumer borrowing

Therefore, consumer borrowing cuts into the share of developmental loans for businesses, and therefore, the government's plan would fail.
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19 Jul 2015, 23:55
went with the wrong answer i chose c too, went through all the explanations given, and i still feel c is correct as nowhere is it mentioned the preference of lenders. do they prefer giving money to personal borrowers or commercial borrowers then how can we state that personal borrowing will consume major chunks of money deposited.
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30 Dec 2015, 11:59
Fight is between A and C

A wins as if available money increases so do the borrowers , which again leads us to a situation of insufficient funds

C talks about some people not all, that's the catch
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11 Jan 2016, 08:16
ykaiim wrote:
Even I marked C but I doubt the OA in OG. The last line of argument says that -

because as more money is deposited in such accounts, more money becomes available to borrowers.

While A says that -
(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.

This is ambiguous. I think to make this a correct argument, the last line of the passage should have been -
because as more money is deposited in such accounts, more money becomes available to bankers/lenders.

when consumer borrowing increase, more money may not left for business borrowing.
Does this make sense?
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11 Jan 2016, 14:07
robu wrote:
ykaiim wrote:
Even I marked C but I doubt the OA in OG. The last line of argument says that -

because as more money is deposited in such accounts, more money becomes available to borrowers.

While A says that -
(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.

This is ambiguous. I think to make this a correct argument, the last line of the passage should have been -
because as more money is deposited in such accounts, more money becomes available to bankers/lenders.

when consumer borrowing increase, more money may not left for business borrowing.
Does this make sense?

Following up on what robu said, the term "consumer" refers to individuals rather businesses. The prompt says: "Businesses are suffering because of a lack of money available for development loans." This argument is bluntly stating that the objective is to promote the lending capacity for businesses.

So now, according to A, if that new lending capacity spurred on by a boost in savings among individual taxpayers is getting scooped up by consumers (individuals) instead, is this new lending capacity as likely to make it to businesses? No. That's why A weakens the likelihood that the plan will work.
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Re: Businesses are suffering because of a lack of money   [#permalink] 11 Jan 2016, 14:07

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