generis wrote:
Many economists hold that keeping taxes low helps to spur economic growth, and that low taxes thus lead to greater national prosperity. But Country X, which has unusually high taxes, has greater per-capita income than the neighboring Country Y, which has much lower taxes. Some politicians have concluded from this that high taxes do not hinder national prosperity.
The politicians' reasoning is most vulnerable to criticism on which of the following grounds?
C) It fails to adequately address the possibility that Country X and Country Y differ in relevant respects other than taxation.
D) It fails to take into account that the per-capita income of a country does not determine its rate of economic growth.
Hi experts
GMATNinja avigutman IanStewart AjiteshArunI could see why the option (C) is the correct answer, but I am confused with the option (D). I've checked all previous posts in this thread and decided to write my own post. I think that the politicians have done something incorrectly with the statistics. Could you help me check my line of thinking or share your thoughts on (D) when you have time?
Stimulus:
Many economists hold that keeping taxes low helps to spur economic growth, and that low taxes thus lead to greater national prosperity. But Country X, which has unusually high taxes, has greater per-capita income than the neighboring Country Y, which has much lower taxes. Some politicians have concluded from this that high taxes do not hinder national prosperity.
My first reaction after reading the argument was that the growth rate is conflated with the per-capital income. The economists talk about the growth rate and link the gauge to an abstract concept "national prosperity," while the politicians use another gauge, per-capital income, to try to connect it with the same concept. The two gauges are not interchangeable--one country with a high growth rate does not necessarily have a high per-capita income, and one country with a comparatively high per-capital income might have reported almost-zero economic growth for years. Such countries exist in the real world.
I am not sure whether GMAT tests this difference in the two gauges--I am only sure that it tests total consumption vs per-capita consumption, absolute increase vs increase rate, sales vs marketing share, and so on. But this discrepancy in the two gauges was so glaring to me that I immediately checked whether there would be an option saying that the politicians have confused the two statistics. But I only found option (D), whose phrasing is a bit puzzling to me.
D) It [the politicians' reasoning] fails to take into account that the per-capita income of a country does not determine its rate of economic growth.I think that the politicians have failed to consider that the two gauges are not the same. So, if option (D) were written this way, it could be a contender in my opinion. If Country X has greater per-capital income than County Y but has reported an economic recession, it might be suspicious to infer that high taxes do not hinder national prosperity.
But, the option (D) says that the politicians have failed to consider that
a country's per-capita income does not determine the country's rate of economic growth. Is (D) incorrect because the politicians actually never mentioned the growth rate in their reasoning? They did not link the per-capital income to the growth rate (and then to the national prosperity). They just linked the per-capita income directly to the national propensity. So, they did not make the error stated by (D)?
In other words, if the politicians had concluded that
high taxes do not hinder economic growth and thus do not prevent national prosperity, would the option (D) have been correct?
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I hope to draw an analogy to confirm the logic behind: Guidebooks say that renting a tuktuk (a modified scooter) will help tourist go to different temples in Angkor Wat more quickly and thus their traveling experience will be more pleasant. But a tourist who rented and rode a bicycle saw more temples in a day than another tourist who rented a tuktuk. Some people concluded that renting a bicycle will not prevent tourists from having a pleasant traveling experience.
We can say that these people ignore the time spent on traffic and use another factor--the number of temples seen--to arrive at the abstract concept "a pleasant traveling experience." But we cannot not criticize them for failing to consider that the number of temple seen does not determine the time spent on traffic, as they completely ignore the time factor in their reasoning, right?
Thank you so much!