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Spending on research and development by United States

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Director
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Spending on research and development by United States [#permalink]

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New post 31 Aug 2004, 14:51
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104. Spending on research and development by United States businesses for 1984 showed an increase of about 8 percent over the 1983 level. This increase actually continued a downward trend evident since 1981 – when outlays for research and development increased 16.4 percent
over 1980 spending. Clearly, the 25 percent tax credit enacted by Congress in 1981, which was intended to promote spending on research and development, did little or nothing to stimulate such spending.
The conclusion of the argument above cannot be true unless which of the following is true?
(A) Business spending on research and development is usually directly proportional to
business profits.
(B) Business spending for research and development in 1985 could not increase by more
than 8.3%.
(C) Had the 1981 tax credit been set higher than 25%, business spending for research and
development after 1981 would have increased more than it did.
(D) In the absence of the 25% tax credit, business spending for research and development
after 1981 would not have been substantially lower than it was.
(E) Tax credits market for specific investments are rarely effective in inducing businesses to
make those investments.
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CR R and D spending [#permalink]

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New post 31 Aug 2004, 15:17
Answer is D.

D states that inthe absence of 25% tax credit, R&D spending would have been greater than what it is now. Because 25% tax credit is present, r&D spending is much lower.
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New post 31 Aug 2004, 15:19
C it is. If tax credit were higher than 25% and R&D spendings is greater because of it, then we can directly blame the lower R&D on the low tax credit figure of 25%
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Paul

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New post 31 Aug 2004, 15:20
D.

Conclusion is the incentive did nothing for spending. For this to be true, the lack of such an incentive would have to have a negligible effect on the spending behavior.
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New post 31 Aug 2004, 15:25
Hmmm, I immediately see my mistake. Yes, D puts the cause directly on the low tax credit figures :oops:
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New post 31 Aug 2004, 17:22
can soembody explain me waht is theri strategy to CR like?
S
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New post 31 Aug 2004, 17:22
can soembody explain me waht is theri strategy to CR like this?
S
  [#permalink] 31 Aug 2004, 17:22
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