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Spending on research and development by United States [#permalink]
08 Aug 2005, 20:48
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Spending on research and development by United States businesses for 1984 showed an increase of about 8 percent over the 1983 level. This increase actually continued a downward trend evident since 1981- when outlays for research and development increased 16.4 percent over 1980 spending. Clearly, the 25 percent tax credit enacted by Congress in 1981, which was intended to promote spending on research and development, did little or nothing to stimulate such spending.
The conclusion of the argument above cannot be true unless which of the following is true?
A. Business spending for research and development is usually directly proportional to business profits.
B. Business spending for research and development in 1985 could not increase by more than 8.3%.
C. Had the 1981 tax credit been set higher than 25%, business spending for research and development after 1981 would have increased more than it did.
D. In the absence of the 25% tax credit, business spending for research and development would not have been substantially lower than it was.
E. Tax credits marked for specific investments are rarely effective in inducing businesses to make those investments.
C says, the tax credit did help because if the the increase would have been more, RD spending would had shown an increase upward. This actually strengthens the argument, saying that tax Credit did contribute.
D says, even without the Tax Cut factor, the increase would had been same, which is what the conclusion of the argument is.