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# A law passed in Rockville three years ago allows a 30% tax

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Manager
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A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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10 Jul 2011, 11:50
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Difficulty:

85% (hard)

Question Stats:

53% (01:50) correct 48% (01:59) wrong based on 1257 sessions

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A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design. However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

Which of the following must be true if the above conclusion is to be properly drawn?

A. New house sales are directly tied to personal income.
B. New house sales cannot increase by more than 6% next year.
C. If the tax credit had been 50%, there would have been a larger increase in new house sales
D. Without the tax credit, new house sales would not have been significantly lower.
E. Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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10 Jul 2011, 12:14
bschool83 wrote:
A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design. However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

Which of the following must be true if the above conclusion is to be properly drawn?

New house sales are directly tied to personal income.
New house sales cannot increase by more than 6% next year.
If the tax credit had been 50%, there would have been a larger increase in new house sales
Without the tax credit, new house sales would not have been significantly lower.
Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.

D it is
we need an answer that says the drop wouldn't have been even worse without the tax credit
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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13 Jul 2011, 06:21
2
I say D. The author is assuming that without the tax credit, the sales would have been similar, not worse than the sales figure now.
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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13 Jul 2011, 23:53
Can some one please explain why E is incorrect?
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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20 Jul 2011, 21:22
1
A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design. However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

Which of the following must be true if the above conclusion is to be properly drawn?

New house sales are directly tied to personal income.
New house sales cannot increase by more than 6% next year.
If the tax credit had been 50%, there would have been a larger increase in new house sales
Without the tax credit, new house sales would not have been significantly lower.
[b]Addresses the conclusion assuming that decrease would not have been sharp if this was not the case
Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.

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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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20 Jul 2011, 21:43
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zuberahmed wrote:
Can some one please explain why E is incorrect?

E - Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.
If we negate, tax credits are usually effective in influencing consumers. It doesn't hurt the argument. Key word here is usually. In reality, it's neither here nor there (is that a GMAT SC-type correct idiom? I haven't gotten there yet hehe). Sure, tax credits are usually effective, but maybe here they are or are not.

D- Without the tax credit, new house sales would not have been significantly lower.
If we negate, new house sales would be significantly lower without the tax credit. The argument breaks down and the law has an equally significant effect. Thus, this is the correct answer. It must be true if the above conclusion is to be properly drawn.

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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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23 Jul 2011, 00:57
zuberahmed wrote:
Can some one please explain why E is incorrect?

Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.

This statement has no bearing on the conclusion which is : Obviously, this law has had little or no effect on the sale of newly constructed homes.

But I believe if the assumption was :Tax credits for specific purchases are usually effective in influencing consumers to make those purchases. It might be an assumption, because if you negate it, the argument may fail if change effective back to ineffective.

My answer was D as well.
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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23 Jul 2011, 12:43
I chose E as well...stupid assumption questions lol. Whats the source?
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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19 Oct 2012, 09:47
2
1
A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design. However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

Which of the following must be true if the above conclusion is to be properly drawn?

a. New house sales are directly tied to personal income.
b. New house sales cannot increase by more than 6% next year.
c. If the tax credit had been 50%, there would have been a larger increase in new house sales
d. Without the tax credit, new house sales would not have been significantly lower.
e. Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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19 Oct 2012, 11:04
My way of thinking is the following -
I think that the question is actually an assumption type.
We have the conclusion - Obviously, this law has had little or no effect on the sale of newly constructed homes.

In assumption type of questions we need to find either contender or defender
Lets negate answ choice D -
Without the tax credit, new house sales would not have been significantly lower.
In this case the argument falls apart. I mean if the tax credit is not a reason of low sales, then the conclusion is erroneous

thats why D is ok
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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19 Oct 2012, 15:21
The conclusion says there is little or no effect, it means that law was not the reason for increase in sales.
So D.
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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24 Oct 2012, 06:01
psdeol wrote:
A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design. However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

Which of the following must be true if the above conclusion is to be properly drawn?

a. New house sales are directly tied to personal income.
b. New house sales cannot increase by more than 6% next year.
c. If the tax credit had been 50%, there would have been a larger increase in new house sales
d. Without the tax credit, new house sales would not have been significantly lower.
e. Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.

the question costs me 2:26, and right shot.
tax credit ....by creating higher demand for new houses
Inference: thanks to tax credit, the sales declined but stoped decline at 5%, not lower
D says that point
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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24 Oct 2012, 09:30
psdeol wrote:
A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design. However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

Which of the following must be true if the above conclusion is to be properly drawn?

a. New house sales are directly tied to personal income.
b. New house sales cannot increase by more than 6% next year.
c. If the tax credit had been 50%, there would have been a larger increase in new house sales
d. Without the tax credit, new house sales would not have been significantly lower.
e. Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.

With this MUST BE TRUE question, I approach it by POE.

A and E is irrelevant. Choice B and C have no reason for standing. Only choice D is remained.
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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14 Jul 2016, 23:26
D infact shows that the new law has some effect on the sales of new houses. option E shows that such tax credits dont have any effect on the sales of an item..why D is correct
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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15 Jul 2016, 14:24
vishnu440 wrote:
D infact shows that the new law has some effect on the sales of new houses. option E shows that such tax credits dont have any effect on the sales of an item..why D is correct

D is correct because it shows that without the new law also, the sales of newly constructed homes would've been similar to what they are right now with the law. Hence, if the presence of law is also not increasing the sales, then the laws effectiveness is questionable.

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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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21 Sep 2016, 08:29
I did not follow the explanation provided. Can someone break it down please?
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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21 Sep 2016, 12:18
1
warriorguy wrote:
I did not follow the explanation provided. Can someone break it down please?

Let's try -

Quote:
A law passed in Rockville three years ago allows a 30% tax credit to consumers who purchase a newly constructed home. The tax credit was intended to stimulate the local economy by creating a higher demand for new houses and spurring the creation of jobs in construction and design.

30% Tax credit for purchase of new House --------> Stimulating demand for new House ----> Creation of contract jobs.
|------------------------(A)------------------------------->-------------------(B)----------------------->-----------(C)----------------|

Quote:
However, since the law was passed, the growth in sales of newly constructed homes has dropped each year, from 15% to 10% to 5%. Obviously, this law has had little or no effect on the sale of newly constructed homes.

30% Tax credit for purchase of new House <--------- Demand for new House dropped
|------------------------(~A)---------------------------<-------------------(~B)----------------|

Check the negation logic used in the stimulus ( as depicted above) , hope this helps...

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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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21 Sep 2016, 12:49
I chose D, was confused between D and E

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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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15 May 2017, 17:42
I chose option (D), but just had a question: this is an inference question, right?
From question stems, I think this is an inference question. But when looking at above comments, I saw many ppl say this is an assumption question. Could anyone shed some light?
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Re: A law passed in Rockville three years ago allows a 30% tax  [#permalink]

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17 May 2017, 19:02
The conclusion is :-

this law has had little or no effect on the sale of newly constructed homes.

If the conclusion says that the new law had little or no effect on the sale of the newly constructed homes, then how can Option D, which states that without the tax credit law, the sale would not have been significantly low be correct. The imposition of tax credit makes no difference in either its absence or presence.
Only E satisfies this implication.
Re: A law passed in Rockville three years ago allows a 30% tax &nbs [#permalink] 17 May 2017, 19:02

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