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Economies in which a high percentage of resources are [#permalink]
06 Aug 2006, 15:01
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Economies in which a high percentage of resources are invested in research and development show greater growth in the long run than do those in which resources are channeled into consumption. Japanese workers spend a higher percentage of their income investing in research and development than do American workers.
To grow as fast as Japan has in the past three decades, the United States must change the tax code in order to encourage savings and investment and discourage debt.
Which of the following, if true, tends to weaken the argument?
(A) Japanese research is more focused on consumers than is research by American firms.
(B) Class mobility, highly valued in American culture, is encouraged by a growing rather than a stagnant economy.
(C) Studies have shown that countries with high consumption rates prosper in the short run.
(D) Proposed changes to the tax code could involve strict limits on the deductability of interest, and increased allowance for research.
(E) Because a decreasing percentage of the United States is under 40, an age when savings are traditionally low, the savings rate will increase without changes to the tax code.
Pretty straighforward (E) here. America, as a whole, is saving more now because its aging population is concerned about (a debunct Social Security System) its own future financial security. These savings wouln`t require a revision in the tax code in order to subsidize R & D to stay abreast of other technologically advanced nations like Japan.