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Housing is one of the most effective ways to stimulate the

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Housing is one of the most effective ways to stimulate the [#permalink] New post 01 Nov 2012, 02:25
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Housing is one of the most effective ways to stimulate the economy. To stimulate housing, the Federal Reserve
lowered the interest rates for mortgages with the aim of making mortgages more affordable. While this stimulus
did lead to increased housing purchases initially, it eventually led to home price inflation, making homes quite
unaffordable for first time buyers.

Which of the following conclusions about first time buyers is best supported by the passage?

A: The stimulus did not improve the economic condition of most first time home buyers enough to absorb the rise
in home prices
B: Apartment prices went up due to increasing demand from first time home buyers
C: Other than first time home buyers, all other buyers in the housing market were able to make use of the low
income rates and purchase houses at a price lower than they would have paid had the stimulus not been put
into effect.
D: More and more college students started living with their parents longer
E: more and more jobs were created due to the stimulus

OA after discussion.
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Re: Housing is one of the most effective [#permalink] New post 01 Nov 2012, 02:32
Torn between A and B. Will go with A for being milder.

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Re: Housing is one of the most effective [#permalink] New post 01 Nov 2012, 05:23
The Ans is 'B'.

'A' is wrong because, we are not concerned about the economic condition of the first time home buyers. & the use of 'most' is incorrect.

I won't choose 'C' because it doesn't explain how the homes became unaffordable for the first time home buyers.
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Re: Housing is one of the most effective [#permalink] New post 01 Nov 2012, 10:05
C says other home buyers took advantage of the low interest rates, making the home prices
very expensive and probably out of reach for first time buyers.

Is this explanation not reasonable to have affected first time buyers?
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Re: Housing is one of the most effective [#permalink] New post 01 Nov 2012, 12:06
I would go with A.
B looks to me Out of Scope.
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Re: Housing is one of the most effective [#permalink] New post 01 Nov 2012, 22:22
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I felt like a girl changing my mind on this one switching between A and B but finally resorted to ==[A]==:

A: The stimulus did not improve the economic condition of most first time home buyers enough to absorb the rise
in home prices.
---> This seems to be somewhat directly supported by the argument. The way I interpret it is that the relief was temporary and as it was taken into advantage by the fresh buyers, sellers got smarter about it and raised housing prices. My reasoning here is analogous to a conclusion I'd make for a "will the plan succeed" CR type question, where a temporary fix is no permanent fix. In this question, since the positive effect was only temporary, the goal is not achieved. In short, buyers get hesitent or stop buying, which brings us back to the original problem of small economic growth.

B: Apartment prices went up due to increasing demand from first time home buyers
---> After giving it some deeper though, I think this answer is flawed as it is a possible but not a must be true answer. Since this is a conclusion type question, we're looking to eliminate the "could be true" answers. Apartments are a subset of housing opportunities and although they're likely to go up with the argument in mind, they're not stated explicitly. So, we can't conclude that that only apartments were high in demand to know that their interest lead to their higher price.

C: Other than first time home buyers, all other buyers in the housing market were able to make use of the low income rates and purchase houses at a price lower than they would have paid had the stimulus not been put into effect.
--- Way out of scope. No mention of "other buyers" in text.

D: More and more college students started living with their parents longer
--- Out of scope because we don't know that college students necessarily are first time buyers. Even if they were and they went back to their momies the housing inflation may not be the only reason for their decision.

E: more and more jobs were created due to the stimulus
--- Out of scope. This could be true but is not guaranteed (aka directly supported by the argument above).
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Re: Housing is one of the most effective [#permalink] New post 02 Nov 2012, 01:55
nemesis23 wrote:
The Ans is 'B'.

'A' is wrong because, we are not concerned about the economic condition of the first time home buyers. & the use of 'most' is incorrect.

I won't choose 'C' because it doesn't explain how the homes became unaffordable for the first time home buyers.


C brings with it a whole barrage of statements that is unwarranted by the argument. There is no support for the facts stated by this option from the argument. So C is just wrong. If the conclusion were choice A and this question were a strengthen if question, then C would make a good answer choice.

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Re: Housing is one of the most effective [#permalink] New post 02 Nov 2012, 03:07
Housing is one of the most effective ways to stimulate the economy. To stimulate housing, the Federal Reserve
lowered the interest rates for mortgages with the aim of making mortgages more affordable. While this stimulus
did lead to increased housing purchases initially, it eventually led to home price inflation, making homes quite
unaffordable for first time buyers.

Which of the following conclusions about first time buyers is best supported by the passage?

A: The stimulus did not improve the economic condition of most first time home buyers enough to absorb the rise
in home prices
B: Apartment prices went up due to increasing demand from first time home buyers
C: Other than first time home buyers, all other buyers in the housing market were able to make use of the low
income rates and purchase houses at a price lower than they would have paid had the stimulus not been put
into effect.
D: More and more college students started living with their parents longer
E: more and more jobs were created due to the stimulus


I think the official answer should be A.

I guess E and D can easily be eliminated.

Let us take C. This is, I guess, what we call a shell game. The stimulus talks about interest rate and not "Income rate", as mentioned in this sentence. Use of 'income rate' altogether changes the meaning, hence eliminate C.

B is a good trap. Increasing demand => Rise is apartment prices, ie, home price inflation. This is true. But, first-time home buyers is just a subset of the population that can cause increase in demand. Hence, eliminate it. Remains A.

The stimulus was supposed to revive the economy so that even first time home buyers to afford it. However, due to increased demand shortly after the stimulus, housing prices rose, and the would be first time buyers (who most likely did not have deep pockets), could not afford even the reduced interest rates. Hence, A.
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Re: Housing is one of the most effective [#permalink] New post 02 Nov 2012, 03:20
IMO, Answer should be A.

option D and E are clearly out as they are out of scope.

B-> firstly, appartment is the subset of housing market and secondly argument does not support that first time buyers are responsible for increase in prices (actually they are the affected parties). could be true but not must be true
C-> same as b --> may be true.
A-> directly supported by the argument
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Re: Housing is one of the most effective [#permalink] New post 02 Nov 2012, 05:05
The general consensus is
[Reveal] Spoiler:
A[/spoiler should be correct;
OA from source is [spoiler=]A

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Re: Housing is one of the most effective ways to stimulate the [#permalink] New post 16 Jan 2013, 23:06
To Stimulate Economy => Housing => Mortagage rates decrease => Increased house purchases => Increase in Demand => Supply is same => Price rise.

A->Most first time buyers (As stated in last line so they were not in slot of incresed house purchases)
B-> Appartment - housing conflict
C-> Considers all first time buyers in the price rise slot, but some can be in "Increase house purchases" slot , so incorrect.
D-> OOS
E-> OOS

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Re: Housing is one of the most effective ways to stimulate the [#permalink] New post 17 Jan 2013, 12:10
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Housing is one of the most effective ways to stimulate the economy. To stimulate housing, the Federal Reserve
lowered the interest rates for mortgages with the aim of making mortgages more affordable. While this stimulus
did lead to increased housing purchases initially, it eventually led to home price inflation, making homes quite
unaffordable for first time buyers.

Which of the following conclusions about first time buyers is best supported by the passage?

A: The stimulus did not improve the economic condition of most first time home buyers enough to absorb the rise
in home prices
B: Apartment prices went up due to increasing demand from first time home buyers
C: Other than first time home buyers, all other buyers in the housing market were able to make use of the low
income rates and purchase houses at a price lower than they would have paid had the stimulus not been put
into effect.
D: More and more college students started living with their parents longer
E: more and more jobs were created due to the stimulus

This is a conclusion question, so the answer should pass the "fact Test".
Housing is one of the most effective ways to stimulate the economy. is author opinion. rest everything the Federal Reserve
lowered the interest rates for mortgages with the aim of making mortgages more affordable. While this stimulus
did lead to increased housing purchases initially, it eventually led to home price inflation, making homes quite
unaffordable for first time buyers.
is a fact set.

In Conclusion question, it is important to remember that any statement that does not pass the "fact test" will always be wrong.
Never pick a answer that is giving an opinion or suggestion.
Stay very close to the argument. The right answer will always pass the fact test.
Most of the answer options would be "could be true" , it is very important that you identify these choices and what is more important is to answer them directly from what is given in the argument, rather than using your own knowledge to determine the possibility.
lastly remember, we need to prove the Validity not the possibility of a statement.

A: The stimulus did not improve the economic condition of most first time home buyers enough to absorb the rise
in home prices ---- If the stimulus made the houses unaffordable for the first time buyers then it can be inferred that before the stimulus it was difficult for first time buyers to afford mortgage and if after elevating the interest rate for the mortgage it became impossible. Then surely The stimulus did not improve the economic condition of most first time home buyers enough to absorb the rise
in home prices

B: Apartment prices went up due to increasing demand from first time home buyers -- The argument does not mention that there was an increase in demand from first time buyer. It only mention that the stimulus made homes unaffordable for first time buyers.
C: Other than first time home buyers, all other buyers in the housing market were able to make use of the low
income rates and purchase houses at a price lower than they would have paid had the stimulus not been put
into effect. --- Way too much of an inference, it could be true but the argument does not provide me any information to validate the "other than first time home buyers". It fails the fact test.
D: More and more college students started living with their parents longer --- This again strengthen the argument that there was indeed some problem with the economy. But at the best we do not know anything. Remember we are only looking for something that is mentioned in the argument and which will pass out fact test.
E: more and more jobs were created due to the stimulus ---- Good, it would definitely helps economy. But we are no concerned about what other factors helped to stimulate the economy. Remember in Conclusion question, never pick a choice which makes a suggestion or give an opinion or gives you a another parallel premise. it will strengthen the argument.
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Re: Housing is one of the most effective ways to stimulate the [#permalink] New post 17 Jan 2013, 19:37
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gmatbull wrote:
Housing is one of the most effective ways to stimulate the economy. To stimulate housing, the Federal Reserve
lowered the interest rates for mortgages with the aim of making mortgages more affordable. While this stimulus
did lead to increased housing purchases initially, it eventually led to home price inflation, making homes quite
unaffordable for first time buyers.

Which of the following conclusions about first time buyers is best supported by the passage?

A: The stimulus did not improve the economic condition of most first time home buyers enough to absorb the rise
in home prices
B: Apartment prices went up due to increasing demand from first time home buyers
C: Other than first time home buyers, all other buyers in the housing market were able to make use of the low
income rates and purchase houses at a price lower than they would have paid had the stimulus not been put
into effect.
D: More and more college students started living with their parents longer
E: more and more jobs were created due to the stimulus

OA after discussion.


Hi,

Let's look at the below statement from the passage since this is the statement talking about first time buyers:

"While this stimulus did lead to increased housing purchases initially, it eventually led to home price inflation, making homes quite unaffordable for first time buyers."

It says:
- Stimulus increased housing purchases initially - but this purchases were made by whom? First time buyers or others or both
- it eventually led to home price inflation
- Inflation made homes quite unaffordable for first time buyers - so, first time buyers could not afford the new prices.

Now, let's look at the option statements:

A: The stimulus did not improve the economic condition of most first time home buyers enough to absorb the rise in home prices - This can be inferred from the last line of the passage. Here, presence of "most" in "...most home buyers..." does not make it incorrect since the last line does not say that only a few were not able to afford, it makes a general that the first time buyers could not afford new prices. Let's keep this option and evaluate other options.

B: Apartment prices went up due to increasing demand from first time home buyers - We don't know who made the initial home purchases; whether they were first time buyers or repeat buyers. So, this statement cannot be inferred.

C: Other than first time home buyers, all other buyers in the housing market were able to make use of the low income rates and purchase houses at a price lower than they would have paid had the stimulus not been put into effect. - Can we say "all other buyers were able to make use...". No. This is a very strong statement talking about all other customers. We certainly can't make such a sweeping statement based on the passage.

D: More and more college students started living with their parents longer - Incorrect. Out of Scope.

E: more and more jobs were created due to the stimulus - Incorrect. Out of Scope.

So, after the analysis, we are left with option A only; therefore, it is the correct choice.

Hope this helps :)
-Chiranjeev
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Re: Housing is one of the most effective ways to stimulate the [#permalink] New post 22 Feb 2013, 01:36
Housing is one of the most effective ways to stimulate the economy. To stimulate housing, the Federal Reserve
lowered the interest rates for mortgages with the aim of making mortgages more affordable. While this stimulus
did lead to increased housing purchases initially, it eventually led to home price inflation, making homes quite
unaffordable for first time buyers.

Which of the following conclusions about first time buyers is best supported by the passage?

A: The stimulus did not improve the economic condition of most first time home buyers enough to absorb the rise
in home prices
B: Apartment prices went up due to increasing demand from first time home buyers. OFS
C: Other than first time home buyers, all other buyers in the housing market were able to make use of the low
income rates and purchase houses at a price lower than they would have paid had the stimulus not been put
into effect. Scope: First time buyers
D: More and more college students started living with their parents longer. OFS. Passage do not mention about College students
E: more and more jobs were created due to the stimulus. OFS. Passage do not mention about jobs

Therefore, IMO A. I guess this question is from OG or Gmatprep.
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Re: Housing is one of the most effective ways to stimulate the [#permalink] New post 22 Feb 2013, 07:52
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@gmatps24: This question is from our live session question repository. Try the egmat free trial to try more such questions. Click below for the link:

https://e-gmat.com/secure/register_gc.php
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Re: Housing is one of the most effective ways to stimulate the   [#permalink] 22 Feb 2013, 07:52
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