Bunuel wrote:
In a July 2011 survey of 53 prominent American economists, 65% said that lack of demand was the main reason why employers were not hiring new employees as compared to 27% who said that high rate of corporate taxation was the main reason. Therefore, higher corporate taxes didn’t likely lead to lower employment rates.
Which of the following statements must be true for the above argument to hold?
A. The lack of demand is not due to higher prices charged by corporates for their products in order to account for the higher tax rate.
B. A higher corporate tax rate does not necessarily lead corporates to adopt low cost strategies.
C. The opinions of all the 53 economists surveyed are equally credible.
D. Most of the claims made by the economists surveyed have been proved to be true in the past.
E. High corporate taxes do not aid the growth of the new companies.
Note that it is an assumption question.
65% economists said that 'lack of demand' was the main reason.
27% said that 'high tax' was the main reason.
Conclusion: higher taxes didn’t likely lead to lower employment rates (lack of demand seems to be the reason)What are we assuming? That 'lack of demand' didn't happen because of higher taxes.
What if 'lack of demand' was created by higher taxes? Then higher taxes are the reason for lower employment rates.
higher taxes led to 'lack of demand' which led to 'lower employment rates'.
A. The lack of demand is not due to higher prices charged by corporates for their products in order to account for the higher tax rate.
Let's try to negate it:
The 'lack of demand' is due to higher prices charged by corporates for their products in order to account for the higher tax rate.
This says that actually higer taxes led to lack of demand which led to lower employment. Then we cannot say that higher taxes didn’t likely lead to lower employment. Our conclusion breaks.
Hence this is the answer.
B. A higher corporate tax rate does not necessarily lead corporates to adopt low cost strategies.
How 'low cost strategies' link to lack of demand and lower employment rate, we don't know. Irrelevant.
C. The opinions of all the 53 economists surveyed are equally credible.We don't need to assume that their opinions are equally credible. In fact, most likely the credibility of their opinions will vary a lot. But that is why we take comfort in numbers. We asked 53 economists, not 1 or 2. As a group, we assume that they have average credibility. Even if their credibility varies, our results are based on big numbers (65% vs 27%). We just need them to have expertise even if their expertise is not equal. Since they are economists, we know they all have some expertise.
D. Most of the claims made by the economists surveyed have been proved to be true in the past.No need to assume that most of their claims have been true in the past. We are evaluating this claim.
E. High corporate taxes do not aid the growth of the new companies.Even if high taxes were to aid the growth of new companies (counter intuitive but for argument's sake), it doesn't mean they are not responsible for lower employment rates. One phenomenon could impact another phenomenon in multiple ways with an overall negative effect.
Answer (A)
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29 Jan 2023, 03:30
39%
(02:05)
wrong 
