Businesses are suffering because of a lack of money : GMAT Critical Reasoning (CR)
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# Businesses are suffering because of a lack of money

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Businesses are suffering because of a lack of money [#permalink]

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22 Dec 2009, 12:00
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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.

(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.

(C) 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
[Reveal] Spoiler: OA

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22 Dec 2009, 12:35
Still waiting for some more replies before posting OA
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22 Dec 2009, 13:42
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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.
Weakness: Do the people actually put money in their retirement accounts? This is not the right weakness as it's mentioned in the fact section and not the conclusion section.(hence C is incorrect).

Right Weakness: Money deposited into retirements accounts might not result is more money available to borrowers (Mentioned in the conclusion).
Scan through the choices which states this -
A looks like the closest match.
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22 Dec 2009, 14:06
Yes A it is...
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Re: Businesses are suffering because of a lack of money [#permalink]

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14 May 2010, 03:47
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.

Experts, please comment.
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14 May 2010, 03:48
Also, A is just the prephased of last sentence of the argument.
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14 May 2010, 11:13
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I picked the wrong OA too.....but after reading thru the explanation I understand that I was wrong.

The premise mean to say that as more money is deposited in such
accounts, more money becomes available to borrowers ( business borrowers).

Now A says that as personal retirement savings increase, consumer borrowing always increases correspondingly.....the important point here is that consumer borrowing is different from business borrowing

The government is intending to increase retirement savings so that businesses can borrow but what if because of increase in retirement savings end consumers borrowing also increases correspondingly....this will defeat the purpose of the plan.
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15 May 2010, 00:36
agreed with seekmba
if people would put more money in retirement saving plan they eventualy end up very less personal saving hence they could become borrowers themselves, and this could frustrate govt's plan, hence the nas must be A
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14 Dec 2010, 18:57
I don't see why C doesn't weaken the conclusion.

The OG concludes that effectiveness of the plan would be determined not by what "some" people do but by what "most" people do. I would argue that by logic, some means at least one i.e. It can be 1, most or all!

We have to take the choices as true since it is a weaken question i.e. for C, if the people decide not to put money into retirement savings account, then the conclusion is weakened in that the plan to provide more money to borrowers via the retirement savings account will not work.
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14 Dec 2010, 19:43
Plan of government is to increase the money so that it can meet the loan amount required. Therefore, govt thinking to modify the tax structure to get the more money collected .
But, if due to this plan, if money demanded by the business/consumer also increases, then this plan will not work

Hence A
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15 Dec 2010, 01:11
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

What abt E ?
If the taxes that people save after increasing their retirement savings does not differ from what it would have been had they not increased their retirement saving, then people would not have incentive to save.
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15 Dec 2010, 01:12
mundasingh123 wrote:
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

What abt E ?
If the taxes that people save after increasing their retirement savings does not differ from what it would have been had they not increased their retirement saving, then people would not have incentive to save.

I think i misread the option .
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15 Dec 2010, 07:56
I would go with A
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16 Dec 2010, 13:02
saurabhgoel wrote:
Plan of government is to increase the money so that it can meet the loan amount required. Therefore, govt thinking to modify the tax structure to get the more money collected .
But, if due to this plan, if money demanded by the business/consumer also increases, then this plan will not work

Hence A

I'm not saying that A is wrong. But the explanation still doesn't rule C out.

As per my response above, The plan would fail because people won't put more money than is currently in a retirement savings account in spite of changes to the tax structure.

I think the reason that OG quotes is not good enough to rule out option C.
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28 Apr 2011, 03:09
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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
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25 Jun 2012, 19:03
Expert...

Please help with this OA.

I still don't understand why OA is A.
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28 Jun 2012, 22:12
Hi

I shortlisted my choices between A and E,

A-Consumer borrowing is different than business borrowing, So Govt will not have funds to provide loan to business- Govt. Plan failed
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- Means it is helpful as retirement saving will have flat saving for all income level people
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29 Aug 2012, 06:50
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salil wrote:

I'm not saying that A is wrong. But the explanation still doesn't rule C out.

As per my response above, The plan would fail because people won't put more money than is currently in a retirement savings account in spite of changes to the tax structure.

I think the reason that OG quotes is not good enough to rule out option C.

As my undertanding. "Some" is pretty close to the "few", perhaps 30%. Clearly, "some" doesn't represnting "most". Furthermore, (C) gives us some weaken but not strong enough compare with (A). Remeber, we have to determine which one is "most weaken" the argument. In other words, partially weaken is not a correct answer(same to the strengthen question). Thus, C out and A is the best!

I got better explaination from another site, but not sure if I can post link here.
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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.
Re: Businesses are suffering because of a lack of money   [#permalink] 08 Feb 2013, 06:00

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