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# A recession is not caused by any economic force other than a

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Senior Manager
Joined: 12 Oct 2008
Posts: 446
A recession is not caused by any economic force other than a  [#permalink]

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19 Feb 2009, 17:28
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Difficulty:

(N/A)

Question Stats:

57% (00:12) correct 43% (02:42) wrong based on 53 sessions

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A recession is not caused by any economic force
other than a nationwide loss of confidence. If the
economy is perceived as being unstable, banks are
conservative in lending money, investors take fewer
risks, and hence economic growth is slowed.

Which of the following, if true, would most
strengthen the argument above?

A recession is severely affected by the response
of the Federal Reserve’s setting of
interest rates.

A recession can be brought on by the failure of
a major bank that had been loaning money.

Slowed economic growth is not the only result
of a recession.

When investors begin taking greater risks it is
enough to stimulate economic growth.

It is a fallacy to assume that economic growth
is necessary for economic stability.
VP
Joined: 05 Jul 2008
Posts: 1265

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19 Feb 2009, 17:52
A recession is not caused by any economic force
other than a nationwide loss of confidence. If the
economy is perceived as being unstable, banks are
conservative in lending money, investors take fewer
risks, and hence economic growth is slowed.

Which of the following, if true, would most
strengthen the argument above?

A recession is severely affected by the response
of the Federal Reserve’s setting of
interest rates.

Tries to set the confidence and fed's response as same and set it as a trap

A recession can be brought on by the failure of
a major bank that had been loaning money.

So factors other than confidence can cause recession. weakens

Slowed economic growth is not the only result
of a recession.

20 other things, we dont care

When investors begin taking greater risks it is
enough to stimulate economic growth.

We are talking about recession and economic growth is referred here For argument sake, lets equate confidence with risk (can we? ). we can say that investor confidence causes economic growth. How ever, that is not the same as lack of confidence causing recession. Can we say vice versa? IMO, No we can only say that there is no economic growth causes no investor confidence

It is a fallacy to assume that economic growth
is necessary for economic stability.

My choice. Only confidence is needed. So economic growth does not contribute to stability.

Wow! is all I can say.. Tough one my choice E

Source OA & OE?
Director
Joined: 14 Aug 2007
Posts: 673

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19 Feb 2009, 22:51
Recently, I have started looking at every CR question from If->Then construction perspective first and this one is perfect if then question

For any if X-> then Y, construction, only thing we can conclude is if NOT Y -> then NOT X. .....(Let me call this rule A.)

Here we are given:
1) nationwide loss of confidence is the only cause of recession.

1) If {economy is NOt stable} -> Then {banks are conservative} -> Then {investors take fewer risks} -> Then { Slow economic growth}

A recession is severely affected by the response
of the Federal Reserve’s setting of
interest rates.
This is a clear strap ; lets not bring in our general knowledge as passage does not talk about Fed.

A recession can be brought on by the failure of
a major bank that had been loaning money.
We don't know whether this will result in nationwide loss of confidence. If it does not, this weakens the conclusion.

Slowed economic growth is not the only result
of a recession.
Slowed economic growth is the "cause" not the "result"

When investors begin taking greater risks it is
enough to stimulate economic growth.

This is correct!. Why ? Because, if {investors take fewer risks} -> Then { Slow economic growth}
Negate this as per Rule A.

It is a fallacy to assume that economic growth
is necessary for economic stability.

As per rule A, we can not conclude this, what we can conclude is opposite of this.

HTH
Manager
Joined: 16 Feb 2009
Posts: 51
Schools: Anderson FEMBA

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19 Feb 2009, 23:46
Quote:
A recession is not caused by any economic force
other than a nationwide loss of confidence. If the
economy is perceived as being unstable, banks are
conservative in lending money, investors take fewer
risks, and hence economic growth is slowed.

Which of the following, if true, would most
strengthen the argument above?

A recession is severely affected by the response
of the Federal Reserve’s setting of
interest rates.

A recession can be brought on by the failure of
a major bank that had been loaning money.

Slowed economic growth is not the only result
of a recession.

When investors begin taking greater risks it is
enough to stimulate economic growth.

It is a fallacy to assume that economic growth
is necessary for economic stability.

I'm going to go with D.

Here are my thoughts:
Given - Recession is caused from a loss of confidence. If the economy appears to be bad, investors / banks get conservative and therefore the economy slows (recession).

Which option strengthens the opinion?
A - out of scope; no mention of the Fed.
B - while it may be true, a failed bank bringing about a recession does not help the author's argument.
C - out of scope; again, looking for points to help the author's point.
E - out of scope; we don't care about economic stability.

D - tells us that if investors take risks, the economy grows. This mates with the given info. If investors do not take risks, the economy slows. If they take risks, the economy will be stimulated.
Manager
Joined: 14 Apr 2010
Posts: 179

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01 Aug 2010, 00:02
Is D the OA?? I think "enough to stimulate economic growth" is too extreme, isn't it?
Manager
Joined: 22 Jan 2012
Posts: 78
Location: India
Concentration: General Management, Technology
GPA: 3.3
WE: Engineering (Consulting)
Re: A recession is not caused by any economic force other than a  [#permalink]

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12 Mar 2012, 02:19
A recession is severely affected by the response of the Federal Reserve’s setting of interest rates. --> Weakening the argument

A recession can be brought on by the failure of a major bank that had been loaning money. --> Weakening the argument

Slowed economic growth is not the only result of a recession. --> Neither weakens nor strengthens

When investors begin taking greater risks it is enough to stimulate economic growth. --> strengthens the argument

It is a fallacy to assume that economic growth is necessary for economic stability. --> Neither weakens nor strengthens
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Manager
Joined: 12 Mar 2012
Posts: 236
Concentration: Operations, Strategy
Re: A recession is not caused by any economic force other than a  [#permalink]

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15 Mar 2012, 02:41
okay D is best here.
E just weakens the argument by reversing the conditional statement.
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SVP
Joined: 12 Dec 2016
Posts: 1600
Location: United States
GMAT 1: 700 Q49 V33
GPA: 3.64
Re: A recession is not caused by any economic force other than a  [#permalink]

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30 Jun 2017, 17:05
what is the main conclusion in this question?
SVP
Joined: 12 Dec 2016
Posts: 1600
Location: United States
GMAT 1: 700 Q49 V33
GPA: 3.64
Re: A recession is not caused by any economic force other than a  [#permalink]

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30 Jun 2017, 17:08
B, or D must be the answer.
I picked B, but now I think D is correct
use the negation technique, if inventors do not take greater risks, there will bo no stimulate for economic growth => economy slows down
Senior Manager
Joined: 15 Jan 2017
Posts: 355
Re: A recession is not caused by any economic force other than a  [#permalink]

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03 Sep 2017, 01:34
I would like to know if D isnt a bit too extreme - the logic begins from'loss of confidence' (presumably certain economic conditions) to banks lending less and then investors suffering --> it doesnt seem that it starts with the investors that D implies.

"When investors begin taking greater risks it is
enough to stimulate economic growth." -- if we put this in the context above - investors CANNOT take a risk because something else stops them (banks). It is not just dependent on them.
E - "It is a fallacy to assume that economic growth
is necessary for economic stability." -- it says, economic growth is not required for economic stability (risk taking is);and it strengthens the main argument.

Please explain why OA is D
SVP
Joined: 12 Dec 2016
Posts: 1600
Location: United States
GMAT 1: 700 Q49 V33
GPA: 3.64
Re: A recession is not caused by any economic force other than a  [#permalink]

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04 Sep 2017, 13:17
the first sentence is the main argument, and the second sentence is an example.
D is relating to both sentences => D is correct.
ALso, all other options are out of scope.
Manager
Status: IF YOU CAN DREAM IT, YOU CAN DO IT
Joined: 03 Jul 2017
Posts: 199
Location: India
Re: A recession is not caused by any economic force other than a  [#permalink]

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02 Nov 2017, 00:38
what is the source of this question?
GMAT Club Verbal Expert
Joined: 20 Nov 2016
Posts: 260
Re: A recession is not caused by any economic force other than a  [#permalink]

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02 Nov 2017, 15:05
As described in the Rules to post on the Verbal Forum, please tag questions with the source, category, and difficulty level. Also, enter the questions exactly as they appear in the original source.

Thanks!
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Re: A recession is not caused by any economic force other than a &nbs [#permalink] 02 Nov 2017, 15:05
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