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Lawmaker: Raising taxes is not the only means of reducing [#permalink]
 18 Feb 2009, 20:17
Question Stats:
30% (00:00) correct
70% (01:01) wrong based on 2 sessions
Lawmaker: Raising taxes is not the only means of reducing government
debt. The government’s stockpile of helium is worth 25 percent more,
at current market prices, than the debt accumulated in acquiring and
storing it. Therefore, by selling the helium, the government can not
only pay off that debt but reduce its overall debt as well.
Which of the following is an assumption on which the argument depends?
A. The government has no current need for helium.
B. Twenty-five percent of the debt the government has accumulated in
Stockpiling helium is not an insignificant portion of the government’s
Total debt.
C. It is not in the lawmaker’s interest to advocate raising taxes as a
Means of reducing government debt.
D. Attempts to sell the government’s helium will not depress the market
Price of helium by more than 25 percent.
E. The government will not incur any costs in closing its facilities for
stockpiling helium.
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reply2spg wrote: Lawmaker: Raising taxes is not the only means of reducing government debt. The government’s stockpile of helium is worth 25 percent more, at current market prices, than the debt accumulated in acquiring and storing it. Therefore, by selling the helium, the government can not only pay off that debt but reduce its overall debt as well.
Which of the following is an assumption on which the argument depends?
A. The government has no current need for helium.
B. Twenty-five percent of the debt the government has accumulated in Stockpiling helium is not an insignificant portion of the government’s Total debt.
C. It is not in the lawmaker’s interest to advocate raising taxes as a Means of reducing government debt.
D. Attempts to sell the government’s helium will not depress the market Price of helium by more than 25 percent.
E. The government will not incur any costs in closing its facilities for stockpiling helium. D. If govt's attempts to sell the helium will depress the market Price of helium by more than 25 percent, it is not worthwhile to store and sell the hellium..
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I would go with option A.
Option D, though appealing has a fundamental mathematical pitfall.
Lets say the buy price of the Govt is 100$ for 10 units therefore the total cost of accruing the helium is 1000$, now the current market price is 125$ for each unit.
Now 24% of 125$ would be 30$. If the market value of helium decreases even by 24%, the net selling price of one unit of helium would be 95$. If the government sells 9 units of helium at this price and 1 unit at 125$, the total amount it would gain is
95*9 + 125*1 = 980$ (this is the worst case scenario).
Still running a debt of 20$.
So i guess option A is the only one that holds, cos a proposition to sell the helium is made iff the govt has no current need for it.
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Selling the Helium is only way to reduce the debt burden because “current market price” supports it. What will happen if D comes true? “Current market price” will fall and government will no more capable of reducing overall debt. IMO D
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aielman wrote: I would go with option A.
Option D, though appealing has a fundamental mathematical pitfall.
Lets say the buy price of the Govt is 100$ for 10 units therefore the total cost of accruing the helium is 1000$, now the current market price is 125$ for each unit.
Now 24% of 125$ would be 30$. If the market value of helium decreases even by 24%, the net selling price of one unit of helium would be 95$. If the government sells 9 units of helium at this price and 1 unit at 125$, the total amount it would gain is
95*9 + 125*1 = 980$ (this is the worst case scenario).
Still running a debt of 20$.
So i guess option A is the only one that holds, cos a proposition to sell the helium is made iff the govt has no current need for it. The argument says that the govt can the stockpile, thus the argument itself signifies that der s a stockpile, which means its der for emergency n no current need is der. so option A is wrong. IMO D.as d negation of dis statement wud make the lawmakes argument to fail. E is wrong, i guess, coz ders nothing mentioned in the argument abt the facility costs. Please correct if m wrong nywhr.
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IMHO A.
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A is simple and straight-forward. What is wrong with it? Why can't it be the correct answer?
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D ..
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IMO - D: Since author implicitly states that selling the helium would cover the cost of acquiring and storing it plus 25% - this option would render the argument invalid.
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The answer should be D I guess....
B, C and E can be eliminated easily.
A doesn't stand out because its not necessarily a correct assumption i.e the government requiring or not requiring the helium shouldn't matter, since raising taxes is what the lawmaker is trying to avoid
What is the OA??
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BarneyStinson wrote: A is simple and straight-forward. What is wrong with it? Why can't it be the correct answer? Main conclusion of the argument says that helium can be sold to pay off the government debt (well some part of it). Let's assume that government does in fact have some urgent need of helium. Does this fact change anything? You can still sell the helium and pay off the debt (as long as market price are high enough). The conclusion still holds. The crucial assumption argument depends on concerns market prices. If prices decrease by more than 25%, there will be no more money left to pay off public debt. So IMO it should be (D)
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IMO D. What is the OA?
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A was tempting at first but then I realized no one really cares whether or not the government even needs helium! So I'll go with D.
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remember that the option A says... "No current"...need. Maybe after sometime the helium price can either crash or rise so argument will either be weakened or strengthened .
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Pls let us know the OA. I think its an exceptionally wicked question. D certainly seems right - but looking closely - D actually says - Government's attempts to sell helium will not weaken the market - what does market mean? So long as the Govt is able to make a profit (at the current elevated prices) - the Govt can proceed with its plan. So I am not sure if this ambiguity has been deliberately built or we can safely assume - that MARKET means Helium as well.
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nverma wrote: IMHO A. can u explain?
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Slightly different .... I choose B
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+1 D Please post OA
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I believe its D i almost picked A but it is irrelevant The government’s stockpile of helium is worth 25 percent more, at current market prices, than the debt accumulated in acquiring and storing it. Therefore, by selling the helium, the government can not only pay off that debt but reduce its overall debt as well. Which of the following is an assumption on which the argument depends? A. The government has no current need for helium. (having or not having a need for helium is irrelevant since you can still reduce the debt even if you have a need for helium). D. Attempts to sell the government’s helium will not depress the market Price of helium by more than 25 percent. (prompt states that from the sell : Revenue-Total cost=25% premium which is used to offset the debt. HOWEVER, if selling the helium would lower the total revenue then the argument will not hold) 
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D
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