In the past two years, the effects of the worldwide economic downturn have been felt in all corners of the economy. For example, data from the Crescent City furniture industry show that sales have decreased 12% compared to two years ago. Yet the banks who provide working capital to the furniture retailers report that, in the first year of the downturn, the proportion of credit they provided to the retailers that was repaid on time dropped sharply, while in the second year it returned to normal levels.
Question
Which one of the following, if true, most helps to explain the change in credit repayment reported?

A)The total dollar amount of the loans decreased slightly between the first year and the second.
B)New restrictions on the banking industry instituted since the economic downturn began have limited the number of loans banks can make to troubled borrowers.
C)The largest furniture chain in Crescent City slashed prices in the second year in order to stimulate sales.
D)Almost all of the most financially troubled furniture retailers went out of business at the end of the first year of the economic downturn.
E)Between the first and second years of the recession, wholesalers were forced to significantly raise the prices they charged to retailers.

Source: Grockit

i had to choose between b and d. finally went for b because that was similar to the reason i had thought of before reading the answer choices.

from the question: Sales went down. Loan defaults went up the 1st year but was normal the 2nd year.

Possible reason: banks were more careful in lending money and lent to only clients who could pay back for sure.

while D might also be a possible reason, B sounds more sufficiently convincing to me. IMO, all financially troubled retailers need not go out of business for default rates to go down. It is sufficient that such retailer are not lent any money for default rates to be normal.

The stimulus mentions that the effects of the downturn have been felt in "all corners" of the economy.

So -- D -- I'm not entirely convinced.

D would have been OK if not for the opening sentence.

B seems right --- because if the banks now only gave loans to "proper" businesses -- there is a much better chance of getting proper payments....

I was hesitated between B and D, and finally chose B.

+1 D

I had done a similar question before with almost the same answer choices, so this one was easy for me. Also this question is tagged as "must be true", but I think it is a "resolve a paradox" type of question. The correct answer choices of "must be true" questions cannot bring in new information and are in most of the cases a simple paraphrase of one or more of the premises themselves.

Paradox in the Argument: Proportion of loan repaid dropped sharply in the first year, but returned to normal levels in the second year.

Correct answer choice will resolve the paradox by explaining the "but" in the argument.


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Mayank
My GMAT Journey: 720 + dare = 760

IMO D as this clears the
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-------Analyze why option A in SC wrong-------

This is a strengthen question !!

doubting btw b and d

diffcult ques
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Kick Ass Gmat

D it is.
If the financially struggling furniture retailers were in business in the first year then the payments will be late to the bank and if they are out of business in the second year and the remaining furniture retailers who are not struggling financially will pay on time that will result in the turnaround in the bank report.