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# Business are suffering because of a lack of money available

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Manager
Joined: 14 Mar 2008
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28 Mar 2008, 12:18
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62% (02:23) correct 38% (01:24) wrong based on 55 sessions

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Business are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpapyers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?

A. When levels of personal retirement savings increase, consumer borrowing always increase correspondingly
B. The increased tax revenue the government would receive as a result of business expansino would not offset the loss in revenue from personal income taxes during the first year of the plan.
C. Even with tax incentives, some people will choose not to increase their levels of retirement savings.
D. Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules.
E. The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings.
Intern
Joined: 22 Feb 2008
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28 Mar 2008, 17:00
1
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I think its C.
the governments assumption is that the individual taxpayers are going to put more money into retirement savings. C weakens that assumption

Business are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpapyers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?

A. When levels of personal retirement savings increase, consumer borrowing always increase correspondingly -- consumer can be both individual and businesses
B. The increased tax revenue the government would receive as a result of business expansino would not offset the loss in revenue from personal income taxes during the first year of the plan. -- It can be after one year....there is no mention of time constarint anywhere
C. Even with tax incentives, some people will choose not to increase their levels of retirement savingsIf people dont put any more money then the Govt.'s plan failsD. Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules.Nothing related to the Govt.'s plans
E. The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings. Strengthens

What do you think?
Manager
Joined: 02 Mar 2008
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28 Mar 2008, 22:15
same - C for me
CEO
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29 Mar 2008, 06:24
I feel its A.

If consumers borrow more, then the money left for development loans remains the same or reduces.

C is not correct, because "some" people may choose not to increase retirements, but some will, hence there will be at least some more money going to the bank to be available for loans.

zhenmaster wrote:
Business are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpapyers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?

A. When levels of personal retirement savings increase, consumer borrowing always increase correspondingly
B. The increased tax revenue the government would receive as a result of business expansino would not offset the loss in revenue from personal income taxes during the first year of the plan.
C. Even with tax incentives, some people will choose not to increase their levels of retirement savings.
D. Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules.
E. The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings.
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Joined: 05 Jul 2006
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29 Mar 2008, 06:35
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The answer is A according to me. We need to find something that would suggest that more money might not be available for business to borrow. Answer A explains the reason, if people borrow more than money may not be available for businesses to borrow.

C states that some might not take advantage of tax incentives but that does not mean all the people will choose to do so. More people might still take advantage of tax incentives and hence it leaves open a possibility that more money might be available for businesses to borrow.

Can you please tell us the OA.

Thanks.
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30 Mar 2008, 09:31
I'll go for C
Manager
Joined: 14 Mar 2008
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30 Mar 2008, 17:33
OA is (A)

I chose C as well ...
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28 Jul 2011, 21:33
1
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I was contemplating between C and D. Never thought the answer will be A. Any perspectives about D will be highly appreciated.
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28 Jul 2011, 21:41
sgupta0827 wrote:
I was contemplating between C and D. Never thought the answer will be A. Any perspectives about D will be highly appreciated.

Business who are not doing well wont be given loans... i would think this as irrelevant statement. we dont know what percentage of such business are there...

And i think it was same thing with C... when it says 'some'.. again we dont know the #. if some refrain, many still invest
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Re: Business are suffering because of a lack of money available [#permalink]

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22 Nov 2011, 03:27
zhenmaster wrote:
Business are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpapyers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers (i.e. businesses).

Get cash into account (\$\$\$\$\$\$\$) then get get businesses to borrow (\$\$\$\$\$\$\$)

Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?

A. When levels of personal retirement savings increase, consumer borrowing always increase correspondingly - if consumers borrow the cash there will be no cash available for businesses to borrow
B. The increased tax revenue the government would receive as a result of business expansino would not offset the loss in revenue from personal income taxes during the first year of the plan.
C. Even with tax incentives, some people will choose not to increase their levels of retirement savings.Some = how many? Some may very well equal 2 people out of 4 million people
D. Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules. Shell game. We are focusing on how successful will the process be of getting cash into accounts then getting businesses to borrow it. We are not concerned with terms of lending or the financial status of the business now or in the future. Also, correct me if i am wrong the loan does not necessarily has to come from banks (it can come from credit unions too). So this option is given as shell to confuse the test taker.
E. The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings.
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Re: Business are suffering because of a lack of money available [#permalink]

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22 Nov 2011, 07:15
+1 A
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Re: Business are suffering because of a lack of money available [#permalink]

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23 Nov 2011, 11:17
+1 A
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Re: Business are suffering because of a lack of money available [#permalink]

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23 Nov 2011, 12:15
IMO it is C.

Govt is under assumption that giving tax incentives will drive taxpayers to put more into Savings account which will inturn increase the money for loan construction.

C is the only one option that weakens this assumption.
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Re: Business are suffering because of a lack of money available [#permalink]

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23 Nov 2011, 15:23
i will go for C
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Re: Business are suffering because of a lack of money available [#permalink]

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23 Nov 2011, 22:40
Between C and A, A is better...

C uses 'some', meaning that many of them will deposit... hence supports the conclusion.

A definitely highlights a flaw.

(originally went for C)
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Re: Business are suffering because of a lack of money available [#permalink]

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23 Nov 2011, 22:46
2
KUDOS
+1 for A.

A very good practice question.

Premise 1 : Less money for business loans
Premise 2 : If more money is deposited in retirement account, more money is available to borrowers.

Conclusion: Govt plans to modify tax structure to induce more money in retirement accounts so that more money is avaialable for dev loans for businesses.

Choice A weakens the argument by saying that if more money is deposited in retirement accounts, consumer borrowing increases correspondingly. This means that more money would still not be available for dev loans to businesses.

Crick
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Re: Business are suffering because of a lack of money available [#permalink]

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01 Dec 2011, 22:21
confused btw a n c- went with c
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Re: Business are suffering because of a lack of money available [#permalink]

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02 Dec 2011, 20:46
A. When savings increase, the number of borrower also increases. So, It still lacks of money for the borrowers.
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Re: Business are suffering because of a lack of money available [#permalink]

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11 Dec 2011, 22:01
Its A
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Re: Business are suffering because of a lack of money available [#permalink]

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11 Dec 2011, 22:38
C is so attractive that i too fell in its trap
yes guys thanx 4 explaning why A is correct.....
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Re: Business are suffering because of a lack of money available   [#permalink] 11 Dec 2011, 22:38

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