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

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

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28 Aug 2009, 09:00
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Question Stats:

50% (01:34) correct 50% (02:29) wrong based on 7 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.

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Manager
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Schools: RD 2: Darden Class of 2012
Re: A law passed in Rockville three years ago allows a 30% tax [#permalink]

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28 Aug 2009, 10:26
Tough question - I really don't like any of these.
There are alot of tricks in this question - %'s and a shift of scope Construction of Homes to Sales of Homes.
I would have looked for one of these to show up in the answer choices but I don't think either did

A) Not mentioned in the passage
B) Irrelevant
C) Hard to say looks possible, I gave it a small check mark
E) Out of scope, now talking about other products

I am going with D) By this being true then it confirms the point that the tax credit was inefficient. If this is not a true then the New House sales could have been 3%, 2% and 1% without the tax credit which goes against the conclusion.

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

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28 Aug 2009, 10:37
IMO E.
Statement D implies the law has effect but it is negative effect in terms of sales i.e. tax credit resulted in the decrease of sales. But as per the question the law has little or no effect. So D cannot be the answer.

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

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28 Aug 2009, 12:51
IMO D....e says usually.....not always....cant just go on some prediction ...Perhaps...OA?

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

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31 Aug 2009, 01:11
between D and E... i go with E since housing purchases can be referred to as 'specific purchases'.

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

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31 Aug 2009, 07:36
i agree with Aleehsgonji.
with (D), the tax credit actually hurt the sales. it does not support the conclusion that the tax credit had no effect.

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

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31 Aug 2009, 14:19
OA is D.

Can anyone elaborate what is wrong with the different answers?
Thanks

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Senior Manager
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Concentration: Nonprofit, Strategy
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Re: A law passed in Rockville three years ago allows a 30% tax [#permalink]

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31 Aug 2009, 16:06
D

New house sales are directly tied to personal income. - income not talked about
New house sales cannot increase by more than 6% next year. -didn't say anything about 6%
If the tax credit had been 50%, there would have been a larger increase in new house sales - weakens not really related...
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. -too vague, usually? that leaves a possibility that it might happen....

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

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01 Sep 2009, 16:39
I will go with D

In must be true questions , answer must match with the information present in the argument

E is an assumption and will be valid if we change the question to assumption question
_________________

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Re: A law passed in Rockville three years ago allows a 30% tax   [#permalink] 01 Sep 2009, 16:39
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