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31 Jan 2020, 03:40
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B
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Difficulty:
45%
(medium)
Question Stats:
70% (02:21) correct
30%
(02:46)
wrong
based on 463
sessions
History
Date
Time
Result
Not Attempted Yet
Economist: Some policymakers believe that our country’s continued economic growth requires a higher level of personal savings than we currently have. A recent legislative proposal would allow individuals to set up savings accounts in which interest earned would be exempt from taxes until money is withdrawn from the account. Backers of this proposal claim that its implementation would increase the amount of money available for banks to loan at a relatively small cost to the government in lost tax revenues. Yet, when similar tax-incentive programs were tried in the past, virtually all of the money invested through them was diverted from other personal savings, and the overall level of personal savings was unchanged.
The passage as a whole provides the most support for which one of the following conclusions?
(A) Backers of the tax-incentive proposal undoubtedly have some motive other than their expressed aim of increasing the amount of money available for banks to loan.
(B) The proposed tax incentive is unlikely to attract enough additional money into personal savings accounts to make up for the attendant loss in tax revenues.
(C) A tax-incentive program that resulted in substantial loss of tax revenues would be likely to generate a large increase in personal savings.
(D) The economy will be in danger unless some alternative to increased personal savings can be found to stimulate growth.
(E) The government has no effective means of influencing the amount of money that people are willing to put into savings accounts.
The passage as a whole provides the most support for which one of the following conclusions?
(A) Backers of the tax-incentive proposal undoubtedly have some motive other than their expressed aim of increasing the amount of money available for banks to loan.
(B) The proposed tax incentive is unlikely to attract enough additional money into personal savings accounts to make up for the attendant loss in tax revenues.
(C) A tax-incentive program that resulted in substantial loss of tax revenues would be likely to generate a large increase in personal savings.
(D) The economy will be in danger unless some alternative to increased personal savings can be found to stimulate growth.
(E) The government has no effective means of influencing the amount of money that people are willing to put into savings accounts.
01 Mar 2021, 04:45
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Bunuel
Official Explanation
(A) No. This is mere speculation.
(B) Yes. Although the government’s loss of tax revenues should be small, the passage states “similar tax-incentive programs left the overall level of personal savings unchanged.”
(C) No. The passage implies that there would be little or no increase in personal savings. The example in the passage shows that a tax incentive program with a small loss in tax revenues did not increase personal savings, so a tax incentive program with a large loss in tax revenues would probably have a similar result.
(D) No. The claim that the economy will be endangered is too strong. Besides the passage does not argue against increasing personal savings, just that the given tax incentive program will fail to increase savings as similar ones have failed in the past.
(E) No. This claim is too broad. The passage does not imply that the government has no means of influencing the savings rate, just that certain tax incentive programs have no affect on savings rates.
General Discussion
31 Jan 2020, 13:52
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Bunuel
Correct answer: B
(A): Incorrect. (A) contains extreme language ("undoubtedly") and requires us to know what the motives behind the policy are. (A) can be countered by the argument that the proposal's backers are well-intentioned but ill-informed.
(B): Correct. Since the passage notes that similar policies have failed to increase the level of personal savings, there will be no change to personal savings. But necessarily there will be a cost to the government (as people shift their personal savings), making the plan cost the government tax revenues.
(C): Incorrect. The argument states that similar programs have not increased personal savings, even at a (presumed) loss to government tax revenues. This does not allow us to conclude that greater tax losses would result in personal savings growth.
(D): Incorrect. Out of scope; we know nothing about the state of this economy.
(E): Incorrect. Extreme language ("no effective means"). We do not know what other tools the government has at its disposal; we have only considered one.
