During the recent economic downturn, banks contributed to : GMAT Critical Reasoning (CR)
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# During the recent economic downturn, banks contributed to

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During the recent economic downturn, banks contributed to [#permalink]

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13 Jan 2012, 21:24
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During the recent economic downturn, banks contributed to the decline by loaning less money. Prior to the downturn, regulatory standards for making bank loans were tightened. Clearly, therefore, banks will lend more money if those standards are relaxed.

The argument assumes that...

A. The downturn did not cause a significant decrease in the total amount of money on deposit with banks, which is the source of funds for banks to lend.

B. The imposition of the tighter regulatory standards was not a cause of the economic downturn.

C. The reason for tightening the regulatory standards was not arbitrary.

D. No economic downturn is accompanied by a significant decrease in the amount of money loaned out by banks to individual borrowers and to businesses.

E. No relaxation of standards for bank loans would compensate for the effects of the downturn
[Reveal] Spoiler: OA
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14 Jan 2012, 02:14
option A .the assumption is that when the stricter sanctions are removed ,the banks must still be able to lend money .Hence we need to assume that there should be money in the bank .
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14 Jan 2012, 21:55
A it is.
During a economic downturn it is quite possible that banks do not have enough money to lend out.
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Re: During the recent economic downturn, banks contributed to [#permalink]

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04 Aug 2013, 19:40
Could somebody help me on why is B not the answer?

I just did this question from Veritas and I thought both A and B sound like a correct assumption.
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Re: During the recent economic downturn, banks contributed to [#permalink]

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04 Aug 2013, 21:02
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gmatter0913 wrote:
Could somebody help me on why is B not the answer?

I just did this question from Veritas and I thought both A and B sound like a correct assumption.

Ask yourself whether (B) affects the argument -- whether (B) in its negated state leads to a negated/opposing conclusion.

B. The imposition of the tighter regulatory standards was not a cause of the economic downturn.

Well, basically the passage is saying:
Before: tight standards --> loan less money + contribute to decline
After: relaxed standards --> argue for "loan more money"

The assumption if TRUE validates the argument
The assumption if NOT true INVALIDATES the argument.

In other words, the assumption has to be a key variable where the argument's validity hinges upon that key variable.

Normal B: Tighter standards WAS NOT a cause of the downturn
Negated B: Tighter standards WAS a cause of the downturn

Impact on Argument:
Normal B: If "tighter standards" was not a cause of the downturn....well, does knowing these two do not have a causal relationship...does that change anything? Does it strengthen or weaken the argument? No. Let's try the negated version to confirm.
Negated B: Does not affect what happens when "standards" are relaxed. Connection between this statement and what happens when "standards are relaxed" is not clear

Since (B) in its negated state does not lead to an opposing conclusion...(B) does not have a key variable that affects the validity of the argument.
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Re: During the recent economic downturn, banks contributed to [#permalink]

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05 Aug 2013, 01:16
Thank you for a very good explanation.
My reasoning for C was as follows:
When the standards are tightened the banks lent less money, in turn contributing to the recession; now, when the standards are relaxed the banks will be able to lend more money.
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Re: During the recent economic downturn, banks contributed to [#permalink]

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05 Aug 2013, 14:11
I'll Take D

During the recent economic downturn, banks contributed to the decline by loaning less money. Prior to the downturn, regulatory standards for making bank loans were tightened. Clearly, therefore, banks will lend more money if those standards are relaxed.

Economic Downturn - Banks contributed to it by loaning less money

Before Downturn - Regulatory Standards were tightened

Argument - If the standards are relaxed banks will lend more money

D. No economic downturn is accompanied by a significant decrease in the amount of money loaned out by banks to individual borrowers and to businesses.

Even if the regulations were fixed but the above was not true, The banks will still not lend out money...
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Re: During the recent economic downturn, banks contributed to [#permalink]

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05 Aug 2013, 23:45
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gmatter0913 wrote:
During the recent economic downturn, banks contributed to the decline by loaning less money. Prior to the downturn, regulatory standards for making bank loans were tightened. Clearly, therefore, banks will lend more money if those standards are relaxed.

The argument assumes that...

A. The downturn did not cause a significant decrease in the total amount of money on deposit with banks, which is the source of funds for banks to lend.

B. The imposition of the tighter regulatory standards was not a cause of the economic downturn.

C. The reason for tightening the regulatory standards was not arbitrary.

D. No economic downturn is accompanied by a significant decrease in the amount of money loaned out by banks to individual borrowers and to businesses.

E. No relaxation of standards for bank loans would compensate for the effects of the downturn

Hi folks
This is a LSAT critical reasoning question, which is about “defender assumption”.

ANALYZE THE STIMULUS:

The form of this question is:

Fact: Before downturn, standards for making bank loans were tighten, --> loaning less money during the downturn.
Conclusion: if those standards are relaxed, banks will lend more money

Two important things:
(1) The main reason that makes banks lend less money is “TIGHTEN REGULATIONS”, NOT “economic downturn”.
(2) The author assumes there is only one factor that make banks lend less money. That is regulatory standards. That also means there is NO OTHER reasons make banks loan less money. This is the core idea of defender assumption, which is introduced in The PowerScore – Critical Reasoning Bible.

A. The downturn did not cause a significant decrease in the total amount of money on deposit with banks, which is the source of funds for banks to lend.
Correct. This is exactly a defender assumption. A says that the downturn did NOT cause a decrease in the total amount of deposit available for lending <== That could be “other reason” makes banks loan less money. A defends the conclusion by eliminating this probability. Thus, A is correct.

B. The imposition of the tighter regulatory standards was not a cause of the economic downturn.
Wrong. . VERY TEMPTING. KEY is tighter regulations ==> Loan less money. Keep in mind, economic downturn is NOT a cause of “loan less money”. If you choose B, the logic will be: tighten regulations --> downturn --> bank lend less money. If tighten regulations --> NOT lead to downturn --> banks will NOT lend less money. Thus, you automatically insist that only tighten regulations that lead to downturn make banks lend less money. But we're talking "tighten regulations" in GENERAL.
For example, in other periods (does not matter downturn or not downturn), in which regulations are tighten, banks face a lot rules, thus they cannot lend more money. Hence, B is not the assumption of the conclusion “less regulations, banks lend more money”.

C. The reason for tightening the regulatory standards was not arbitrary.
Wrong. Out of scope. We just talk about the relationship between “tighter regulations” and “loan less money”. Arbitrary or non-arbitrary do not help to buttress the conclusion: less tighten regulations, bank can lend more money. If you’re not sure, let negate C:
The reason for tightening the regulatory standards WAS arbitrary. Does it help to support the conclusion above? Not at all.

D. No economic downturn is accompanied by a significant decrease in the amount of money loaned out by banks to individual borrowers and to businesses.
Wrong. TEMPTING because of the wording. However, it’s wrong. Keep in mind, economic downturn is NOT a cause of “loan less money”. If you vote for D, you automatically insist that “economic downturn” is the main reason to make banks lend less money. But, the main reason is “tighten regulations”. It doesn’t matter which period economic downturn or not downturn. (see example in B).

E. No relaxation of standards for bank loans would compensate for the effects of the downturn
Wrong. Same as D. If you vote for E, you automatically insist that regualtions affect “economic downturn”, which would be the main reason to make banks lend less money. But, the main reason to make banks lend less money is “tighten regulations”. It doesn’t matter which period economic downturn or not downturn. (see example in B).

Hope it helps.

http://www.lawschooldiscussion.org/inde ... ic=99361.0
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Re: During the recent economic downturn, banks contributed to [#permalink]

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07 Jan 2015, 07:38
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Re: During the recent economic downturn, banks contributed to [#permalink]

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23 Feb 2016, 18:38
During the recent economic downturn, banks loaned less money.

Prior to the downturn, regulatory standards for making bank loans were tightened.

Clearly, therefore, banks will lend more money if those standards are relaxed.
(i.e., we assume that regulation standards are the only reason why banks are lending less money. In other words they have the capacity or money to lend more if those standards are relaxed.)

The argument assumes that...

A. The downturn did not cause a significant decrease in the total amount of money on deposit with banks, which is the source of funds for banks to lend.
This in inline with our pre-thinking

B. The imposition of the tighter regulatory standards was not a cause of the economic downturn.
This is a trap answer as this can be assumed to strengthen to validate our premises in the argument before the conclusion.
But this does not relate to the conclusion in any manner.

C. The reason for tightening the regulatory standards was not arbitrary.
Whatever might be the reason we need only money! This does not help us in knowing whether we can get more money if restrictions are relaxed.

D. No economic downturn is accompanied by a significant decrease in the amount of money loaned out by banks to individual borrowers and to businesses.
This is too extreme and even if consider the statement still it does not make sense for below reasons.
1. if sth is not accompanied by decrease does not mean that it will increase.
2. also pay attention to word "significant" as it means that not much decrease which makes us doubt that if the decrease is small will that support the conclusion.

E. No relaxation of standards for bank loans would compensate for the effects of the downturn
Why are we discussing things to compensate for the downturn effects. The subject of concern is loan amount here.
Completely out of scope.

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Re: During the recent economic downturn, banks contributed to [#permalink]

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23 Feb 2016, 21:53
Premise: Banks loaned less money. Why? Regulatory standards for loans were tightened.
Conclusion: Banks will lend more money if regulatory standards are relaxed

Clearly A is the answer as it conveys that no other factors were responsible for lending less money and only regulatory standards were responsible for banks to lend less money.

Negate A: The downturn caused a significant decrease in the deposits. - Conclusion breaks down as there is insufficient funds for banks to lend more money even if the regulatory standards are relaxed.
Re: During the recent economic downturn, banks contributed to   [#permalink] 23 Feb 2016, 21:53
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