While Governor Verdant has been in office, the states budget

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While Governor Verdant has been in office, the states budget [#permalink]

04 Jun 2009, 21:49

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While Governor Verdant has been in office, the states budget has increased by an average of 6 percent each year. While the previous governor was in office, the states budget increased by an average of 11.5 percent each year. Obviously, the austere budgets during Governor Verdants term have caused the slowdown in the growth in state spending.

Which of the following, if true, would most seriously weaken the conclusion drawn above?

(A) The rate of inflation in the state averaged 10 percent each year during the previous governors term in office and 3 percent each year during Verdants term.

(B) Both federal and state income tax rates have been lowered considerably during Verdants term in office.

(C) In each year of Verdants term in office, the states budget has shown some increase in spending over the previous year.

(D) During Verdants term in office, the state has either discontinued or begun to charge private citizens for numerous services that the state offered free to citizens during the previous governors term.

(E) During the previous governors term in office, the state introduced several so-called austerity budgets intended to reduce the growth in state spending.

Can anyone help me in the same?

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Re: Governor Verdant [#permalink]

04 Jun 2009, 22:09

I think the answer should be E

(A) The rate of inflation in the state averaged 10 percent each year during the previous governors term in office and 3 percent each year during Verdants term. - Strengthens the argument

(B) Both federal and state income tax rates have been lowered considerably during Verdants term in office. - Out of scope

(C) In each year of Verdants term in office, the states budget has shown some increase in spending over the previous year.- Out of scope

(D) During Verdants term in office, the state has either discontinued or begun to charge private citizens for numerous services that the state offered free to citizens during the previous governors term.- Out of scope

(E) During the previous governors term in office, the state introduced several so-called austerity budgets intended to reduce the growth in state spending. - weakens the argument by providing an alternate reason for slowdown. Based on this one can say that the slowdown might has happened due to previous governors policies.
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Re: Governor Verdant [#permalink]

04 Jun 2009, 22:31

Answer as per 1000 SC is A.

as per one of the explaination on net
http://www.beatthegmat.com/state-s-budg ... 12655.html

In India, right now the rate of inflation is 11.05%. the highest is last 13yrs.
following r the main reasons, as cited by the experts:
1)high import oil prices.
2)big farm loan waiver by the government (close to Rs71000 crore - an election gimmick).
3)high GDP growth.
4)depreciting rupee .........etc.
so if the inflation is down, in some cases it will allow the government to have extra funds to spend on the states, if it wants to.in such cases A will actually strengthen the argument.

so u see it depends upon what the scenario is. there is nothing mentioned in the passage about the rate of inflation.
hence A is out of scope.

Thanks!

yeah i saw that in newpaper today ...... and reasons given by you are true....

BUT, you forgot to mention a very important reason .... India's growth .... In any economy one of the main reasons for hight inflation is high growth rate...

so coming back to our question..... if we take option A, some portion of less growth can be attributed to less infaltion (10 to 3). So its not entirley Mr Verdant's fault .....

BTW the question is from 1000CR and the OA is A.... 8)

Do u think Inflation has something to do with state spending ...???

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Re: Governor Verdant [#permalink]

04 Jun 2009, 23:00

ya, may be "state spending" is directly effected by "inflation". If inflation increases, prices will increase and "state spending" will slowdown.

But, if we take it other way, if "state spending" slows down, prices will fall, inflation will decrease (this is what is happening currently across globe).

So if inflation is lower during Verdant's period, is it due to slowdown in "state spending" or is it due to his policies ? confusing ?

I think this argument has been written before the recent global meltdown :lol:

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Re: Governor Verdant [#permalink]

04 Jun 2009, 23:33

imo, the answer shud be A.

The argument states that governor verdant has given austere budgets which caused slowdown in the state's budget.

and option A says that the rate of inflation was low when compared to rate of inflation in previous terms.. hence more budget is not necessary.. inturn means no slow down in govt spending..

for example,

when rate of inflation is 10 %, laying a road will cost you 110.-->budget 110
when rate of inflation is 3%, laying the same road will cost you only 103. --> budget 106. ( surplus )

hence verdant didnt actually slowdown govt expenditure.. when the rate of inflation is considered.

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Re: Governor Verdant [#permalink]

07 Jun 2009, 11:00

I'm with A too as the point of inflation clearly weakens the Austerity aspect.

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Re: Governor Verdant [#permalink]

07 Apr 2011, 11:27

i got that lower Inflation led to lower spending.
but i believe i can convincingly argue that Higher inflation will also lead to lower spending.

So we get: be it lower or higher, either way we have lower spending. i think the question is badly constructed.

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Re: Governor Verdant [#permalink]

07 Apr 2011, 18:13

Was confused between A & B. Going with A

Re: Governor Verdant [#permalink] 07 Apr 2011, 18:13

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While Governor Verdant has been in office, the states budget

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