Check GMAT Club Decision Tracker for the Latest School Decision Releases https://gmatclub.com/AppTrack

 It is currently 29 May 2017, 03:05

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# Public hospitals are suffering because of a lack of money

Author Message
TAGS:

### Hide Tags

Manager
Joined: 06 Aug 2010
Posts: 223
Location: Boston
Followers: 3

Kudos [?]: 198 [1] , given: 5

Public hospitals are suffering because of a lack of money [#permalink]

### Show Tags

27 Oct 2010, 18:36
1
KUDOS
1
This post was
BOOKMARKED
00:00

Difficulty:

(N/A)

Question Stats:

48% (02:15) correct 52% (01:34) wrong based on 231 sessions

### HideShow timer Statistics

Public hospitals are suffering because of a lack of money available for physical expansion projects. To help hospitals, local governments plan to offer municipal bonds with above-average interest rates to induce individuals to buy these bonds, because as local governments get more money from municipal bonds, more money becomes available to public hospitals for physical expansion projects.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of local governments' plan to increase the amount of money available for hospital expansion projects?

(A) When local governments increase the interest on municipal bonds, the percentage of government funds allocated to non-expansion government projects increases correspondingly.
(B) The increased revenue local governments would receive as a result of offering municipal bonds with above-average interest rates would not offset the loss in revenue from personal income taxes during the first year of the plan.
(C) Even with interest rate incentives, some people will choose not to buy the municipal bonds.
(D) Individuals will generally not buy high-interest municipal bonds unless these bonds, when repaid, will help them cover home and healthcare payments.
(E) The municipal bonds would give all buyers, regardless of how many bonds they purchase, the same interest rate per bond.

I disagree with the OA.

[Reveal] Spoiler:
It's A, and here's the OE:

Quote:
We're told that local governments plan to help fund hospital expansion projects by offering municipal bonds with above-average interest rates, which encourage people to buy these bonds.

The author concludes that if more bonds are purchased, more money will in turn be available for hospital's physical expansion projects.

We're asked to weaken this argument. The local governments' plan supposes that the money invested in municipal bonds will be readily available to hospitals in the form of funds for physical expansion projects. Therefore, to undermine this argument, we need to identify a reason why money might not go to hospital expansion projects.

Choice A states that when local governments offer high-interest municipal bonds, the money given to other projects increases. If this were true, this undermines the assumption that more money will go to hospital expansion projects. Choice A is correct.

Choice B states that the increased money from municipal bonds would not offset the loss in revenue from personal income taxes during the first year of the plan. The goal of the plan is to increase the amount of money available as physical expansion funds for hospitals, so this point is irrelevant to the effectiveness of the plan.

Choice C states that even with interest rate incentives, some people will not purchase municipal bonds. The effectiveness of the plan would be determined not by what some people do, but by what most people do.

Choice D states that people will generally not buy municipal bonds which, when, repaid, do not yield enough money to help them pay significant personal expenses. The plan would increase the money available specifically for hospitals' physical expansion projects, not individuals' personal loans.

Choice E states that municipal bonds would give all buyers, regardless of how many bonds they buy, the same interest rate per bond. The universal interest rate does not affect the effectiveness of the plan.

The passage says that if municipal bonds are purchased, more money will go to hospital expansion plans... then answer A says that more money will NOT go to hospital expansion plans. This is a direct contradiction of what's given as concrete, irrefutable fact in the passage. Why is that correct?
[Reveal] Spoiler: OA
If you have any questions
New!
Manager
Joined: 26 Sep 2010
Posts: 151
Nationality: Indian
Concentration: Entrepreneurship, General Management
Followers: 7

Kudos [?]: 59 [3] , given: 18

### Show Tags

19 Feb 2011, 16:58
3
KUDOS

First concentrate on the question stem "Which of the following, if true, " --> You don't have to doubt the choices for truth, but you have to question the validity of them in helping the Govt. plan.

A) Mentions that if you increase the interest rates , a higher portion of Govt. funds will go to non-expansion projects. Thus, the option indicates that the money *might not* reach the intended cause. Hence A.

B) Why would there be a loss in personal income taxes is not clear? If anything, personal taxes should have increased because of high interest that people got. So there are other causes of losses in personal income taxes - (unrelated tax breaks? , natural disasters ?) ..

E)No relation with same interest rate. If government is getting the money, who cares?
_________________

You have to have a darkness...for the dawn to come.

Intern
Joined: 10 Oct 2010
Posts: 10
Location: United States
Concentration: Marketing, Finance
GMAT 1: 760 Q49 V45
Followers: 0

Kudos [?]: 10 [2] , given: 6

### Show Tags

19 Feb 2011, 00:32
2
KUDOS
I just saw this problem, and I still disagree--I think B more clearly weakens the conclusion. Between A and B:

(A) When local governments increase the interest on municipal bonds, the percentage of government funds allocated to non-expansion government projects increases correspondingly. This says that as the interest on municipal bonds increases, the local government gives more money to other projects. This says nothing about how much money the municipal bonds will generate. Maybe non-expansion projects will get some of the increased revenue, but hospitals will still get the rest. In other words, this doesn't necessarily mean that the plan will not be effective in increasing the available funds for the hospitals.

(B) The increased revenue local governments would receive as a result of offering municipal bonds with above-average interest rates would not offset the loss in revenue from personal income taxes during the first year of the plan.If there is an external factor already in place that would negate any revenues gained by the municipal bonds, then clearly the municipal bond plan wouldn't create any additional funds for the hospitals. This additional information would weaken the conclusion.

Thoughts??? This question is the fishiest I've seen so far in my studies, and I'm doing pretty darn well for the most part, but maybe I'm just missing something right under my nose.
Intern
Joined: 27 Jul 2009
Posts: 20
Followers: 0

Kudos [?]: 13 [1] , given: 1

### Show Tags

27 Oct 2010, 20:54
1
KUDOS
this is a weaken question so you can use the elimination technique to figure out the answer and it would take you to A.

what we have to prove with the answer is that
"more money Would Not becomes available to public hospitals for physical expansion projects."

(A) When local governments increase the interest on municipal bonds, the percentage of government funds allocated to non-expansion government projects increases correspondingly. Supports what we have to prove because it says more money is allocated elsewhere so wont be available for the hospitals
(B) The increased revenue local governments would receive as a result of offering municipal bonds with above-average interest rates would not offset the loss in revenue from personal income taxes during the first year of the plan.
Taxes => redundant outside information and even if they suffer losses, they still might allocate the funds to the hospital
(C) Even with interest rate incentives, some people will choose not to buy the municipal bonds. if some people don't buy the bond, it does not mean that the bonds are not generating enough money
(D) Individuals will generally not buy high-interest municipal bonds unless these bonds, when repaid, will help them cover home and healthcare payments.
the bonds might as well help them cover healthcare payments, its a suggesting and not a binding statement
(E) The municipal bonds would give all buyers, regardless of how many bonds they purchase, the same interest rate per bond.
neutral statement, even if all get the same interest rate, they still might buy the bonds
Director
Status: Impossible is not a fact. It's an opinion. It's a dare. Impossible is nothing.
Affiliations: University of Chicago Booth School of Business
Joined: 03 Feb 2011
Posts: 903
Followers: 14

Kudos [?]: 359 [1] , given: 123

### Show Tags

19 Feb 2011, 01:06
1
KUDOS
If you are assuming B you are AlSO assuming - there is no other way to offset the loss which is wrong. I don't think the conclusion is subservient to this. A is sufficient to get to conclusion.

mikeepeck wrote:
I just saw this problem, and I still disagree--I think B more clearly weakens the conclusion. Between A and B:

(A) When local governments increase the interest on municipal bonds, the percentage of government funds allocated to non-expansion government projects increases correspondingly. This says that as the interest on municipal bonds increases, the local government gives more money to other projects. This says nothing about how much money the municipal bonds will generate. Maybe non-expansion projects will get some of the increased revenue, but hospitals will still get the rest. In other words, this doesn't necessarily mean that the plan will not be effective in increasing the available funds for the hospitals.

(B) The increased revenue local governments would receive as a result of offering municipal bonds with above-average interest rates would not offset the loss in revenue from personal income taxes during the first year of the plan.If there is an external factor already in place that would negate any revenues gained by the municipal bonds, then clearly the municipal bond plan wouldn't create any additional funds for the hospitals. This additional information would weaken the conclusion.

Thoughts??? This question is the fishiest I've seen so far in my studies, and I'm doing pretty darn well for the most part, but maybe I'm just missing something right under my nose.
Manager
Joined: 26 Sep 2010
Posts: 151
Nationality: Indian
Concentration: Entrepreneurship, General Management
Followers: 7

Kudos [?]: 59 [1] , given: 18

### Show Tags

19 Feb 2011, 17:11
1
KUDOS
Quote:
Well explained thanks but could you tell why E is not true since, if people don't seem enthused about buying large quantities of bonds. ( The interest rate is same).

It doesn't say that the people are less enthused. It just says that if a person buys in bulk he won't be given a special interest rate.
Though even if people are less enthused, we don't know if they skip the issues all together. Refer my arguments for C) and D).
_________________

You have to have a darkness...for the dawn to come.

Intern
Joined: 10 Oct 2010
Posts: 10
Location: United States
Concentration: Marketing, Finance
GMAT 1: 760 Q49 V45
Followers: 0

Kudos [?]: 10 [1] , given: 6

### Show Tags

19 Feb 2011, 21:14
1
KUDOS
ylee57: (E) just says that all the buyers of these bonds (the above-average interest rate bonds) will receive the same rate per bond. Thus it still stands that people will be more willing to buy these bonds (since they're at a higher interest rate), and this doesn't weaken the conclusion.

IndigoIntentions: Your explanation of (A) makes a lot of sense, but I think your explanation of (B) is off. Like you said, the assumption is that the answer choices are true, so you can't go into depth trying to figure out whether income tax revenues would increase or wouldn't... the answer choice says that they would decrease.

Looking at the question some more, I think I found my error.

Evidence 1: Hospitals are suffering from a lack of money for expansion
Evidence 2: More money for gov't from municipal bonds leads to more money available for hospitals' expansion projects
Assumption: increasing municipal bond interest rates leads to more bond sales
Conclusion: Local gov't should sell above average rate municipal bonds

I mistook Evidence 2 for the conclusion, but because it's stated as evidence, it's a straight up truth. Therefore, even if the local gov't has a huge loss in revenue from income taxes, it doesn't effect the argument. I went outside the argument and figured that the local gov't was working from one big bucket of money, but if municipal bond revenues are kept in a separate bucket, then the argument still stands unaffected.

Tough question! Thanks for the feedback everyone. And thanks to Jen from Knewton for the CR2 Knewton class that helped me make sense of this question.
Director
Status: Impossible is not a fact. It's an opinion. It's a dare. Impossible is nothing.
Affiliations: University of Chicago Booth School of Business
Joined: 03 Feb 2011
Posts: 903
Followers: 14

Kudos [?]: 359 [1] , given: 123

### Show Tags

19 Feb 2011, 21:31
1
KUDOS
cool explanation ! The assumption that increased revenue from bonds should offset the loss due to taxes is wrong. Its may be / may not be. Who knows if Govt can overcome losses by some other way. We have no way to tell from the premise.

mikeepeck wrote:
ylee57: (E) just says that all the buyers of these bonds (the above-average interest rate bonds) will receive the same rate per bond. Thus it still stands that people will be more willing to buy these bonds (since they're at a higher interest rate), and this doesn't weaken the conclusion.

IndigoIntentions: Your explanation of (A) makes a lot of sense, but I think your explanation of (B) is off. Like you said, the assumption is that the answer choices are true, so you can't go into depth trying to figure out whether income tax revenues would increase or wouldn't... the answer choice says that they would decrease.

Looking at the question some more, I think I found my error.

Evidence 1: Hospitals are suffering from a lack of money for expansion
Evidence 2: More money for gov't from municipal bonds leads to more money available for hospitals' expansion projects
Assumption: increasing municipal bond interest rates leads to more bond sales
Conclusion: Local gov't should sell above average rate municipal bonds

I mistook Evidence 2 for the conclusion, but because it's stated as evidence, it's a straight up truth. Therefore, even if the local gov't has a huge loss in revenue from income taxes, it doesn't effect the argument. I went outside the argument and figured that the local gov't was working from one big bucket of money, but if municipal bond revenues are kept in a separate bucket, then the argument still stands unaffected.

Tough question! Thanks for the feedback everyone. And thanks to Jen from Knewton for the CR2 Knewton class that helped me make sense of this question.
Intern
Joined: 01 Sep 2010
Posts: 44
Followers: 1

Kudos [?]: 0 [0], given: 0

### Show Tags

27 Oct 2010, 20:35
A for me
Retired Moderator
Status: 2000 posts! I don't know whether I should feel great or sad about it! LOL
Joined: 04 Oct 2009
Posts: 1669
Location: Peru
Schools: Harvard, Stanford, Wharton, MIT & HKS (Government)
WE 1: Economic research
WE 2: Banking
WE 3: Government: Foreign Trade and SMEs
Followers: 103

Kudos [?]: 993 [0], given: 109

### Show Tags

27 Oct 2010, 23:09
+1 A
_________________

"Life’s battle doesn’t always go to stronger or faster men; but sooner or later the man who wins is the one who thinks he can."

My Integrated Reasoning Logbook / Diary: http://gmatclub.com/forum/my-ir-logbook-diary-133264.html

GMAT Club Premium Membership - big benefits and savings

Manager
Status: Will Retake GMAT
Joined: 30 Jul 2010
Posts: 131
Location: India
Concentration: General Management, Entrepreneurship
Schools: Stanford '13 (D)
GPA: 3.11
WE: Information Technology (Computer Software)
Followers: 3

Kudos [?]: 15 [0], given: 28

### Show Tags

28 Oct 2010, 01:40
Got a little confused with B...the answer is A for sure
_________________

Re-taking GMAT. Hope the charm works this time..

Senior Manager
Joined: 23 May 2010
Posts: 429
Followers: 5

Kudos [?]: 118 [0], given: 112

### Show Tags

29 Oct 2010, 21:26
+1 A
Intern
Joined: 10 Oct 2010
Posts: 10
Location: United States
Concentration: Marketing, Finance
GMAT 1: 760 Q49 V45
Followers: 0

Kudos [?]: 10 [0], given: 6

### Show Tags

19 Feb 2011, 13:50
Could you explain that a little more clearly? I'm not sure what you mean. If (B) is true, then you can't assume that the loss in government revenue will be offset by something else, thus freeing up the municipal bond revenue for hospitals.

I understand that a weakener doesn't have to negate the conclusion, it just seems that (B) more clearly and definitively weakens the conclusion than (A).

Can anyone from Knewton weigh in on this? Thanks!
Intern
Joined: 16 Feb 2011
Posts: 6
Followers: 0

Kudos [?]: 0 [0], given: 7

### Show Tags

19 Feb 2011, 17:05
IndigoIntentions wrote:

First concentrate on the question stem "Which of the following, if true, " --> You don't have to doubt the choices for truth, but you have to question the validity of them in helping the Govt. plan.

A) Mentions that if you increase the interest rates , a higher portion of Govt. funds will go to non-expansion projects. Thus, the option indicates that the money *might not* reach the intended cause. Hence A.

B) Why would there be a loss in personal income taxes is not clear? If anything, personal taxes should have increased because of high interest that people got. So there are other causes of losses in personal income taxes - (unrelated tax breaks? , natural disasters ?) ..

E)No relation with same interest rate. If government is getting the money, who cares?

Well explained thanks but could you tell why E is not true since, if people don't seem enthused about buying large quantities of bonds. ( The interest rate is same).
Senior Manager
Status: Can't give up
Joined: 20 Dec 2009
Posts: 315
Followers: 2

Kudos [?]: 31 [0], given: 35

### Show Tags

20 Feb 2011, 08:55
A - ripple effect (I call it)
Manager
Joined: 14 Dec 2010
Posts: 208
Location: India
Concentration: Technology, Entrepreneurship
GMAT 1: 680 Q44 V39
Followers: 2

Kudos [?]: 38 [0], given: 5

### Show Tags

22 Feb 2011, 05:11
I was actually confused between A and D. In the end, selected A because it directly weakens the conclusion.
GMAT Club Legend
Joined: 01 Oct 2013
Posts: 10303
Followers: 1000

Kudos [?]: 225 [0], given: 0

Re: Public hospitals are suffering because of a lack of money [#permalink]

### Show Tags

15 Aug 2015, 23:05
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
Current Student
Joined: 15 May 2015
Posts: 43
GMAT 1: 690 Q49 V35
Followers: 0

Kudos [?]: 10 [0], given: 3

Public hospitals are suffering because of a lack of money [#permalink]

### Show Tags

18 Aug 2015, 03:11
Hi,

If the increased government revenues do not offset the losses that would occur as a result of fall in income taxes,then it might be true that the net revenues of the government have increased or decreased depending upon the actual values of revenue increase and losses from tax reductions.

Increase in revenues > losses from reduction in personal tax ==> Increase in net revenues
Increase in revenues < losses from reduction in personal tax ==> decrease in net revenues

So we cannot say with certainty whether the net revenues have increased.

This rules out option B

Please feel free to point flaw in the explanation if any

Cheers!!
Senior Manager
Joined: 07 Sep 2014
Posts: 376
Concentration: Finance, Marketing
Followers: 5

Kudos [?]: 43 [0], given: 251

Re: Public hospitals are suffering because of a lack of money [#permalink]

### Show Tags

18 Aug 2015, 04:00
(B) The increased revenue local governments would receive as a result of offering municipal bonds with above-average interest rates would not offset the loss in revenue from personal income taxes during the first year of the plan.--> we are least bothered about personal income tax. it's not matter in the hand/
(C) Even with interest rate incentives, some people will choose not to buy the municipal bonds. --> if it would have all in sentence, then it's a problem otherwise no.
(D) Individuals will generally not buy high-interest municipal bonds unless these bonds, when repaid, will help them cover home and healthcare payments. We don't anything about if bonds help or not so we can't say anything.
(E) The municipal bonds would give all buyers, regardless of how many bonds they purchase, the same interest rate per bond. - so what? if interest rate is high than normal rate, it is still a good deal for buyer. right?

(A) When local governments increase the interest on municipal bonds, the percentage of government funds allocated to non-expansion government projects increases correspondingly.

if non expansion allocation increases, so ultimately what we are gaining through bonds is going somewhere else but expansion project. weaken
IMO A
Manager
Joined: 22 Jun 2016
Posts: 60
Followers: 0

Kudos [?]: 2 [0], given: 4

Re: Public hospitals are suffering because of a lack of money [#permalink]

### Show Tags

05 Oct 2016, 20:30
Even I do not agree with OA

As per pre-thinking the plan will fail if people do not buy bonds or so call high interest cannot be generated or sufficient bonds are not sold to help hospitals or ROI is not as per expected making the bonds to go on loss after some time.

(A) When local governments increase the interest on municipal bonds, the percentage of government funds allocated to non-expansion government projects increases correspondingly. ==> NOT CORRECT
It is not clear with % increase of government funds are allocated to non-expansion projects, it could be 1% or 2% or even less than 1%. With that we cannot deduce that that short of money will not be available

(D) Individuals will generally not buy high-interest municipal bonds unless these bonds, when repaid, will help them cover home and healthcare payments. ==> CORRECT
It is in parallel to pre-thinking to some extent compared to other options because nothing has been mentioned about what is the amount of repayment. Possiblility that individuals will not buy bonds. Atleast a close match and better answer than all other answers.
Re: Public hospitals are suffering because of a lack of money   [#permalink] 05 Oct 2016, 20:30

Go to page    1   2    Next  [ 21 posts ]

Similar topics Replies Last post
Similar
Topics:
6 Many children in the public schooling system who are aged 6-8 suffer 3 09 Sep 2015, 21:12
6 Because most hospitals suffer a chronic undersupply of 6 12 Apr 2017, 20:22
14 Businesses are suffering because of a lack of money 6 24 Feb 2016, 02:45
138 Businesses are suffering because of a lack of money 51 06 May 2017, 14:05
6 Business are suffering because of a lack of money available 23 26 Oct 2016, 02:34
Display posts from previous: Sort by

# Public hospitals are suffering because of a lack of money

 Powered by phpBB © phpBB Group and phpBB SEO Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.