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# Household indebtedness, which some theorists regard as

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Director
Joined: 05 May 2004
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Household indebtedness, which some theorists regard as [#permalink]

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14 Aug 2004, 02:19
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Household indebtedness, which some theorists regard as causing recession, was high preceding the recent recession, but so was the value of assets owned by households. Admittedly, if most of the assets were owned by quite affluent households, and most of the debt was owed by low-income households, high household debt levels could have been the cause of the recession despite high asset values: low-income households might have decreased spending in order to pay off debts while the quite affluent ones might simply have failed to increase spending. But, in fact, quite affluent people must have owed most of the household debt, since money is not lent to those without assets. Therefore, the real cause must lie elsewhere.

11. Which one of the following, if true, casts the most doubt on the argument?

(A) Prior to the recent recession, middle-income households owed enough debt that they had begun to decrease spending.

(B) The total value of the economyâ€™s household debt is exceeded by the total value of assets held by households.

(C) Low-income households somewhat decreased their spending during the recent recession.

(D) During a recession the affluent usually borrow money only in order to purchase assets.

(E) Household debt is the category of debt least likely to affect the economy.

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Intern
Joined: 12 Mar 2004
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14 Aug 2004, 03:42
I feel C should be the answer....

since the question is : 11. Which one of the following, if true, casts the most doubt on the argument?

If C is true, then the author's argument "But, in fact, quite affluent people must have owed most of the household debt, since money is not lent to those without assets. Therefore, the real cause must lie elsewhere" becomes weak.

Its a good question...what the official answer.....

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Manager
Joined: 28 Jul 2004
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14 Aug 2004, 14:35
Very nice question. It has taken me almost 3 minutes to answer it.

My analysis as follows.

D and E are just restating the conclusion of the author. We need to identify a choice which provides information to prove that the author's conclusion is wrong.

Putting it short, the author feels that increase or decrease in spending doesnt have to do much with the recession.

Choice A and C provides some relation between these two.

A tells us about middle income which showed a similar graph in the recent recession. While C says that the Low income group has reduced spending.

I would prefer picking up C as it is concerned with the context, even though A gives us some similar information.

Thanks

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Senior Manager
Joined: 07 Oct 2003
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14 Aug 2004, 15:17
tough question, I'll go with A. C seems to be already contained in the text

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Senior Manager
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14 Aug 2004, 16:24
Tough question.. I'll choose C for similar reasons as above. If a had cited "low income" rather than "middle income", i would have chosen A.

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Director
Joined: 05 May 2004
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14 Aug 2004, 21:46
The OA is A
Tough Question indeed!
both A and C are contenders and I think lastochka's logic of eliminating C makes sense

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Manager
Joined: 02 Jul 2004
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16 Aug 2004, 08:21
went for A

C is no good because it says what was happening DURING the recession. The conclusion however is about WHAT CAUSED the recession

A reinstates the contention that it was household indebtedness that caused the recession

the question is trickily worded and looks really tough

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16 Aug 2004, 08:21
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