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guygmat
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I chose D. Since the most troubled retailers went out of business after 1st year, the remaining retailers had greater market, which in turn results in a better business for them. That is the only way they could pay in 2nd year, IMO.
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The stimulus mentions that the effects of the downturn have been felt in "all corners" of the economy.

So -- D -- I'm not entirely convinced.

D would have been OK if not for the opening sentence.

B seems right --- because if the banks now only gave loans to "proper" businesses -- there is a much better chance of getting proper payments....
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From my understanding the restrictions instituted since the economic downturn began i.e they are applicable for both years. Hence we can eliminate B
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I was hesitated between B and D, and finally chose B.
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toughmat
From my understanding the restrictions instituted since the economic downturn began i.e they are applicable for both years. Hence we can eliminate B


I agree, that was the tricky part of the question. The restrictions wouldn't explain why they weren't able to pay the first year.

The answer is D
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+1 D

I had done a similar question before with almost the same answer choices, so this one was easy for me. Also this question is tagged as "must be true", but I think it is a "resolve a paradox" type of question. The correct answer choices of "must be true" questions cannot bring in new information and are in most of the cases a simple paraphrase of one or more of the premises themselves.

Paradox in the Argument: Proportion of loan repaid dropped sharply in the first year, but returned to normal levels in the second year.

Correct answer choice will resolve the paradox by explaining the "but" in the argument.

guygmat

Which one of the following, if true, most helps to explain the change in credit repayment reported?

A)The total dollar amount of the loans decreased slightly between the first year and the second.
irrelevant-doesn't explain why the proportion of loans repaid returned to normal levels, total amount of loans may have dropped and the proportion of loans returned may still have remained the same.

B)New restrictions on the banking industry instituted since the economic downturn began have limited the number of loans banks can make to troubled borrowers.
if you followed why Option A is wrong, this option can easily be seen as irrelevant, and because of the same reasons. Even if the total amount of loans dropped, the proportion of loans repaid could remain the same. An increase or decrease in number doesn't guarantee a similar increase or decrease in proportion (or percentage). If, however, this option stated that banks are diverting loans from troubled retailers to well-off retailers, then this option might have been a contender.

C)The largest furniture chain in Crescent City slashed prices in the second year in order to stimulate sales.
out of scope, we are talking about all furniture retailers, not just one or the biggest player. Also we do not know whether the stimulated sales were sufficient to repay the loans

D)Almost all of the most financially troubled furniture retailers went out of business at the end of the first year of the economic downturn.
correct, if most of the troubled retailers who had difficulty in repaying loans went out of business at the end of the first year, in the second year only those those retailers remained who could repay the loans, thus increasing the proportion of loans repaid and explaining the paradox

E)Between the first and second years of the recession, wholesalers were forced to significantly raise the prices they charged to retailers.
irrelevant, we are concerned about retailers and not wholesalers. And also if this option were true, retailers would be left more troubled by the rise in prices, thus making the paradox more grave.
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yup, an easy point I missed out. Eliminates B straightforward. Kudos to you for reminding me about this type of wrong answer choice :wink: .

toughmat
From my understanding the restrictions instituted since the economic downturn began i.e they are applicable for both years. Hence we can eliminate B
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+1 for D...although my answer was E......but D wins
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This is a strengthen question !!
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I'm not convinced with D. But of all the given choices D seems correct.
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Izvos
doubting btw b and d


definately D

B)New restrictions on the banking industry instituted since the economic downturn began have limited the number of loans banks can make to troubled borrowers.

but this does not explain why 1st year has more number of defaulters and how suddenly for the second yr the number decreased.
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diffcult ques
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D it is.
If the financially struggling furniture retailers were in business in the first year then the payments will be late to the bank and if they are out of business in the second year and the remaining furniture retailers who are not struggling financially will pay on time that will result in the turnaround in the bank report.
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Chose E but surely D is the correct answer choice....
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D is correct. Because, if most of the troubled retailers went out from business after first year then in second year remained retailers got more market share to sell their products. Eventually, they can generate enough money to repay their loans.
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I can see a lot of people supporting B here ..but D is the clear winner here for following reasons ..

Passage talks about the Proportion of credit repaid returned to normal value in the 2nd year ..please note we are talking about proportion ..i.e percentage or the ratio ...
Decreasing the total number of credit given will not help in any way unless we are not sure reduction of credit is mostly in the bad credit or in cases where repayment were not going to happen ..hence B is eliminated ..

D clearly tells us ..Almost all of the most financially troubled furniture retailers went out of business at the end of the first year of the economic downturn.
Hence we are sure reduction in number of financially troubled retailers must have helped to improve the proportion in the 2nd year

Hence D .
Hope it helps
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