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Business are suffering because of a lack of money available for develo

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

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New post 29 Mar 2017, 01:10
HI , expert
please explain option E i got stuck in option A & E please, what i have understood about option E that if all taxpayer get the same flat saving incentive then it is most likely that most taxpayer don't deposit money in retirement savings ac as whether they deposit more or less they would get same tax savings, is not it ? please clarify
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Re: Business are suffering because of a lack of money available for develo  [#permalink]

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New post 06 Apr 2017, 20:13
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please explain option E i got stuck in option A & E please, what i have understood about option E that if all taxpayer get the same flat saving incentive then it is most likely that most taxpayer don't deposit money in retirement savings ac as whether they deposit more or less they would get same tax savings, is not it ? please clarify


Hi nks2611, good question! You stated, "whether they deposit more or less they would get same tax savings"; however, notice the wording in choice E...

Quote:
(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.


This does not say that taxpayers will get the same tax savings regardless of how much they deposit in retirement savings accounts; rather, it says that taxpayers will, regardless of their incomes, get "the same tax savings for a given increase in their retirement savings." Therefore, according to choice E, if two taxpayers have different incomes but make identical increases in their retirement savings, then both would get the same tax savings. This does not mean, as I believe you understood, that two taxpayers will get the same tax savings even if the amount by which one increases his/her retirement savings is much greater than that of the other taxpayer. Thus, even if choice E is true, a taxpayer could save more by putting more money into retirement savings accounts.
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Re: Business are suffering because of a lack of money available for develo  [#permalink]

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New post 07 Aug 2017, 08:37
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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 taxpayers 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 increases correspondingly

(B) The increased tax revenue the government would receive as a result of business expansion 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.


PREMISE: Businesses suffering due to lack development loans
PREMISE: Government's proposed changes will induce taxpayers to put more money into savings accounts
CONCLUSION: This will help businesses
UNWRITTEN CONCLUSION: There will be more money available for BUSINESSES to borrow

As we examine each answer choice, we should ask "Does this weaken the conclusion that there were be more money available for BUSINESSES to borrow?"

(A) When levels of personal retirement savings increase, consumer borrowing always increase correspondingly
Does this weaken the conclusion that there were be more money available for BUSINESSES to borrow?
YES! It says that consumer borrowing will DEFINITELY increase. So, there may NOT be more money available for BUSINESSES to borrow

(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan.
Does this weaken the conclusion that there were be more money available for BUSINESSES to borrow?
NO. ELIMINATE

(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
Does this weaken the conclusion that there were be more money available for BUSINESSES to borrow?
MAYBE
The key word here is SOME. On the GMAT, "some" means 1 or more.
So, if "some" means one, then we're basically saying that everyone (except for one person) will put more money into retirement savings accounts. Does this weaken the conclusion? No.
Alternatively, if "some" means 99% of the population, then we're saying that almost no one will put more money into retirement savings accounts. Does this weaken the conclusion? Yes.

(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules.
Does this weaken the conclusion that there were be more money available for BUSINESSES to borrow?
NO. ELIMINATE

(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.
Does this weaken the conclusion that there were be more money available for BUSINESSES to borrow?
NO. ELIMINATE

So, we're down to A or C. They're both decent answers.
I'd go with A, because it uses stronger language (consumer borrowing always increases).

Cheers,
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Re: Business are suffering because of a lack of money available for develo  [#permalink]

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New post 21 Dec 2017, 12:27
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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 taxpayers 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 increases correspondingly. -Correct. If the borrowings of people will also increase, then the money available to business will also be less.

(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan. -business expansion is out of scope

(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings. -That means most people will increase their savings, thus strengthening the argument

(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules. -If bank's won't lend the money then this tax increment is out of question. Out of scope of argument

(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. -out of scope
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Re: Business are suffering because of a lack of money available for develo  [#permalink]

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New post 22 Dec 2017, 09:01
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 taxpayers 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 increases correspondingly. - If, by inducing individual tax payers to put a larger portion of their incomes into retirement savings accounts causes consumer borrowing to increase correspondingly, then net change is 0. Hence the plan becomes ineffective.

(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan. - Yes. It maybe true that increased tax revenue the government would receive would not offset the loss in revenue from personal income taxes, but this will increase the money available for development loans for businesses.

(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings. - Who cares about those people, who will choose not to increase their levels of retirement savings. If the remaining people choose to increase their level of retirement savings, thats more money for development loans

(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules. - Does not answer the question about whether the government's plan is effective

(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. - If this is true, this could strengthen the argument.

Hence A :shocked weakens the government's plan
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Re: Business are suffering because of a lack of money available for develo  [#permalink]

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New post 25 Dec 2018, 11:19
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 taxpayers 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.

Simplified Argument: Businesses are unable to get loans. So the government will come out with a tax scheme that encourages taxpayers to put a larger sum of money into retirement accounts. That way more money will be available for borrowers.

Pre thinking: In what scenario will more money not be available to businesses?

Weakener 1: What if people change their behavior when they come to know about this scheme? i.e they start withdrawing from other accounts to increase the money in these retirement accounts? That way still no net increase in available money would be there.

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 increases correspondingly.
In line with the pre thinking. If people also borrow more money, overall there is no increase in money available with banks to provide loans.

(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan.
Taxes received by the government have no impact on the argument concerning money available to businesses,

(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
If a minority of people don't change their behavior it's not an issue. The larger segment could still act as desired by the government.

(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules. Okay. So what? We are talking about one segment of businesses: those who can't meet their loans. The statement has no impact on the argument that deals with money available to be lent to businesses

(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. Okay this means the savings are independent of the income. So what? This doesn't weaken the argument. We could still have a surplus to distribute to the businesses.

By far, choice A is the best.
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Re: Business are suffering because of a lack of money available for develo  [#permalink]

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New post 07 Jun 2019, 18:25
(A) can be derived from thinking about the argument this way:

The governement assumes that banks will redistribute the additional money they receive through business development loans, but the validity of this assumption can be challenged when we think about other potential methods by which the bank can redistribute the additional funds they receive.

Enter answer choice (A)

(A) states that consumers will borrow a correspondingly larger amount of money if they increase their personal retirement savings - hence another method by which the banks will distribute the additional funds they receive.
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Business are suffering because of a lack of money available for develo  [#permalink]

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New post 22 Jun 2019, 00:37
WEAKEN
CONCLUSION : govt plan will result in more money available for development lones
GOAL: Govt plan result in less money available for development loans

(CORRECT)as money available after govt plan will go in customer borrowing so less money will be available for development loans so this is the answer
(NARROW)—talks only about 1st year of plan
(NARROW)—talks about some people
(NARROW)– only talk about some buisneeses who cannot repay
(IRRELEVANT)—we are not concerned about savings
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Re: Business are suffering because of a lack of money available for develo  [#permalink]

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New post 29 Jul 2019, 04:41
To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpayers 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.

Do we have to take the bold part as fact?

I am confused why a retirement account would have an effect on business loan structure.
I think I assumed that people purchased stock or funds in there retirement account, so I was looking for an answer such as that.

Also, I rejected A because I thought it said commercial loan instead of consumer loan. HUGE difference in this argument.
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Re: Business are suffering because of a lack of money available for develo  [#permalink]

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New post 10 Aug 2019, 08:38
gcantre3 wrote:
To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpayers 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.

Do we have to take the bold part as fact?

I am confused why a retirement account would have an effect on business loan structure.

I think I assumed that people purchased stock or funds in there retirement account, so I was looking for an answer such as that.

I agree that it is hard to see how increased retirement savings has an effect on business loans. However, even if the logical connection between the ideas in the passage is unclear, you can still get a good understanding of the structure of the argument before you move on to the answer choices. For a full breakdown of the argument and each answer choice, check out this post, but let's revisit some of the key points, starting with the logical structure:

The author

  • Introduces a problem: "Business are suffering because of a lack of money available for development loans."
  • Proposes a solution: "modify the income-tax structure in order to induce individual taxpayers to put a larger portion of their incomes into retirement savings accounts,"
  • Explains the reasoning behind this solution: "as more money is deposited in such accounts, more money becomes available to borrowers."

Overall, the argument is that the government should encourage higher retirement savings in order to increase the money available to businesses for development loans. The exact mechanic of HOW retirement savings somehow free up funds for business loans is not important -- we just know that, according to the author, as more money is deposited in retirement accounts, more money becomes available to borrowers.

To answer the question, we need to "cast the most serious doubt" that this plan will work as intended.

gcantre3 wrote:
Also, I rejected A because I thought it said commercial loan instead of consumer loan. HUGE difference in this argument.

You're exactly right that the difference between business and personal loans is hugely important to understanding this answer choice! Let's take another look:

Quote:
(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.

The passage tells us that increased retirement savings lead to increased money available to "borrowers."

The author uses this information to conclude that increased retirement savings will lead to increased money available for business development loans -- in other words, a specific TYPE of borrower.

(A) says that, actually, CONSUMER borrowing increases as retirement savings increase. So if a pool of extra money is created by increased retirement savings, it will NOT be available for business development loans. Instead, it will be used for consumer loans.

Therefore, the plan to encourage increased retirement savings will NOT effectively increase the amount of money available for business development loans. (A) casts serious doubt on the effectiveness of the author's plan, so it is the correct answer.

I hope that helps!
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Re: Business are suffering because of a lack of money available for develo  [#permalink]

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New post 26 Sep 2019, 00:24
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 taxpayers 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 increases correspondingly.

(B) The increased tax revenue the government would receive as a result of business expansion 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.


Verbal Question of The Day: Day 184: Critical Reasoning


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Conclusion says that more money will be available for distribution to the business owners.

Let's try to break the conclusion. What if :

a) the money so collected in retirements saving cannot be lended to businesses because they are too risky
b) the income itself has reduced and hence the savings will reduce

In essence, the money so made available is not expected to more than previously available, cannot be disbursed or be used in other applications.

Option A: Fits well. Contender
Option B: Irrleevant
Option C: Some may choose. But even in that case overall money will be more. So rejected
Option D: Fine. But money will still be available. Conclusion is about availability not the final lending activity. So, rejected
Option E: Fine. No issues. Doesn't say that the income will reduce. Rejected.

We are left with A. Correct answer.
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Re: Business are suffering because of a lack of money available for develo   [#permalink] 26 Sep 2019, 00:24

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