Some economists view the Kennedy-Johnson tax cut of 1964, which radica

KJ tax cut (reduced corporate and individual taxes ) = impetus for prosperity in the late 1960's and early 1970's.

This is a weaken question and Power Score states that correct answer to a weaken question must : -

1. Attack the premises on which the argument rests 2. Correct answer will undermine the conclusion but it must not contradict the conclusion 3. Answers that attacks the assumption 4. Attack Necessary condition , showing that the necessary condition does not need to occur for sufficient condition to occur

Now check the options -

(A) Modernized, more productive factories were built in the late 1960's as a result of the funds made available by the tax cut.

Strengthens the conclusion ; It suggests that the KJ tax cut led to availability of funds that resulted in building more production factories.

(B) Improved economic conditions in Western Europe and Japan resulted in substantially increased demand for United States manufactured goods in the late 1960's.

Suggests that KJ tax cut , but another factor led to the increased demand for United States manufactured goods leading to prosperity.

This option clearly attacks the premises on which the argument rests , hence this is the correct answer.

(C) The tax cut of 1964 contained regulations concerning tax shelters that prompted investors to transfer their savings to more economically productive investments.

Strengthening the argument as in (A)

(D) Personal income after taxes rose in the years following 1964.

If tax rates are cut then post tax income is bound to rise , irrelevant....

(E) In the late 1960's, unemployment was relatively low compared with the early 1960's.

Irrelevant , unemployment has no role here...


Hence correct answer must be (B)
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In 1964, a tax cut was implemented. It reduced corporate and individual taxes (so they had to pay less money and taxes and hence had more spare income).
Some economists claim that this is why US saw substantial prosperity in late 1960s and early 1970s.

What will weaken this claim? If we can give some new information about some other reason that could have been responsible for the prosperity, it would weaken our claim.

(A) Modernized, more productive factories were built in the late 1960's as a result of the funds made available by the tax cut.

The tax cut made the factories possible so it seems to still say that the tax cut led to the prosperity. Hence it doesn't weaken the claim.

(B) Improved economic conditions in Western Europe and Japan resulted in substantially increased demand for United States manufactured goods in the late 1960's.

Correct. This tells you that because of more demand in other countries, exports of US increased. So this could have led to the increased prosperity in US. Then the prosperity may not be because of the tax cuts. This does weaken our claim.

(C) The tax cut of 1964 contained regulations concerning tax shelters that prompted investors to transfer their savings to more economically productive investments.

Again, this suggests that the tax cut had a good economic impact and hence it doesn't weaken the claim.

(D) Personal income after taxes rose in the years following 1964.

This is also a positive impact of the tax cut only.

(E) In the late 1960's, unemployment was relatively low compared with the early 1960's.

This is an effect of prosperity, not the cause of it. So it doesn't give us the reason why prosperity happened.

Answer (B)
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Tax cuts --> Reduced corporate and individual taxes --> Economic Prosperity

A, C and D state that tax cuts led to economic prosperity - Eliminate A, C and D

Between B and E:
(B) Improved economic conditions in Western Europe and Japan resulted in substantially increased demand for United States manufactured goods in the late 1960's. - Correct

(E) In the late 1960's, unemployment was relatively low compared with the early 1960's. - Incorrect - Relatively low unemployment may not result in substantial prosperity.

Answer: B

AjiteshArun how do we know that the united states was in fact able to meet the increase in demand? There isn't any sort of linkage mentioned anywhere in the argument. Option b simply tells us that there was an increase in demand of the goods manufactured in the US.

Kindly help

Best Regards,
Adit

Hi Adit,

If an economy is enjoying "substantial prosperity", we can assume that it is meeting a higher level of demand. The question here is what led to that ability to meet a higher level of demand. Was it something domestic (a tax cut) or was it foreign trade?

The question tells us that the US enjoyed substantial prosperity in the late 1960s and early 1970s. This means that ~the US economy was doing well then. We know that increased demand could have been a reason for that. The question says that something ("the Kennedy-Johnson tax cut of 1964") that is capable of increasing demand (let's call it domestic demand) in the US was not the reason for the substantial prosperity mentioned in the question.

Option B gives us reason to believe that the 1964 tax cut was not the impetus for the prosperity by:
1. Giving us something else (an alternative, foreign demand) that could explain the substantial prosperity.
2. Moving the alternative much closer to where we want it: (a) tax cut 1964, (b) foreign demand late 1960s, and (c) substantial prosperity late 1960s and early 1970s.
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(A) Modernized, more productive factories were built in the late 1960s as a result of the funds made available by the tax cut.

Strengthens the conclusion; It suggests that the KJ tax cut led to the availability of funds that resulted in building more production factories.

(B) Improved economic conditions in Western Europe and Japan resulted in substantially increased demand for the United States manufactured goods in the late 1960s.

Suggests that KJ tax cut, but another factor led to the increased demand for the United States manufactured goods leading to prosperity.

This option clearly attacks the premises on which the argument rests, hence this is the correct answer.

(C) The tax cut of 1964 contained regulations concerning tax shelters that prompted investors to transfer their savings to more economically productive investments.

Strengthening the argument as in (A)

(D) Personal income after taxes rose in the years following 1964.

If tax rates are cut then post-tax income is bound to rise, irrelevant...

(E) In the late 1960s, unemployment was relatively low compared with the early 1960s.

Irrelevant , unemployment has no role here...


Hence correct answer must be (B)

EducationAisle



What is the meaning conveyed by choice (C)? Does it mean that due to the tax cuts there investments made in the country reduced? If so, doesn't this show that the tax cuts reduced the prosperity?

Notice C says: The tax cut of 1964 contained regulations concerning tax shelters that prompted investors to transfer their savings to more economically productive investments.

Let's take an example:

Suppose that before 1964, people put their savings in savings bank accounts.

C says: The tax cut of 1964 contained regulations concerning tax shelters.

Suppose Kennedy-Johnson act of 1964 stipulated that investments in infrastructure would be a tax shelter (meaning these investments would be exempted from tax).

Consequently, (as per C), people transferred their savings (savings bank accounts) to more economically productive investments (such as infrastructure).

This will clearly result in a lot of funds available for infrastructure, thereby leading to substantial development and prosperity.

Hence, C is actually strengthening the claim that the tax cut of 1964 was the impetus for economic prosperity.
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