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# Businesses are suffering because of a lack of money

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14 Sep 2013, 09:34
sagarsabnis wrote:
Businesses 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.
(8) 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.
(e) 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.

Please some one explain this...as i am not convinced with the explanation from OG

A it is....

But E too got a effect....Since the tax benefit is same for everyone regardless of their income...It will only encourage people who have less salary than to people who are in the highest slab...

Because they might think that what is the use to put the money in this plan since we are not getting any extra benefit...

But we dont have to choose the correct answer, we need to choose the best out of it..
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05 Jan 2014, 17:23
garimavyas wrote:
C states 'Even with tax incentives, some people will choose not to increase their levels of retirement savings.'

but that also means some people will choose to increase their levels of retirement savings, hence funds available for borrowing will still increase. and that increase amount will be available for businesses to borrow.

so C doesn't weaken the conclusion .

A states that number of borrowers will increase , this may result in even lesser funds for businesses to borrow than were previously available.

hence A seriously weakens the conclusion
Nice explanation. I understand that A is correct. I have another question for you all.. Will this modified version of B act as a weakener for this question?
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.
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05 Jan 2014, 17:55
sagarsabnis wrote:
Businesses 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.
(8) 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.
(e) 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.

Please some one explain this...as i am not convinced with the explanation from OG

The negated conclusion is: More money is NOT available to the borrowers

Choice A offers the best explanation for this because it says that now there are more borrowers and so more money would actually not be available to the borrowers.
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23 Aug 2014, 20:04
Businesses 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.

Conclusion: More money becomes available to borrowers.
Assumption: The money is used by businesses only.

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.
Yes. suppose bank has 1000 bucks in the fund. It is planning to give to 500 to businesses. It possible that many normal people applied for loans and eaten into the share of businesses.

(8) 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.
We are not even bother about losses during the first year of plan. out of scope
(e) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
This is the most tricky and misleading answer to the question. Be extra careful with some. Inorder for a plan to work it is not mandatory for everyone to agree. There will always be some outliers. As long as majority agree the plans get along. (Welcome to democracy )
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are
insufficient to meet their loan repayment schedules.
Some people reason this way. There is money with business but businesses are not good enough to get that money. The conclusion is about more money will be available or not, but not about how banks grant money. These is play of words. One can write many such answer choices such as business fritter away money after taking loans. The scope is conclusion money is available or not

(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.
Sorry i'm not looking into tax slabs here. Out of scope.
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06 Sep 2014, 13:06
We have here 2 points:
1) Money amount in the pot increases
2) This increased money amount reaches the right group of borrowers

--> We have 1) Money amount in the pot increases BUT we miss here 2) as consumer borrowing increases CORRESPONDINGLY so it +/- 0 for business borrowers, the don't get more money --> This argument most weakens the intended plan
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24 Sep 2014, 08:56
Fact1: Businesses are suffering because of a lack of money available for development loans.
Fact 2: 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
Conclusion: Because as more money is deposited in such accounts, more money becomes available to borrowers.

If we can prove that even if govt plan implemented successfully, the no of borrowers increase or intended saving money not increase then it weakens the conclusion.
Option A does it.

Option C is wrong that even if some people chose not to save, still other people will be saving money
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28 Oct 2014, 05:46
Whats wrong with D?
If more money is put into the retirement savings, the effective money to be available for use by the business will be less. He would then reach bank for loan, and the bank denies his loan sanction because he can't repay the loan with his effective monthly earning. Thus no borrowing even when saving! :/

Any explanations?
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26 Nov 2014, 20:40
Good question. +1. Let me attempt a good explanation now!

I've made some key words in each option in bold and have entered my comments inline in blue as to why each wrong answer is wrong and why the correct one is correct.
F2: Govt thinks --> more retirement savings causes more money available for borrowers (just borrowers and not only business borrowers)
C: If more money is available to lend, more money will be available for development loans for businesses (which are suffering)

NOTE:
a) Whenever we have a X will cause Y weakener, in 99.99% of the cases, we just have to prove that Y won't happen
b) Whenever we have a X causes/may cause Y weakener, in 99.99% of the cases, we just have to prove that either Y caused X or that Z caused Y

We have case (b) here. We just have to prove that X will not cause Y (more money will be available for businesses which are suffering for development)

Now let's skim!

sagarsabnis wrote:
Businesses 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. This looks like a match to our pre phase. X will not cause Y because it causes Z. HOLD

(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.Nothing to do with our pre phrase. OUT

(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings. Only some people won't. Still if majority invest that might help the Government. This probably strengthens the argument. OUT

(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules. Increased savings leads to more money available for lending. But that doesn't mean that the bank will lend money just for the sake of lending. There is no incentive for the bank to lend for a poor business too. Possible trap answer. We have a clear A so far. Let's HOLD to it IF we find a flaw in A

(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 I am interested in money available for lending and not savings. SCOPE SHIFT. OUT

Please some one explain this...as i am not convinced with the explanation from OG

So now between A & D. A fits my pre phrase amazingly well and has no flaws in my eyes whereas D does. So A it is!
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26 Nov 2014, 23:10
(A) When levels of personal retirement savings increase, consumer borrowing always increases
correspondingly.
If people borrow more then there might not be anymore money to give out for 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.
The revenue is irrelevant folks investing more into their personal retirement savings.

(e) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
Even with some the businesses can still achieve their goal.

(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are
insufficient to meet their loan repayment schedules.
They don't have to loan more money. They just need to have the funds to back up the loans they do give out.

(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 can still add more funds to the loans.
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17 Mar 2015, 21:42
Explanation for choice A

Type: weaken

Conclusion: increase personal retirement taxes => give more money available for loan.

Assumption: increase retirement taxes cause more money available

Break assumption: increase retirement taxes do not cause redundance in loans or do cause money available for loan reduced. Hence choice A is the most logical option.
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23 Mar 2015, 18:59
The logic of the argument:
+ Fact: Lack of money available for development loans --> Businesses are suffering.
+ Goverment plan: Modify the tax income structure --> Increase retirement savings --> More money available for loans.
The effectiveness of the plan depends on the assumption that more retirement savings mean more money available for loans.
The answer should weaken the assumption.
A - It implies that even more money is put on retirement saving accounts, this amount of money will be shared for consumer borrowings and there is no guarantee that money left for businesses loans will increase.
B - No impact on the conclusion.
C - The conclusion deals w the majority, not w some.
D - The matter in the argument is the lack of money to lend general businesses, not the problematic businesses.
E - No impact.
so, A is CORRECT.
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16 Jul 2015, 02:29
ykaiim wrote:
Even I marked C but I doubt the OA in OG. The last line of argument says that -

because as more money is deposited in such accounts, more money becomes available to borrowers.

While A says that -
(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.

This is ambiguous. I think to make this a correct argument, the last line of the passage should have been -
because as more money is deposited in such accounts, more money becomes available to bankers/lenders.

You were on the right track with this thinking. With more deposits, more money is available for borrowers.
The money increases uniformly for all borrowers - businesses and consumers.

We want to find a doubt regarding the plans effectiveness to increase the amount of money available for developmental loans for businesses.

A) says, with higher savings, consumer borrowings increase.

Hence:

1) Increase in savings = more money for borrowers
2) More money = increased consumer borrowing

Therefore, consumer borrowing cuts into the share of developmental loans for businesses, and therefore, the government's plan would fail.
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20 Jul 2015, 00:55
went with the wrong answer i chose c too, went through all the explanations given, and i still feel c is correct as nowhere is it mentioned the preference of lenders. do they prefer giving money to personal borrowers or commercial borrowers then how can we state that personal borrowing will consume major chunks of money deposited.
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30 Sep 2015, 10:26
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Quote:
Hi, there. I'm happy to help with this.

The argument:
Businesses 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.

In a nutshell --- if we tweak the tax system to encourage folks to put more into their retirement accounts, then presto, more money for loans will be available to business.

Prompt:
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?

So, which answer effectively says -- make those changes to the tax code, and there won't be as much money for loans available to business?

(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.
OK, so when people put more into their retirement, they wind up borrowing more. That would mean, private citizens en masse would be competing with business for that loan money --- that would mean less money for loans available to business. A possible right answer.

(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.
Making this change to the tax code could wind up hurting the government --- interesting, but not relevant to the argument. The argument is strictly about: will business have more money available for loans? What happens to the government is irrelevant to this argument. (B) is out.

(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
This argument above is a macroeconomics argument. It's about changes in the entire tax-system, the entire banking system, etc. Of course, not every private citizen will follow the tax incentive. Tax incentives are given with the idea that only a certain percentage of the population will respond to them. So, some private citizens won't respond to the tax incentive. So what? That's 100% predictable, and not relevant to the big macroeconomic argument at hand. (C) is out.

(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules.
Well, anyone -- a household or a business --- that fails to meet loan payments is not going to be wildly successful getting more loans. That's pretty obvious. There's absolutely nothing in the original argument suggesting that the businesses discussed are so strapped for money that they all are defaulting on their loans. The business are "struggling" insofar as they can't take out loans to fund R&D, which would grow already thriving businesses. My business is making money already, and I want to to R&D to grow it, but there's no money for loans so I can pursue that R&D --- that's the problem we are addressing, according to the original argument. The problem of some business defaulting on their loans --- that's something separate, not relevant to this argument. (D) is out.

(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.
Again, this is a macroeconomic argument. What matters it the total revenue taken in by the government. Let's say, because of this tax code change, retirement accounts get an additional $1 billion, and that new money is available for loans to business. That$1 billion could have come from everybody in the whole socioeconomic spectrum making an equal contribution, or it could have come from rich people putting in much much more than middle class people. From the business standpoint, once they have that $1 billion available for loans, they don't give a flying figtree where it came from. From the business point of view, it's completely irrelevant how the government goes about raising that money; the specifics of allocation by various socioeconomic classes doesn't matter at all. (E) is out. Thus, answer (A) is the only one that poses a direct attack on the argument, so that's the answer. Does that make sense? Here's another free CR practice question of a similar type. http://gmat.magoosh.com/questions/1257 The question at that link should be followed by a free video with a complete explanation of the solution, once you submit you answer. Let me know if you have any other questions. @mikemcgarry _________________ EMPOWERgmat Instructor Joined: 23 Feb 2015 Posts: 175 Followers: 159 Kudos [?]: 494 [2] , given: 51 Businesses are suffering because of a lack of money [#permalink] ### Show Tags 28 Dec 2015, 16:03 2 This post received KUDOS Expert's post 2 This post was BOOKMARKED Businesses 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. Type: Weaken Boil It Down: Tax change -> More deposits -> More$ for DEVELOPMENT loans
Missing Information: The plan will work.
Goal: Our goal is to “raise the most serious doubt regarding the effectiveness of the government's plan”. That means we need to select an option that points to a reality in which the government’s goal of facilitating greater capital available for business development loans won’t be achieved. We need to find an option that shows that despite the government's plan, there wouldn’t be an increase in funds available for business development loans specifically.

Yes. This option exposes the truth that when retirement savings increase, CONSUMER borrowing always increases correspondingly. In other words, this option would radically wipe out the hope that increased retirement deposits will boost funds available for DEVELOPMENT borrowing. The capital is likely to get absorbed by consumers instead. Notice that this argument doesn’t entirely destroy the plan, but it absolutely raises a serious doubt regarding the effectiveness of the government’s plan to boost funds available for DEVELOPMENT loans.

Also notice the nasty shift from CONSUMER borrowing to BUSINESS borrowing. The prompt says: "Businesses are suffering because of a lack of money available for development loans." This argument is bluntly stating that the objective is to promote the lending capacity for businesses. So now, according to A, if that new lending capacity spurred on by a boost in savings among individual taxpayers is getting scooped up by consumers (individuals) instead, is this new lending capacity as likely to make it to businesses? No. That's why A weakens the likelihood that the plan will work. This option turns out to be a stunningly awesome demonstration of the degree of precision and engagement we need when we read.

The health of the federal budget is violently Out of Focus to what this question asks us to do. This plan could result in a dramatic cut in revenue for the government, but the government's goal of boosting loans available for business development could still work.

No impact. Nobody is making the claim that EVERYONE will boost retirement savings as a result of the government’s plan, so whether SOME people don’t increase retirement savings is of no consequence to an evaluation of the government’s plan. This option provides no significant information to show that the government’s plan is not likely to succeed.

Trash this option. We have no way to tell how relevant this option is to the government’s plan. If banks won’t lend to businesses that are unlikely to pay the loans on time, the government’s plan to boost lending to businesses in general could still succeed because, for all we know, a substantial share of businesses could still qualify. We just don’t know to what extent this loan condition impacts the lending environment. For this option to be even remotely in play, the test-taker would have to make the unwarranted leap that a substantial volume of businesses can’t meet the loan payment schedules. We can’t make any such leap.

This option introduces a factor that has no clear impact on the likelihood that the government’s plan will work. This option could just as easily help reaffirm the likelihood that the government’s plan would work if it appears a general increase in retirement funds were available. In that interpretation of E, it actually becomes a 180 option.

Bigger GMAT Perspective:
Why is this question statistically so hard? A brutally sneaky shift in focus from CONSUMER lending to BUSINESS lending. What can be done to be able see the magnitude of option A? The most basic GMAT Verbal tenet of all: extremely engaged and careful reading. That's something that takes more discipline (especially when a timer is running, and the adrenaline is flowing) than most people realize. GMAT assassins train to be able to read at optimal 200 WPM pace. It's staggering how much easier the GMAT feels when it's read at optimal speed, and with the right set of engaged reading actions. Test-takers are able to reduce time wasted re-reading, and trim time evaluating the options.
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30 Dec 2015, 12:59
Fight is between A and C

A wins as if available money increases so do the borrowers , which again leads us to a situation of insufficient funds

C talks about some people not all, that's the catch
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11 Jan 2016, 09:16
ykaiim wrote:
Even I marked C but I doubt the OA in OG. The last line of argument says that -

because as more money is deposited in such accounts, more money becomes available to borrowers.

While A says that -
(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.

This is ambiguous. I think to make this a correct argument, the last line of the passage should have been -
because as more money is deposited in such accounts, more money becomes available to bankers/lenders.

when consumer borrowing increase, more money may not left for business borrowing.
Does this make sense?
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11 Jan 2016, 15:07
robu wrote:
ykaiim wrote:
Even I marked C but I doubt the OA in OG. The last line of argument says that -

because as more money is deposited in such accounts, more money becomes available to borrowers.

While A says that -
(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.

This is ambiguous. I think to make this a correct argument, the last line of the passage should have been -
because as more money is deposited in such accounts, more money becomes available to bankers/lenders.

when consumer borrowing increase, more money may not left for business borrowing.
Does this make sense?

Following up on what robu said, the term "consumer" refers to individuals rather businesses. The prompt says: "Businesses are suffering because of a lack of money available for development loans." This argument is bluntly stating that the objective is to promote the lending capacity for businesses.

So now, according to A, if that new lending capacity spurred on by a boost in savings among individual taxpayers is getting scooped up by consumers (individuals) instead, is this new lending capacity as likely to make it to businesses? No. That's why A weakens the likelihood that the plan will work.
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09 Mar 2016, 02:02
Correct choice A

Consumer borrowing is different from Business borrowing. So if consumer also increases then less money will be available for Business borrowing. Clearly a Weaken.

Crossing out choice C as it tells about "Some" and Not all. So if "some people will choose not to increase their levels of retirement savings", then also there will be many people ,who will increase there retirement savings and plan could work out.
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08 Jun 2016, 21:06
While solving a CR question, it is very easy to forget the main point as to why we are solving this particular question.
Therefore it is always good to read the question stem first and then the passage.

Here we need to weaken the conclusion that more money would be available for the business after the modification of tax structure.

Only Option A does that by saying that the individuals will also start borrowing more, hence no money will be left for the businesses.

Option B is irrelevant

Option C: even if some do not increase the savings, some others will. Hence this does not weaken our conclusion

Option D: This would have been the case always. Obviously bankers would put a criteria before lending out. This criteria would not be affected by the modification of tax structure.

Option E: This again does not talk about the availability of the loan for the businesses. Irrelevant

Correct Option: A
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Re: Businesses are suffering because of a lack of money   [#permalink] 08 Jun 2016, 21:06

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