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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, 12:50
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75% (hard)

Question Stats:

51% (02:29) correct 49% (01:34) wrong based on 414 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?

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.
[Reveal] Spoiler: OA
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Re: CR - Assumption 700 level [#permalink]

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10 Jul 2011, 13:14
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: CR - Assumption 700 level [#permalink]

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13 Jul 2011, 07:21
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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: CR - Assumption 700 level [#permalink]

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14 Jul 2011, 00:53
Can some one please explain why E is incorrect?
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Re: CR - Assumption 700 level [#permalink]

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20 Jul 2011, 22:22
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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?

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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Joined: 06 Jul 2011
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Re: CR - Assumption 700 level [#permalink]

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20 Jul 2011, 22:43
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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: CR - Assumption 700 level [#permalink]

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23 Jul 2011, 01:57
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: CR - Assumption 700 level [#permalink]

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23 Jul 2011, 13:43
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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12 Nov 2014, 08:01
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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, 09:29
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, 13:18
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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, 13:49
I chose D, was confused between D and E

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Manager
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Posts: 93
Re: A law passed in Rockville three years ago allows a 30% tax [#permalink]

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15 May 2017, 18:42
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, 20:02
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.
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Re: A law passed in Rockville three years ago allows a 30% tax [#permalink]

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27 May 2017, 10:52
Hello expert, could you please explain why option 'e' is wrong?
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Re: A law passed in Rockville three years ago allows a 30% tax [#permalink]

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02 Jun 2017, 14:53
VKat wrote:
Hello expert, could you please explain why option 'e' is wrong?

Quote:
(E) Tax credits for specific purchases are usually ineffective in influencing consumers to make those purchases.

The question asks, "Which of the following must be true if the above conclusion is to be properly drawn?" The conclusion is that the tax credit has had little or no effect on the sale of newly constructed homes. It doesn't matter whether tax credits are usually ineffective. If, on the other hand, tax credits are usually effective but do not influence consumers to purchase homes, the conclusion can still be properly drawn.
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Re: A law passed in Rockville three years ago allows a 30% tax   [#permalink] 02 Jun 2017, 14:53
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