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In the country of Veltria, the past two years' broad

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New post 28 Feb 2013, 00:37
I also go to c but spend a lot of time , nearly 3 minutes.

the reason for time consumingness is

the answer choices are long and are time consuming.
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New post Updated on: 04 Aug 2013, 22:06
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Hi everybody, I have seen following question on many threads but what I want is to understand the later part of this question. The part which is in bold is difficult for me to understand. Can anybody put it in layman/simple English. Thank you.

In the country of Veltria, the past two years' broad economic recession has included a business downturn in the clothing trade, where sales are down by about 7 percent as compared to two years ago. Clothing wholesalers have found, however, that the proportion of credit extended to retailers that was paid off on time fell sharply in the first year of the recession but returned to its prerecession level in the second year.

Which of the following, if true, most helps to explain the change between the first and the second year of the recession in the proportion of credit not paid off on time?

(A) The total amount of credit extended to retailers by clothing wholesalers increased between the first year of the recession and the second year.
(B) Between the first and second years of the recession, clothing retailers in Veltria saw many of their costs, rent and utilities in particular, increase.
(C) Of the considerable number of clothing retailers in Veltria who were having financial difficulties before the start of the recession, virtually all were forced to go out of business during its first year.
(D) Clothing retailers in Veltria attempted to stimulate sales in the second year of the recession by discounting merchandise.
(E) Relatively recession-proof segments of the clothing trade, such as work clothes, did not suffer any decrease in sales during the first year of the recession.

Originally posted by ykakad on 04 Aug 2013, 21:40.
Last edited by Zarrolou on 04 Aug 2013, 22:06, edited 1 time in total.
Merging similar topics.
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New post 04 Aug 2013, 21:57
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Clothing wholesalers have found, however, that the proportion of credit extended to retailers that was paid off on timefell sharply in the first year of the recession but returned to its prerecession level in the second year.

let say there were 4 retailers
total revenue from all 4 let say = 100 (assume 25 from each)
now recession came now revenue dropped to 50 in first year ( assume 12.5 from each)===>so this is the proportion of credit which dropped from 25 to 12.5
now it says in second year proportion came back to normal i.e =25
now how is that possible.
let say 2 retailers close their shop so we have 2 retailer left and demand in recession is of 50 which can be equally divided between 2 i,e it will come to normal of 50...==>now this is what correct option (C) says.


(C) Of the considerable number of clothing retailers in Veltria who were having financial difficulties before the start of the recession, virtually all were forced to go out of business during its first year.

hope this helps
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New post 18 Sep 2014, 01:01
The explanation by KeepingUp is awesome.
Here is some more info.
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New post 18 Sep 2014, 11:57
In the country of Veltria, the past two years' broad economic recession has included a business downturn in the clothing trade, where sales are down by about 7 percent as compared to two years ago. Clothing wholesalers have found, however, that the proportion of credit extended to retailers that was paid off on time fell sharply in the first year of the recession but returned to its prerecession level in the second year.

ok, so in first year, a lot of companies went bankrupt, hence the proportion of credit that was paid off fell. As a result, only big/financially stable companies remained in the business. These company could pay in time so therefore in the second year, the PROPORTION was not that low as in first year.

that's how I got to the C, although I chose D first time.
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New post Updated on: 19 Feb 2015, 05:38
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(A) The total amount of credit extended to retailers by clothing wholesalers increased between the first year of the recession and the second year --> The amount of extended credit is errelevant, as the argument says the proportion Payment/Credit, the amount can change but the proportion can stay the same. (paid 100 / credit 1000 = 10%; paid 200 / credit 2000 = 10 %)
(B) Between the first and second years of the recession, clothing retailers in Veltria saw many of their costs, rent and utilities in particular, increase --> when the costs went up between 1 and 2nd years, companies can not have more money to pay for the credit - reverse: they have less money.
(C) Of the considerable number of clothing retailers in Veltria who were having financial difficulties before the start of the recession, virtually all were forced to go out of business during its first year --> CORRECT. Just eliminated the wrong answer choices to derive to ....(C). Update for (C). I have other opinion regarding WHY C is the right answer, many have stated here, ok, companies were kicked out , so that's why other companies have a better life now and can pay back the loan, because of the decreased competition --> In my opinion, if those companies were eliminated, it means that only healthy companies left there, wich can pay the credit back.
(D) Clothing retailers in Veltria attempted to stimulate sales in the second year of the recession by discounting merchandise --> OK, attempted, and what was the result of it ? Had the succeeded or not...?
(E) Relatively recession-proof segments of the clothing trade, such as work clothes, did not suffer any decrease in sales during the first year of the recession --> a) We need some information that 1st year had worse ecomic situation than 2nd --> this answer choice illustrates the reverse one. B) We don't know the share of work clothes in the whole clothes market...
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Originally posted by BrainLab on 19 Feb 2015, 03:55.
Last edited by BrainLab on 19 Feb 2015, 05:38, edited 1 time in total.
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New post 19 Feb 2015, 05:03
Many clothing retailers in Veltria were having financial difficulties before the start of the recession. So, this obviously resulted in the proportion of credit extended to retailers that was paid off on time, fall sharply in the first year of the recession.

However, according to C, such clothing retailers were forced to go out of business during its first year.

So, there is reason to believe that those clothing retailers who were left, were relatively better off. Hence, the proportion of credit extended to retailers that was paid off on time returned to its prerecession level in the second year.

So, C seems to explain this paradox.
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New post 18 Feb 2016, 07:54
It has to be option C. The correct answer must indicate why the proportion rises. This is possible only when those who cannot repay the credit leave the business.
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New post 06 Apr 2016, 17:23
I specifically crossed out C since it mentioned retailers who were "having financial difficulties before the start of the recession", which seems too narrow in scope. I was even thinking to myself "I will be so mad if it is C since it's such an attractive answer, but the answer choice loaded it with an obvious disqualifier"
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New post 03 May 2016, 09:14
When there is proportion or ratio in the stimulus attack the Proportion or the relationship.

Here, Repaid Debt/Total Debt is in question.

Only c addresses that is retailers went out of business the the denominator goes off, yes it still is unpaid debt .

This is the best explanation i came up with.
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New post 08 Feb 2017, 22:04
I chose D - thinking they stimulate the sale by way of discounting the marchandise. However, OA is c. One question - if the weaker section of retailers have gone out of business during the first year - how can it take credit repayment back to prerecession level? when the weaker section of retailers are going out of business, it reduces the number of retailers who are actually going to repay the credit compare to prerecession level?
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New post 09 Mar 2017, 11:46
In the country of Veltria, the past two years' broad economic recession has included a business downturn in the clothing trade, where sales are down by about 7 percent as compared to two years ago. Clothing wholesalers have found, however, that the proportion of credit extended to retailers that was paid off on time fell sharply in the first year of the recession but returned to its prerecession level in the second year.

Which of the following, if true, most helps to explain the change between the first and the second year of the recession in the proportion of credit not paid off on time?

(A) The total amount of credit extended to retailers by clothing wholesalers increased between the first year of the recession and the second year.
(B) Between the first and second years of the recession, clothing retailers in Veltria saw many of their costs, rent and utilities in particular, increase.
(C) Of the considerable number of clothing retailers in Veltria who were having financial difficulties before the start of the recession, virtually all were forced to go out of business during its first year.
(D) Clothing retailers in Veltria attempted to stimulate sales in the second year of the recession by discounting merchandise.
(E) Relatively recession-proof segments of the clothing trade, such as work clothes, did not suffer any decrease in sales during the first year of the recession.

*********************************************************************************************************************

=======================================================================
PreThinking:In Resolve the Paradox question the one needs to link the opposite premises by providing a fitting reason.
=======================================================================


A:Out of scope.
B:It will increase the paradox further.
C:Correct answer .Since most of the retailers were forced to go out of business the remaining were sufficinet to fulful the lowered demand and maintianed better business.
D:The attempt results are not provided so cannot be considered.
E:limited scope does not provide impact data.
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New post 13 Apr 2017, 23:44
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gurpreet07 wrote:
In the country of Veltria, the past two years' broad economic recession has included a business downturn in the clothing trade, where sales are down by about 7 percent as compared to two years ago. Clothing wholesalers have found, however, that the proportion of credit extended to retailers that was paid off on time fell sharply in the first year of the recession but returned to its prerecession level in the second year.

Which of the following, if true, most helps to explain the change between the first and the second year of the recession in the proportion of credit not paid off on time?

(A) The total amount of credit extended to retailers by clothing wholesalers increased between the first year of the recession and the second year.
(B) Between the first and second years of the recession, clothing retailers in Veltria saw many of their costs, rent and utilities in particular, increase.
(C) Of the considerable number of clothing retailers in Veltria who were having financial difficulties before the start of the recession, virtually all were forced to go out of business during its first year.
(D) Clothing retailers in Veltria attempted to stimulate sales in the second year of the recession by discounting merchandise.
(E) Relatively recession-proof segments of the clothing trade, such as work clothes, did not suffer any decrease in sales during the first year of the recession.


Situation

Two years of recession in Veltria included a downturn in the clothing trade where sales are down 7 percent from two years ago. Yet, in the second year of the recession, the proportion of credit extended from clothing wholesalers to retailers that was paid off on time has returned to its prerecession level, after having fallen sharply during the first year.

Reasoning

Which option would most help to explain the change between the first and second year in the proportion of credit paid off on time? The apparent discrepancy in the passage that needs explaining is between the downturn in the clothing trade over the last two years and the return to prerecession rates in the proportion of credit extended to clothing retailers that was paid on time. How can the proportion this past year be similar to what it would be in a normal year? After all, one would expect retailers to have a harder time paying off credit in a recession. And what changed in the past year to bring this about? If the first year of the recession drove out of business many of the retailers who were most apt to get behind in their payments to wholesalers, then that would explain how the rate at which credit was being paid on time could be as high in the second year of the recession as it was before the recession.

(A) The fact that the absolute amount of credit that was extended to retailers went up in the second year does not help to explain why the proportion that was paid on time also went up.
(B) If anything, this would suggest that more retailers would have trouble paying their credit to wholesalers on time.
(C) Correct. This is the option that most helps to explain the phenomenon.
(D) Just because retailers tried to stimulate sales does not mean that they succeeded, and the passage tells us that the downturn in sales in the clothing trade continued into the second year.
(E) This does not change the fact that there was a downturn in sales of clothing during the first year. Furthermore, the question is why the rate of unpaid credit dropped in the second year of the recession.

GMATNinja, Could you help to explain in a simplified language? It is too complicated to visualize.
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New post 22 Jul 2017, 15:00
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To me it was too easy so I tripled checked.
First: This is a Resolve the Paradox.

Second: The argument in very simple terms tells you that in the beginning of the economic recession the sales where higher than on the 2nd year of the recessing (by 7%). <-- SIDE A. OF THE PARADOX.
Then it follows to tell you that on the first year of the recession the paid off credit fell but on the second year it went back up. <-- SIDE B. OF THE PARADOX

In this type of problem we need to look for something that explains the 2 side (A and B) of the paradox.

I made a little drawing, because I am extremely visual, and saw that the paradox is mainly on the second year. The sales decreased but the payment of credit increased. Here is my reasoning:

(A) The total amount of credit extended to retailers by clothing wholesalers increased between the first year of the recession and the second year.
R: It talks about increase in extended credit to businesses from one year to another. Good for them! This is irrelevant!

(B) Between the first and second years of the recession, clothing retailers in Veltria saw many of their costs, rent and utilities in particular, increase.
R: It "could" explain why the credit was not paid off. Maybe they focused on priorities and decided to stop paying off the credit so they could pay the lighting and the actual place to sell the cloth... BUT then why did the sales fall? It doesn't explain the paradox.

(C) Of the considerable number of clothing retailers in Veltria who were having financial difficulties before the start of the recession, virtually all were forced to go out of business during its first year.
[b]R:[/b] Well if some stores went out of business that means that sales would fall because those stores wouldn't buy as much, but what about the increase in credit payoff? Actually, it would make sense too. "bad finance" stores are no longer "available" which means that more "good finance" stores remain. The "bad stores" are no longer affecting the percentage of paid off credit.

(D) Clothing retailers in Veltria attempted to stimulate sales in the second year of the recession by discounting merchandise.
R: Again, talks only about PART A. OF THE PARADOX, IF it even does THAT.

(E) Relatively recession-proof segments of the clothing trade, such as work clothes, did not suffer any decrease in sales during the first year of the recession.
R: SOOOOO OUT OF SCOPE. NO offense but who cares about the type of clothes (work)? How would that connect Para A and B of the paradox?
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New post 22 Sep 2017, 03:42
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Premise : the past two years' broad economic recession has included a business downturn in the clothing trade
Counter Premise : that the proportion of credit extended to retailers that was paid off on time fell sharply in the first year of the recession but returned to its prerecession level in the second year.

The argument tries to say that two years' recession resulted a downturn in the clothing trade. But, clothing wholesalers find that for first year the credit fell sharply because of recession and it came to normal in second year.

Which of the following, if true, most helps to explain the change between the first and the second year of the recession in the proportion of credit not paid off on time?

(A) The total amount of credit extended to retailers by clothing wholesalers increased between the first year of the recession and the second year. - We dont know if the increase in credit helps to explain the difference between the first and second year of recession
(B) Between the first and second years of the recession, clothing retailers in Veltria saw many of their costs, rent and utilities in particular, increase. - This would actually increase the recession in second year
(C) Of the considerable number of clothing retailers in Veltria who were having financial difficulties before the start of the recession, virtually all were forced to go out of business during its first year. - Great. Since due to recession, some retailers were forced to close, the credit not paid would be comparatively low in second year. This is what the question intends to ask.
(D) Clothing retailers in Veltria attempted to stimulate sales in the second year of the recession by discounting merchandise. - Even if they discount, will the money be enough to repay. So wrong
(E) Relatively recession-proof segments of the clothing trade, such as work clothes, did not suffer any decrease in sales during the first year of the recession. - No connection. Out

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New post 04 Oct 2017, 16:24
In the country of Veltria, the past two years' broad economic recession has included a business downturn in the clothing trade, where sales are down by about 7 percent as compared to two years ago. Clothing wholesalers have found, however, that the proportion of credit extended to retailers that was paid off on time fell sharply in the first year of the recession but returned to its prerecession level in the second year.

Which of the following, if true, most helps to explain the change between the first and the second year of the recession in the proportion of credit not paid off on time?


(A) The total amount of credit extended to retailers by clothing wholesalers increased between the first year of the recession and the second year.
- out of scope. Who cares about the absolute number? we're concerned with addressing the CHANGE.

(B) Between the first and second years of the recession, clothing retailers in Veltria saw many of their costs, rent and utilities in particular, increase.
- how do retailer costs have anything to do with the proportion of credit wholesalers extended to them?

(C) Of the considerable number of clothing retailers in Veltria who were having financial difficulties before the start of the recession, virtually all were forced to go out of business during its first year.
- correct as is. retailers couldn't pay off credit on time so they went out of business. this explains how the proportion of credit bounced back.

(D) Clothing retailers in Veltria attempted to stimulate sales in the second year of the recession by discounting merchandise.
- out of scope. how does this relate to paying back wholesalers?

(E) Relatively recession-proof segments of the clothing trade, such as work clothes, did not suffer any decrease in sales during the first year of the recession.
- out of scope. who cares about particular segments of the clothing trade?

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New post 27 Oct 2017, 00:28
Assume: there is 100 retailer in the market and 50 of them have credit extended who paid off on time, 50/100=1/2 is the ratio.
Option C, 40 are out of business, then (50-40)/(100-40)=1/6 , sharply fell in the first year. But how to explain about the second year?
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New post 13 Apr 2018, 05:47
gmat1112 wrote:
Can someone please explain why C is better than D?

C assumes that retailers will gain if competitors go out of business. Is this a valid assumption given the broad economic recession?

Also, C does not indicate the percentage of businessmen who had financial difficulties.

I am leaning more towards D, although it is not clear if the attempt made by retailers was fruitful.

Thanks!



i think the key word i the argument is PROPORTION
1ST year:50% credit was returned on time
2nd year:100% credit return on time.
after 1st year,say only those people got credit,whose previous credits are clear or people who are capable of paying the debt(lanisters ,are not they?)
so in that case % of credit return will increase even though sales is less.
option C describes such a scenario where people who could not sustain the recession were out of competition and credit is extended to lesser people.

option D:
1.attempted to stimulate sale:but was it successful/was the sales enough to pay credit in time?
a lot of assumptions.
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New post 13 Apr 2018, 07:25
Claudia700 wrote:
Assume: there is 100 retailer in the market and 50 of them have credit extended who paid off on time, 50/100=1/2 is the ratio.
Option C, 40 are out of business, then (50-40)/(100-40)=1/6 , sharply fell in the first year. But how to explain about the second year?



I shall give my humble input here.
1/2 is the pre-recession level.
Option C, virtually all of the remaining are forced to go out of business.Consider that out of remaining 50, 40 go out of business.
Out of the remaining 10, only 2 are able to pay off the credit at the end of first year. So, 2/10 = 1/5 is the sharp decline after the first year.(Your calculation of 1/6 is incorrect here, as it does not calculate the ratio of retailers paying their credit on time. It calculates something else :think: )
To explain the 2nd year : During the first and the second year together, the sales of 4 retailers out of 8 increases enough that they are able to pay off their credit at the end of 2nd year. So, 4/8 = 1/2 is the ratio after 2nd year. The increase in sales during the first and second year can be attributed to the 40 retailers who went out of business during first year and subsequently their customers went to the remaining 10 retailers for purchasing their clothes.
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New post 21 Jul 2018, 19:48
nitronori41 wrote:
ok,i must admit one thing, i have arrived at C purely on the basis of aggressive elimination strategy . so i am not really sure. :?

nevertheless i will try to explain my reasoning.

the premise is that there was a recession that affected sales. given timeline is 2 years. now there seems to be an ongoing tradition of credit between the wholesalers and retailers. this relationship suffered a bit in the first year but it was back on track in the second.
so on to the choices:

A: more credit extended between years 1 and 2 is irrelevant to the repayment. so OUT.
B:If costs for retailers increased during year 2, then how can they repay more? so OUT.
D: the retailers ATTEMPTED to increase sales by discounting. but were they any good at raising money to repay loans? not very clear ... so OUT.
E: if recession did not affect some divisions... er... so what? can't find any connection.. so out

last option: C..... bankruptcy for competitiors meant less competition. so the survivors found more customers who bought their stuff. hence they raised money and repaid in the 2nd year.

what is the OA?


Very Good Explanation. I was able to relate it to a real life case and come to option C.
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