Summer is Coming! Join the Game of Timers Competition to Win Epic Prizes. Registration is Open. Game starts Mon July 1st.

It is currently 19 Jul 2019, 14:23

Close

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
Your Progress

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

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Close

Request Expert Reply

Confirm Cancel

Bank depositors in the United States are all financially protected

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:

Hide Tags

Find Similar Topics 
Manager
Manager
User avatar
B
Joined: 26 Feb 2015
Posts: 68
GPA: 3.92
Bank depositors in the United States are all financially protected  [#permalink]

Show Tags

New post 19 Dec 2016, 17:02
3
11
00:00
A
B
C
D
E

Difficulty:

  45% (medium)

Question Stats:

70% (02:07) correct 30% (02:17) wrong based on 607 sessions

HideShow timer Statistics


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.

Which of the following, if true, most seriously weakens the economist's argument?

(A) Before the government started to insure depositors against bank failure, there was a lower rate of bank failure than there is now.

(B) When the government did not insure deposits, frequent bank failures occurred as a result of depositors' fears of losing money in bank failures.

(C) Surveys show that a significant proportion of depositors are aware that their deposits are insured by the government.

(D) There is an upper limit on the amount of an individual's deposit that the government will insure, but very few individuals' deposits exceed this limit.

(E) The security of a bank against failure depends on the percentage of its assets that are loaned out and also on how much risk its loans involve.

Similar question: LINK
Manager
Manager
User avatar
B
Joined: 26 Feb 2015
Posts: 68
GPA: 3.92
Re: Bank depositors in the United States are all financially protected  [#permalink]

Show Tags

New post 20 Dec 2016, 12:19
The assumption version of this question can be found here: bank-depositors-in-the-united-states-are-all-financially-63628.html
Manager
Manager
avatar
B
Joined: 02 Nov 2013
Posts: 81
Location: India
Re: Bank depositors in the United States are all financially protected  [#permalink]

Show Tags

New post 22 Dec 2016, 09:38
1
2
Simple weaken question,
A) Before the government started to insure depositors against bank failure, there was a lower rate of bank failure than there is now.--- Information about bank failure at current time point is not available in the argument.. Eliminate.

B) When the government did not insure deposits, frequent bank failures occurred as a result of depositors' fears of losing money in bank failures.---- Correct. Previously, more failure were happened when government not insured the deposits.

C) Surveys show that a significant proportion of depositors are aware that their deposits are insured by the government.--- Not correct.

D) There is an upper limit on the amount of an individual's deposit that the government will insure, but very few individuals' deposits exceed this limit.---- Not make sense.. Does not weaken the argument.

E) The security of a bank against failure depends on the percentage of its assets that are loaned out and also on how much risk its loans involve.---- loan position will not effect much and irrelevant.
Retired Moderator
avatar
P
Joined: 17 Jun 2016
Posts: 503
Location: India
GMAT 1: 720 Q49 V39
GMAT 2: 710 Q50 V37
GPA: 3.65
WE: Engineering (Energy and Utilities)
GMAT ToolKit User Reviews Badge
Re: Bank depositors in the United States are all financially protected  [#permalink]

Show Tags

New post Updated on: 11 Jun 2017, 05:08
1
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.

Which of the following, if true, most seriously weakens the economist's argument?
(A) Before the government started to insure depositors against bank failure, there was a lower rate of bank failure than there is now.
(B) When the government did not insure deposits, frequent bank failures occurred as result of depositors' fears of losing money in bank failures.
(C) Surveys show that a significant proportion of depositors are aware that their deposits are insured by the government.
(D) There is an upper limit on the amount of an individual's deposit that the government will insure, but very few individuals' deposits exceed this limit.
(E) The security of a bank against failure depends on the percentage of its assets that are loaned out and also on how much risk its loans involve
_________________

Originally posted by mihir0710 on 15 May 2017, 02:16.
Last edited by broall on 11 Jun 2017, 05:08, edited 1 time in total.
Merged topic. Please search before posting question.
Intern
Intern
User avatar
B
Status: GMAT tutor
Joined: 20 Apr 2017
Posts: 20
GMAT 1: 770 Q49 V47
Re: Bank depositors in the United States are all financially protected  [#permalink]

Show Tags

New post 15 May 2017, 09:11
1
mihir0710 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.

Which of the following, if true, most seriously weakens the economist's argument?
(A) Before the government started to insure depositors against bank failure, there was a lower rate of bank failure than there is now.
(B) When the government did not insure deposits, frequent bank failures occurred as result of depositors' fears of losing money in bank failures.
(C) Surveys show that a significant proportion of depositors are aware that their deposits are insured by the government.
(D) There is an upper limit on the amount of an individual's deposit that the government will insure, but very few individuals' deposits exceed this limit.
(E) The security of a bank against failure depends on the percentage of its assets that are loaned out and also on how much risk its loans involve


Our job is to weaken the economist's argument. His conclusion is: Government insurance is partly responsible for the high rate of bank failures. If this conclusion is true then the addition of government insurance must have caused an increase in bank failures and removing this insurance should result in fewer bank failures.

Answer choice (B) is the best answer. This is the one that suggests that without government insurance, bank failures occurred frequently. It implies that government insurance has reduced the high rate of bank failures.
_________________
Elias Latour
Verbal Specialist @ ApexGMAT
blog.apexgmat.com
+1 (646) 736-7622
IIMA, IIMC School Moderator
User avatar
V
Joined: 04 Sep 2016
Posts: 1361
Location: India
WE: Engineering (Other)
CAT Tests
Re: Bank depositors in the United States are all financially protected  [#permalink]

Show Tags

New post 21 Dec 2017, 04:51
GMATNinja VeritasPrepKarishma

For solution provided by eliaslatour

Quote:
Our job is to weaken the economist's argument. His conclusion is: Government insurance is partly responsible for the high rate of bank failures. If this conclusion is true then the addition of government insurance must have caused an increase in bank failures and removing this insurance should result in fewer bank failures.


If I pay close attention to word partly that means something else is responsible for high rate of bank failures?

Does not (E) fit more correctly?
_________________
It's the journey that brings us happiness not the destination.

Feeling stressed, you are not alone!!
SC Moderator
User avatar
V
Joined: 23 Sep 2015
Posts: 1746
GMAT ToolKit User Premium Member Reviews Badge
Re: Bank depositors in the United States are all financially protected  [#permalink]

Show Tags

New post Updated on: 22 Apr 2018, 00:38
3
Conclusion: insurance is 'partly' responsible for the high rate of bank failures.
Evidence for conclusion: depositors are feeling secure from any bank failure. moreover, if depositors were more selective, Competition would have come into picture.

Pre-thinking - As we said in conclusion, insurance is 'partly' responsible for the high rate of bank failures. and we need to weaken it. What if we look for an option that shows that a high rate of bank failures would persist even in the absence of deposit insurance, not partly but 100%. moreover I think partly word is a trap in this question.

Which of the following, if true, most seriously weakens the economist's argument?

A) Before the government started to insure depositors against bank failure, there was a lower rate of bank failure than there is now.--- Classic causality. Ask yourself, Are you 100% sure this is the reason. Can something else be possible ? even partly ?

B) When the government did not insure deposits, frequent bank failures occurred as a result of depositors' fears of losing money in bank failures. --- so prior to insurance banks used to failure. now it is insured and still failing. clearly it is not affecting the factor that is responsible for failure. in other words insurance is not affecting it even partly.

C) Surveys show that a significant proportion of depositors are aware that their deposits are insured by the government. --- So? irrelevant to conclusion.

D) There is an upper limit on the amount of an individual's deposit that the government will insure, but very few individuals' deposits exceed this limit. looks like you are talking about a case. any how its not at all part of solution.

E) The security of a bank against failure depends on the percentage of its assets that are loaned out and also on how much risk its loans involve. --- irrelevant

I think its a good question given that very good traps are used, otherwise a simple one.
_________________
Thanks!
Do give some kudos.

Simple strategy:
“Once you’ve eliminated the impossible, whatever remains, however improbable, must be the truth.”

Want to improve your Score:
GMAT Ninja YouTube! Series 1| GMAT Ninja YouTube! Series 2 | How to Improve GMAT Quant from Q49 to a Perfect Q51 | Time management

My Notes:
Reading comprehension | Critical Reasoning | Absolute Phrases | Subjunctive Mood

Originally posted by aragonn on 22 Apr 2018, 00:33.
Last edited by aragonn on 22 Apr 2018, 00:38, edited 1 time in total.
SC Moderator
User avatar
V
Joined: 23 Sep 2015
Posts: 1746
GMAT ToolKit User Premium Member Reviews Badge
Re: Bank depositors in the United States are all financially protected  [#permalink]

Show Tags

New post 22 Apr 2018, 00:35
adkikani wrote:

If I pay close attention to word partly that means something else is responsible for high rate of bank failures?

Does not (E) fit more correctly?


the argument is not concerned with things about the banks themselves that make the banks more susceptible to failure; rather, it is concerned with the behavior of the banks' depositors. more like think from your prospective. you are a customer in a bank. Hope you see it though. Ask any specific questions, if needed.
_________________
Thanks!
Do give some kudos.

Simple strategy:
“Once you’ve eliminated the impossible, whatever remains, however improbable, must be the truth.”

Want to improve your Score:
GMAT Ninja YouTube! Series 1| GMAT Ninja YouTube! Series 2 | How to Improve GMAT Quant from Q49 to a Perfect Q51 | Time management

My Notes:
Reading comprehension | Critical Reasoning | Absolute Phrases | Subjunctive Mood
Manager
Manager
User avatar
G
Joined: 21 May 2017
Posts: 106
Location: India
GMAT ToolKit User Premium Member CAT Tests
Re: Bank depositors in the United States are all financially protected  [#permalink]

Show Tags

New post 12 Jul 2019, 23:43
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.

Which of the following, if true, most seriously weakens the economist's argument?

(A) Before the government started to insure depositors against bank failure, there was a lower rate of bank failure than there is now.

(B) When the government did not insure deposits, frequent bank failures occurred as a result of depositors' fears of losing money in bank failures.

(C) Surveys show that a significant proportion of depositors are aware that their deposits are insured by the government.

(D) There is an upper limit on the amount of an individual's deposit that the government will insure, but very few individuals' deposits exceed this limit.

(E) The security of a bank against failure depends on the percentage of its assets that are loaned out and also on how much risk its loans involve.


B seems to be the best ans for this. E talks about security of bank against failure and we don't know how much assets and how much risks the loans involve.Our argument talks about the insurance provided by the govt to the depositors. So if we show that without insurance also there were failures then our argument will break and this is what B does.
Hope my reasoning is correct.if not , I am happy to learn
GMAT Club Bot
Re: Bank depositors in the United States are all financially protected   [#permalink] 12 Jul 2019, 23:43
Display posts from previous: Sort by

Bank depositors in the United States are all financially protected

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  





Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne