GMAT Question of the Day - Daily to your Mailbox; hard ones only

 It is currently 20 Jun 2019, 00:19

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Bank depositors in the United States are all financially

Author Message
TAGS:

Hide Tags

Intern
Joined: 08 Nov 2011
Posts: 3
Concentration: Healthcare, Technology
GPA: 3.7
WE: Analyst (Health Care)
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

12 Apr 2013, 10:01
1
E.

If depositors were NOT able to distinguish between which banks are secure and failure, then the economist's argument falls apart. If this is indeed the case, whether the insurance is there or not, you can assume the same pattern would continue.
Manager
Joined: 14 Jun 2011
Posts: 67
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

27 Jun 2013, 22:05
@pqhai,

Hi,

why option D is incorrect?
if X->Y, then assumption could be that Y --x-->X(Y will not cause X)
or A->Y(A will cause Y)
In option D, aint we trying to do this --it assumes other cause (interest rate) as the reason of bank failures?

_________________
Kudos always encourages me
Manager
Status: Prep Mode
Joined: 25 Apr 2012
Posts: 153
Location: India
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

28 Jun 2013, 02:30
1
Let me try:

Author mentions that "since it removes from depositors any financial incentive" ---> so depositors are not financially concerned because in any case their money is secured.

D restates that depositors are not financially motivated and that the interest rates are not a significant factor for them. Sounds good, and may strengthen the arg little bit but the conclusion is different here.

Conclusion: If depositors were more selective, then banks would need to be secure in order to compete for depositors' money.

E assumes that the depositors have the knowledge of making decisions and can choose banks but they don't see any financial motive so they are least bothered.

Hope it helps.
Intern
Joined: 15 Mar 2013
Posts: 25
Location: United States
Concentration: General Management, Strategy
GMAT Date: 08-07-2013
GPA: 3.33
WE: Consulting (Energy and Utilities)
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

28 Jun 2013, 05:39
swati007 wrote:
@pqhai,

Hi,

why option D is incorrect?
if X->Y, then assumption could be that Y --x-->X(Y will not cause X)
or A->Y(A will cause Y)
In option D, aint we trying to do this --it assumes other cause (interest rate) as the reason of bank failures?

There is no mention of Interest rate in the passage. Avoid picking questions that introduce something new.
Having said that, the relationship between the Interest rate paid and bank failure is not been spoken about. A lot of critical information would be required to actually determine their relation.
Senior Manager
Joined: 07 Sep 2010
Posts: 254
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

Updated on: 29 Jun 2013, 09:24
Bank depositors in the United States are all financially protected against bank failure because the government insures all individuals' bank deposits. An economist argues that this insurance is partly responsible for the high rate of bank failures, since it removes from depositors any financial incentive to find out whether the bank that holds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositors' money
The economist's argument makes which of the following assumptions?

(A) Bank failures are caused when big borrowers default on loan repayments.
(B) A significant proportion of depositors maintain accounts at several different banks.
(C) The more a depositor has to deposit, the more careful he or she tends to be in selecting a bank.
(D) The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
(E) Potential depositors are able to determine which banks are secure against failure.

Hi Experts,
What is the Conclusion of the Argument. What is it that author is trying to put forward.
Request you to please decipher the conclusion of this argument.
Regards,
imhimanshu

Originally posted by imhimanshu on 29 Jun 2013, 09:15.
Last edited by Zarrolou on 29 Jun 2013, 09:24, edited 1 time in total.
Merging similar topics.
Intern
Joined: 22 Jul 2010
Posts: 28
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

29 Jun 2013, 09:24
imhimanshu wrote:
Bank depositors in the United States are all financially protected against bank failure because the government insures all individuals' bank deposits. An economist argues that this insurance is partly responsible for the high rate of bank failures, since it removes from depositors any financial incentive to find out whether the bank that holds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositors' money
The economist's argument makes which of the following assumptions?

(A) Bank failures are caused when big borrowers default on loan repayments.
(B) A significant proportion of depositors maintain accounts at several different banks.
(C) The more a depositor has to deposit, the more careful he or she tends to be in selecting a bank.
(D) The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
(E) Potential depositors are able to determine which banks are secure against failure.

Hi Experts,
What is the Conclusion of the Argument. What is it that author is trying to put forward.
Request you to please decipher the conclusion of this argument.
Regards,
imhimanshu

Conclusion of the argument is:" If depositors were more selective, then banks would need to be secure in order to compete for depositors' money"

This argument does not have conclusion indicator. But this is the conclusion and the author reaches this conclusion using the premise.
Director
Joined: 14 Dec 2012
Posts: 741
Location: India
Concentration: General Management, Operations
GMAT 1: 700 Q50 V34
GPA: 3.6
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

29 Jun 2013, 09:35
1
imhimanshu wrote:
Bank depositors in the United States are all financially protected against bank failure because the government insures all individuals' bank deposits. An economist argues that this insurance is partly responsible for the high rate of bank failures, since it removes from depositors any financial incentive to find out whether the bank that holds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositors' money
The economist's argument makes which of the following assumptions?

(A) Bank failures are caused when big borrowers default on loan repayments.
(B) A significant proportion of depositors maintain accounts at several different banks.
(C) The more a depositor has to deposit, the more careful he or she tends to be in selecting a bank.
(D) The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
(E) Potential depositors are able to determine which banks are secure against failure.

Hi Experts,
What is the Conclusion of the Argument. What is it that author is trying to put forward.
Request you to please decipher the conclusion of this argument.
Regards,
imhimanshu

hi,
i am not an expert....
argument is like this:
let suppose Mr X belongs to US
Now according to argument whatever money MR X deposits in any bank of US....is safe also when bank becomes bankrupt==>this is because all the depositors money are insured by the government. hence you can say MR X never uses his brain in order to select bank for deposition.
now author is saying this is the reason for higher rate of bank failiures.
NOW if government now doesnt insures money of depositors then people like MR X will become selective in choosing bank in order to have more security for their money ....then a competetion will rise among different banks in order to grab customers.

here conclusion is: If depositors were more selective, then banks would need to be secure in order to compete for depositors' money

KUDOS if it helped
_________________
When you want to succeed as bad as you want to breathe ...then you will be successfull....

GIVE VALUE TO OFFICIAL QUESTIONS...

learn AWA writing techniques while watching video : http://www.gmatprepnow.com/module/gmat-analytical-writing-assessment
Intern
Joined: 07 Jul 2016
Posts: 38
Location: India
Concentration: Technology, Marketing
GMAT 1: 740 Q50 V41
GPA: 3.6
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

11 Sep 2016, 06:17
Need help in where i got this wrong...conclusion....insurance is responsible for the high bank failure rates. I interpreted this as causal argument. So shouldn't be the assumption something on the lines of "nothing else causes high failure rates"?
SVP
Joined: 12 Dec 2016
Posts: 1525
Location: United States
GMAT 1: 700 Q49 V33
GPA: 3.64
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

07 Jun 2017, 01:44
this question discuss a classical economic issue. The right answer can be easily found.
The question can be summarized as since the government protects the bank, the failure rate of the bank is high. The argument can still be true if without the government, banks have to protect themselves to gain confidence from depositors. As a result, the failure rate is low.
Intern
Joined: 12 Mar 2017
Posts: 39
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

13 Jul 2017, 03:34
Bank depositors in the United States are all financially protected against bank failure because the government insures all individuals' bank deposits. An economist argues that this insurance is partly responsible for the high rate of bank failures, since it removes from depositors any financial incentive to find out whether the bank that holds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositors' money.

Reason why the banks are failing: Because the depositors were not concerned with the banks with whom they want to deposit the money. Because there was an insurance. So the assumption is that normally potential depositors are but because there is an insurance, people are not concerned about the bank failure.

The economist's argument makes which of the following assumptions?

(A) Bank failures are caused when big borrowers default on loan repayments.
Not the reason.

(B) A significant proportion of depositors maintain accounts at several different banks.
Not the reason.

(C) The more a depositor has to deposit, the more careful he or she tends to be in selecting a bank.
Classifies against a diffrent types of depositors, where as premise doesn't.

(D) The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
Not the reason.

(E) Potential depositors are able to determine which banks are secure against failure.
Potentially the reason.
Intern
Joined: 27 Jun 2017
Posts: 8
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

04 Dec 2017, 12:18
Hi Experts,

In this question
Bank depositors in the United States are all financially protected against bank failure because the government insures all individuals' bank deposits. An economist argues that this insurance is partly responsible for the high rate of bank failures, since it removes from depositors any financial incentive to find out whether the bank that holds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositors' money.

The economist's argument makes which of the following assumptions?

(A) Bank failures are caused when big borrowers default on loan repayments.
(B) A significant proportion of depositors maintain accounts at several different banks.
(C) The more a depositor has to deposit, the more careful he or she tends to be in selecting a bank.
(D) The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
(E) Potential depositors are able to determine which banks are secure against failure.

I see the official answer is E) and it does make sense.
When I solved this question I selected D):

My doubt is that in the question it was mentioned that Insurance is primarily responsible for high rate of bank failures,then would D) be the correct answer as it provides an alternate reason and negation of D would imply that the difference in interest rated is a significant factor in bank failures.

Thanks,
Saksham
GMAT Club Verbal Expert
Status: GMAT and GRE tutor
Joined: 13 Aug 2009
Posts: 2569
Location: United States
GMAT 1: 780 Q51 V46
GMAT 2: 800 Q51 V51
GRE 1: Q170 V170
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

13 Dec 2017, 20:19
Sakshamachiever wrote:
Hi Experts,

In this question
Bank depositors in the United States are all financially protected against bank failure because the government insures all individuals' bank deposits. An economist argues that this insurance is partly responsible for the high rate of bank failures, since it removes from depositors any financial incentive to find out whether the bank that holds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositors' money.

The economist's argument makes which of the following assumptions?

(A) Bank failures are caused when big borrowers default on loan repayments.
(B) A significant proportion of depositors maintain accounts at several different banks.
(C) The more a depositor has to deposit, the more careful he or she tends to be in selecting a bank.
(D) The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
(E) Potential depositors are able to determine which banks are secure against failure.

I see the official answer is E) and it does make sense.
When I solved this question I selected D):

My doubt is that in the question it was mentioned that Insurance is primarily responsible for high rate of bank failures,then would D) be the correct answer as it provides an alternate reason and negation of D would imply that the difference in interest rated is a significant factor in bank failures.

Thanks,
Saksham

The economist does not argue that insurance is PRIMARILY responsible for the high rate of bank failures. Rather, the economist argues that the government insurance is PARTLY responsible for bank failures. See how one little word can change the entire meaning?

So it is certainly possible that the difference in interest rates described in choice (D) is a significant factor in bank failures. That does not mean that it is the ONLY factor. Both the government insurance and the difference in interest rates can influence bank failures.

Similarly, diet is a major factor in cholesterol levels. Does that mean that exercise can't also be a factor? Of course not. There can be multiple factors (and even multiple significant factors) affecting the same thing.

Thus, choice (D) is not a required assumption.
_________________
GMAT Club Verbal Expert | GMAT/GRE tutor @ www.gmatninja.com (Now hiring!) | Instagram | Food blog | Notoriously bad at PMs

Beginners' guides to GMAT verbal
Reading Comprehension | Critical Reasoning | Sentence Correction

Series 1: Fundamentals of SC & CR | Series 2: Developing a Winning GMAT Mindset

SC & CR Questions of the Day (QOTDs), featuring expert explanations
All QOTDs | Subscribe via email | RSS

Hit the request verbal experts' reply button -- and please be specific about your question. Feel free to tag @GMATNinja in your post. Priority is always given to official GMAT questions.

Sentence Correction articles & resources
How to go from great (760) to incredible (780) on GMAT SC | That "-ing" Word Probably Isn't a Verb | That "-ed" Word Might Not Be a Verb, Either | No-BS Guide to GMAT Idioms | "Being" is not the enemy | WTF is "that" doing in my sentence?

Reading Comprehension, Critical Reasoning, and other articles & resources
All GMAT Ninja articles on GMAT Club | Using LSAT for GMAT CR & RC |7 reasons why your actual GMAT scores don't match your practice test scores | How to get 4 additional "fake" GMAT Prep tests for \$29.99 | Time management on verbal
Manager
Joined: 08 Jan 2018
Posts: 217
Location: United States (ID)
GPA: 3.33
WE: Accounting (Accounting)
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

03 Feb 2018, 23:38
E and C are closed, but E talks about the ability while C talks about "more money".
I have seen two of them in other gmat questions as well.
Director
Joined: 20 Sep 2016
Posts: 636
Location: India
Concentration: Strategy, Operations
GPA: 3.95
WE: Operations (Real Estate)
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

09 Aug 2018, 23:42
TommyWallach @DimitriFarber

Posted from my mobile device
Manager
Joined: 20 Jun 2017
Posts: 92
GMAT 1: 570 Q49 V19
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

01 Sep 2018, 04:23
If the depositors are unable to determine secure banks then the whole argument goes for a toss.
The above statement is the negation of Option E and if this were to be true then how on earth can the author of this passage make such a conclusion.
The entire argument hinges on the idea that depositors can identify secure banks and if they invest in only those banks and not invest in non secure banks then the non secure banks would face an existential crisis and as a consequence would have to make themselves more secure so as to win depositors confidence.
And this is what option E says and hence is the correct answer.
Manager
Joined: 03 Dec 2018
Posts: 192
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

26 Jan 2019, 21:55
what is the conclusion? confusion between D and E.
VP
Joined: 09 Mar 2018
Posts: 1003
Location: India
Re: Bank depositors in the United States are all financially  [#permalink]

Show Tags

02 Feb 2019, 05:10
lexis wrote:
Bank depositors in the United States are all financially protected against bank failure because the government insures all individuals' bank deposits. An economist argues that this insurance is partly responsible for the high rate of bank failures, since it removes from depositors any financial incentive to find out whether the bank that holds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositors' money.

The economist's argument makes which of the following assumptions?

(A) Bank failures are caused when big borrowers default on loan repayments.
(B) A significant proportion of depositors maintain accounts at several different banks.
(C) The more a depositor has to deposit, the more careful he or she tends to be in selecting a bank.
(D) The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
(E) Potential depositors are able to determine which banks are secure against failure.

Conclusion of this argument was banks would need to be secure in order to compete for depositors money.

How is that ? if we as consumers knew which bank will not be secure and which will be secure

The same is told in E as well
(E) Potential depositors are able to determine which banks are secure against failure.

(A) Bank failures are caused when big borrowers default on loan repayments.
Talking about the reason, why failure happens

(B) A significant proportion of depositors maintain accounts at several different banks.
Ok that is good, but how are they careful, Not relevant.

(C) The more a depositor has to deposit, the more careful he or she tends to be in selecting a bank.

(D) The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
OOS, it is talking about the depositors and not about the bank.
_________________
If you notice any discrepancy in my reasoning, please let me know. Lets improve together.

Quote which i can relate to.
Many of life's failures happen with people who do not realize how close they were to success when they gave up.
Re: Bank depositors in the United States are all financially   [#permalink] 02 Feb 2019, 05:10

Go to page   Previous    1   2   [ 37 posts ]

Display posts from previous: Sort by