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06 Feb 2020, 11:14
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varotkorn
Dear IanStewart,
I do agree with your recent response that the highlighted part is a claim because it is the similar to the conclusion from the last sentence of the stimulus.
==============================================
However, my confusion is quoted below
However, is this part a premise and cannot be challenged?
Why is the first sentence a claim that can be challenged?
The author is not talking about any regulatory standards at all in this sentence. He doesn't care why banks stopped lending. He just focuses on the fact that banks stopped lending.
So, this every sentence, except the 2nd, is claims?
I have been taught that when an answer choice in Assumption question is the same with the information in the stimulus (as is the case), it can't be the correct one
My approach to this question is:
The conclusion in the last sentence is in future time frame - an event that does not yet occur.
But the premise in the first sentence, which is taken as true, is in the past time frame - an event that already occurred.
While "banks stopped lending caused a recession" is true in the past, this isn't necessarily true in the future.
Do you have any comment on my reasoning?
Thank you!
IanStewart
It's not a premise that the new standards caused the banks to stop lending -- that's the claim of the argument
I do agree with your recent response that the highlighted part is a claim because it is the similar to the conclusion from the last sentence of the stimulus.
==============================================
However, my confusion is quoted below
varotkorn
IanStewart
Here we have "banks stopped lending caused a recession".
According to the quoted part above, you seem to focus on the first sentence : During the recent economic downturn, banks contributed to the decline by loaning less money.However, is this part a premise and cannot be challenged?
Why is the first sentence a claim that can be challenged?
The author is not talking about any regulatory standards at all in this sentence. He doesn't care why banks stopped lending. He just focuses on the fact that banks stopped lending.
So, this every sentence, except the 2nd, is claims?
I have been taught that when an answer choice in Assumption question is the same with the information in the stimulus (as is the case), it can't be the correct one
My approach to this question is:
The conclusion in the last sentence is in future time frame - an event that does not yet occur.
But the premise in the first sentence, which is taken as true, is in the past time frame - an event that already occurred.
While "banks stopped lending caused a recession" is true in the past, this isn't necessarily true in the future.
Do you have any comment on my reasoning?
Thank you!
Varot,
Nobody is saying that we can challenge a premise. Nobody is challenging the idea that "banks contributed to the decline by loaning less money"; IanStewart said
IanStewart
It's not a premise that the new standards caused the banks to stop lending -- that's the claim of the argument
You're pointing to a statement that is not what he called a claim. And it is quite possible that BOTH "banks contributed to the decline by loaning less money" AND "the new standards caused the banks to stop lending" -- or that "the downturn [caused] a significant decrease in the total amount of money on deposit with banks."
It seems like you take the premise as contradicting the negated answer A, or vice versa, but that's not true. "banks loan less --> downturn happens --> downturn causes banks to not have money," or perhaps "downturn happens --> banks loan less --> downturn gets worse as a result --> death spiral --> banks no haz $$" is a perfectly plausible story, and a story in which simply relaxing the standards would not particularly be expected to resolve the problem. That's the point. If A is false, then the conclusion that "reverting the standards will fix the problem" is highly dubious.
Also, you said that "when an answer choice in Assumption question is the same with the information in the stimulus (as is the case), it can't be the correct one"; true, but that is simply not occurring here. Answer A is absolutely not providing the same information as any premise in the fact pattern.
To reply to one of your other questions, when you negate B, you find that "The imposition of the tighter regulatory standards WAS a cause of the economic downturn." But then relaxing the standards WOULD be expected to help fix the downturn, right? So negating B improves the conclusion. We don't want that. It's 100% backwards. Negating the right answer in an assumption question should MURDER the conclusion, not help it. B is very wrong.
06 Feb 2020, 11:20
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gmatter0913
During the recent economic downturn, banks contributed to the decline by loaning less money. Prior to the downturn, regulatory standards for making bank loans were tightened. Clearly, therefore, banks will lend more money if those standards are relaxed.
The argument assumes that...
A. The downturn did not cause a significant decrease in the total amount of money on deposit with banks, which is the source of funds for banks to lend.
B. The imposition of the tighter regulatory standards was not a cause of the economic downturn.
C. The reason for tightening the regulatory standards was not arbitrary.
D. No economic downturn is accompanied by a significant decrease in the amount of money loaned out by banks to individual borrowers and to businesses.
E. No relaxation of standards for bank loans would compensate for the effects of the downturn
The argument assumes that...
A. The downturn did not cause a significant decrease in the total amount of money on deposit with banks, which is the source of funds for banks to lend.
B. The imposition of the tighter regulatory standards was not a cause of the economic downturn.
C. The reason for tightening the regulatory standards was not arbitrary.
D. No economic downturn is accompanied by a significant decrease in the amount of money loaned out by banks to individual borrowers and to businesses.
E. No relaxation of standards for bank loans would compensate for the effects of the downturn
I received a PM requesting that I comment.
Plan:
Relax the regulatory standards for making bank loans.
Goal:
Banks will lend more money.
Given the three preceding events -- the tightening of regulatory standards, a downturn in the economy, and the decrease in bank lending -- the plan above assumes that the event in red is responsible for the event in blue.
Apply the NEGATION TEST.
When the correct answer is negated, the plan will be invalidated.
A, negated:
The downturn caused a significant decrease in the total amount of money on deposit with banks, which is the source of funds for banks to lend
Here, the DOWNTURN is responsible for the decrease in bank lending, invalidating the conclusion that relaxing bank standards will lead to an increase in bank lending.
07 Feb 2020, 01:31
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VeritasKarishma
varotkorn
Dear IanStewart VeritasKarishma,
Q1. First off, I have one question on the tense used in the last sentence.
Clearly, therefore, banks will lend more money if those standards are relaxed.
Shouldn't the above sentence be Clearly, therefore, banks WOULD HAVE lenT more money if those standards HAD BEEN relaxed.? It should refer to the past event, not the future event as suggested in the question stem.
Q2. Is the negated choice B. an assumption of the argument?
B. The imposition of the tighter regulatory standards was NOT a cause of the economic downturn.
Negated B. The imposition of the tighter regulatory standards was a cause of the economic downturn.
I think the author needs to assume the opposite of choice B. to arrive at the conclusion in the last sentence.
banks contributed to the decline by loaning less money + The imposition of the tighter regulatory standards was a cause of the economic downturn -> banks will lend more money if those standards are relaxed
Thank you!
Q1. First off, I have one question on the tense used in the last sentence.
Clearly, therefore, banks will lend more money if those standards are relaxed.
Shouldn't the above sentence be Clearly, therefore, banks WOULD HAVE lenT more money if those standards HAD BEEN relaxed.? It should refer to the past event, not the future event as suggested in the question stem.
Q2. Is the negated choice B. an assumption of the argument?
B. The imposition of the tighter regulatory standards was NOT a cause of the economic downturn.
Negated B. The imposition of the tighter regulatory standards was a cause of the economic downturn.
I think the author needs to assume the opposite of choice B. to arrive at the conclusion in the last sentence.
banks contributed to the decline by loaning less money + The imposition of the tighter regulatory standards was a cause of the economic downturn -> banks will lend more money if those standards are relaxed
Thank you!
The argument is forward looking.
Regulatory standards for loans were tightened.
So during the recession, banks contributed to the decline by loaning less money.
Conclusion: If the standards are relaxed, the banks will loan more money (implying that it might help negate the effects of economic downturn)
We are looking for an assumption.
A. The downturn did not cause a significant decrease in the total amount of money on deposit with banks, which is the source of funds for banks to lend.
Correct. The conclusion is saying that if the standards are relaxed, the banks will loan more money. But do the banks have money to loan? The conclusion is assuming that they do. So the conclusion is assuming that the downturn did not cause significant decrease in the total amount of money on deposit with banks.
B. The imposition of the tighter regulatory standards was not a cause of the economic downturn.
Not an assumption. The argument says that the banks "contributed" to the decline. So the tighter standards was a contributing factor. In what way it contributed, we do not know. Hence it does not assume that the tighter standards was not a cause - whether it triggered the downturn along with some other factors and some additional factors worsened the downturn or some other factors triggered it and the standards worsened the downturn.
C. The reason for tightening the regulatory standards was not arbitrary.
Irrelevant.
D. No economic downturn is accompanied by a significant decrease in the amount of money loaned out by banks to individual borrowers and to businesses.
Let's negate it: Some downturns are accompanied by banks loaning less money.
Our conclusion can still hold. We don't know what happened in this particular downturn. Did the downturn cause banks to loan less money? We don't know. It is quite possible that the tighter standards caused banks to loan less money and once we relax the standards, the banks will loan out more.
E. No relaxation of standards for bank loans would compensate for the effects of the downturn
Not an assumption. If anything, the argument seems to imply that banks will lend more money and that might be helpful to the economy.
Answer (A)
Quote:
Dear Karishma,
I'm still a bit unsure of my understanding of the stimulus.
Here, the premise is about the past event DURING the decline, but the conclusion is about the future event AFTER the decline right?
I'm still a bit unsure of my understanding of the stimulus.
Here, the premise is about the past event DURING the decline, but the conclusion is about the future event AFTER the decline right?
Yes, as I mentioned above - the argument is forward looking.
It says "Clearly, therefore, banks will lend more money if those standards are relaxed."
It talks about the future - that the banks will lend more money if the standards are relaxed.
