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Lawmaker: Raising taxes is the the only means of reducing

imaru

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05 Aug 2006, 08:42

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Lawmaker: Raising taxes is the the only means of reducing government debt. The government's stockpile of helium is worth 25 percent more, at current market prices, than the debt accumulated in acquiring and storing it. Therefore, by selling helium, the government can not only pay off that debt but reduce its overall debt as well.

Which of the following is an assumption on which the argement depends?

a. The government has no current need for helium.

b. 25 percent of the debt the government has accumulated in stockpiling helium is not an insignificant portion of the government's total debt.

c. It is not in the lawmaker's interest to advocate raising taxes as a means of reducing government debt.

d. Attempts to sell the government's helium will not depress the market price of helium by more than 25 percent.

e. The government will not incur any costs in closing its facilities for stockpiling helium.

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dwivedys

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05 Aug 2006, 09:06

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Is it B? I think by negation we can see that if the money earned by selling Helium is not a significant portion of the overall debt then the claim that the overall debt will be reduced falls apart.

mailtheguru

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05 Aug 2006, 09:46

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imaru

I am going with C. If C were not true, then the passage is meaningless.

imaru

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05 Aug 2006, 09:47

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OA is D, but i dunno why... can anyone explain?

dwivedys

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05 Aug 2006, 10:08

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imaru

OA is D, but i dunno why... can anyone explain?

I have to recant my earlier stmt about B. B is actually stated in the argument.

D is correct because if due to bulk selling the price of helium is depressed the govt can't make that much money and the argument falls..it HAS to rely on the assumption that the sale will bring in the money AT THE CURRENT MARKET PRICE.

Guru I see your predicament. I did get confused with this choice as well, but the point is that raising taxes is stated in the very first line and is then not mentioned; hence actually we don't have enough information to conclude this from the passage though it's a very cleverly crafted choice. The thrust of the passage changes course from raising taxes to the helium stockpile.

aryanb

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05 Aug 2006, 10:12

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imaru

The conclusion of the lawmakers statement is that the overall debt of the nation can be reduced by selling of the helium.

The fact that present market value of the stored helium is 25% higher is the evidence presented.

The first part of the stimuli - Raising taxes .... its a consideration raised and is not the conlclusion. If one treats this as the conclusion, then subsequent evidence is int he opposite direction of the argument since reduction in the national debt by selling of helium will not necessitate the increase in tax as well. Hence C is wrong.

a and e are totally irrelevant to the conclusion.

d is right because, applying negaton it would prove that the national debt will not be reduced.

b is a possible inference, but is not the underlying assumption. There will be a reduction in national debt, irrespective of significance of the portion that will be reduced.

Hence d.

pelihu

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05 Aug 2006, 10:28

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I do not have a guess for this question. My response is that the question does not make sense. Consider this:

1. Raising taxes is the only means of reducing the governmet's debt.
2. By selling helium, the government can...reduce its overall debt.

Those two sentences cannot both be true, yet the passage makes no commentary on the conflict between the two statements. The answer choices are ambiguous as well.

This question didn't come from the OG did it?

old_dream_1976

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05 Aug 2006, 12:17

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logic for D is not completely true.

what if the 25% becomes 18% because of increase in supply in the open market.

Still the debt may reduce. there is nothing that says 25%is the threshold limit below which the arguement falls apart.

what is the source please?

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05 Aug 2006, 22:45

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old_dream_1976

IMO D
If 25% becomes 18% the statment holds good, because "price of helium by more than 25 percent" That means the price of helium is not going fall by more than 25%. In which case it will be better-off storing than selling.

Futuristic

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05 Aug 2006, 23:34

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I think this is a straight D.

Let debt = 100 x
Then sale price of helium = 125x

If we are to make some profit selling it, then we have to sell it at 100x or more. Now lets assume that D is incorrect. Then :

attempts to sell the government's helium will depress the market price of helium by more than 25%. which means that the sale price will be 3/4 of 125x or less than 100x, implying a loss.

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06 Aug 2006, 00:13

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I can't digest D.

I think this should be B.

Argument says:
Govt should sell helium to reduce debt but even after selling the helium govt has to raise the taxes to reduce overall debt.

Negate B: If debt accumulated in stockpiling helium is a big portion of total debt then their is no need to raise taxes. Argument falls apart.

Negate D: If selling helium in bulk will depress the market then it means this will not be an effective mean of reducing the overall debt. Hence we have to raise taxes. Supporting the argument.

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06 Aug 2006, 14:46

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ps_dahiya

By supporting the argument, we must support the conclusion:
"by selling helium, the government can not only pay off that debt but reduce its overall debt as well"

Assume B is false. Then 25% of the debt is an insignificant portion of the overall debt. Even if it is insignificant, it will still help reduce the overall debt, even if marginally. So the conclusion still holds.

Assume D is false. The sale of helium brings no profits. The debt is not reduced at all. Conclusion is broken.

jaynayak

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07 Aug 2006, 00:08

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I think this is one of the GMAT question types where they test one thing only. I have seen so many questions like these that ....... if I go with intution, the answer will be D everytime.

But logically we can argue on many options.

The premise is the stockpile of helium is worth a lot to reduce the debt considering the market prices.

Now if the sale of the helium brings it price down, then the argument presented by the lawmaker doesnot stand. The prices will not be at the same level that it could reduce the debt.

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