The downturn in the economy last year has prompted many companies to

C
though the layoffs have taken place it is necessary to know whether the prices of necessities have increased or decreased. Suppose the price of necessities has decreased. thus in spite of layoffs, general public would not feel the need to go for extra savings as now the necessities are cheaper.
On the other hand if necessities are dearer than the extra savings may be used up.

Thus this question (C) gives the criteria to evaluate the saving pattern which of course has not come to pass

Should be (C).

downturn in economy ==> caused lay offs ==> lost of jobs

economist predicted that people will cut back in discretionary spneding in anticipation of hard times

prediction was wrong because people did not have any money inh savings account.

What would be important in finding out why people do not have money in savings a/c?

What business sectors were most affected by the layoffs? - does not help
How much of their savings, on average, do laid-off employees deplete before finding new employment? - we are talking about general public
What has been the percent increase in the cost of necessities such as food, housing, and utilities during the period since the layoffs? - Correct
What percentage of people laid off have savings accounts? - we are talking about general public
What has been the average salary during the period since the layoffs? - average salary alone will not help unless we have something more to compare with average salary

I think C is vulnerable since the economy is not doing good. Hence the cost of the necessities are likely to go up. So the decision on just the percentage increase in the costs to evaluate the spending pattern of people is half baked. A more thorough analysis is the spending patterns on the items itself. Since the argument leaves the logical gap to connect the cost of the items with the spending pattern for those items, it is unconvincing. If this is a gmat question I will send the question for reevaluation by the designers. I may sound stilted but a true gmat question has a overwhelming unambiguous answer.

Argument states :
there has been no increase in the amount of money set aside by the general public in savings accounts even though people may have cut on discretionary spending.

To validate this argument what would be most useful to know is :
Whether people have to spend same amount of money that they used to earlier on necessary things.

Option C does precisely that by explaining that prices of necessary commodities have increased in the period since layoffs.
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Correct answer is C.

It provides an alternative explanation to why savings rate are not going up, i.e. possibly because prices of food and other necessities are going up, people are using monies that could have been saved for this increased expenditures.

Cheers,
Der alte Fritz.

Dear IanStewart

I seem to be missing something important in choice B. Could you please check whether I am applying variance test correctly?
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I don't see how one could evaluate the answer choices here, since the question doesn't make sense to begin with. For one thing, I don't see how one can know what the phrase "there has been no increase in the amount of money set aside by the general public in savings accounts" means. There are two perfectly reasonable interpretations:

- the total amount of money in savings accounts didn't change from last year to this year

If that's the intended meaning, then as evidence, it is useless. We'd need to know what a 'normal' year to year change is in the total amount of money in savings accounts. If normally people set aside billions of dollars in savings accounts, but set aside nothing last year, this might be evidence that people are saving less. If normally people are depleting their savings accounts by billions of dollars, but didn't deplete their savings at all last year, this is evidence that people are saving more. So if this is the intended meaning, then before anything else, we need to know how last year compares to previous years.

- the total amount of money set aside last year in savings accounts was the same as in previous years

If we interpret the sentence this way, then it would mean that if, in an ordinary year, the public sets aside a billion dollars in savings, they did that again last year. But if that's the intended meaning, I don't understand the argument at all. Say two years ago, people saved a billion dollars, and then tons of people lost their jobs. You'd expect those people who lost their jobs to save much less than before. So if overall, savings didn't change in aggregate, that would necessarily mean that employed people saved more. So the argument makes no sense -- the evidence supports the exact opposite conclusion of the one the argument draws.

There are other critical problems with the question: it reaches a conclusion about people whose 'jobs are secure' from evidence about "the general public," which presumably includes children, retirees, those with insecure jobs, and the unemployed. We'd need to know something about what all those people, the ones the conclusion isn't talking about, are doing to say anything at all about those with 'secure jobs'. When real GMAT CR questions draw a conclusion about a specific subset of a group from information about the group as a whole, that's almost always the error you're looking for. But it doesn't seem to be here. So to even evaluate the evidence, we need to know about groups besides those with 'secure jobs', which makes answers like B reasonable choices here.

It's also unclear why we're looking at savings accounts in particular. The cited evidence is meaningless unless we know that savings account deposits somehow correlate with the total amount people save. How are we to know people aren't putting their savings under a mattress, or in a chequing account, or in mutual funds? So that's yet another question we need an answer to before we could hope to evaluate the argument.

There is one criterion I would ordinarily find decisive for a question like this. The question doesn't give us any units -- we have no idea if people in this question are saving $100 per year or $1,000,000,000 per year. So if you got an answer to the question in answer choice B -- say you learned "people deplete $150 on average" -- there'd be no way to interpret that number. You don't have any other numbers to compare it with. The only single question that could provide useful numerical information would need to ask about a ratio or percentage, not about an absolute number. But I wouldn't rely on that criterion here, because I don't have any confidence in the overall logic of the question setup, so I wouldn't expect the question to observe logical subtleties like this one.

I'd suggest using official questions in general for Verbal practice, since you can rely on them to be logically airtight.

KarishmaB Ma'am,

Request you to share your thoughts on my reasoning below.

Option A:- identifying the sectors won't tell us anything about the prediction.

Option B:- how much savings are depleted does not tell us about the prediction. Even if a larger percentage is depleted or a smaller percentage, the conclusion still stands about the prediction.

Option C:- this is the correct answer choice. Lets say there has been a 60 to 70% increase in the cost of necessities during the period of layoffs. So what the economists predicted did not happen because people could not cut back on their discretionary spending. Hence, strengthens.
On the other hand if there was just a 5 to 6 % increase in the cost of necessities then people didn't feel the need to cut back on their discretionary spending. Hence, weakens the claim.

Option D:- We are focusing on all the people. Not just people who were laid off. Hence, incorrect.

Option E:- Irrelevant to our discussion. Answering the negation test does not impact our conclusion. Salary can be 100,000$ or 50,000$. No impact on the conclusion.

Please evaluate.

C is the correct answer. IT is the only option that explains why savings have not increased.