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Spending on research and development by United States

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

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New post 27 Nov 2018, 00:23
ykaiim wrote:
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.


Since Option 2 and 3 are scenario outside our gameplay i.e years b/w 1980-1984 and tax credit >25%, how should one deal with such options? According to me Option 3 Supports but is not necessary whereas Option 2 tries to take a new value corresponding to the 1985 year and almost effects the premise not the conclusion of the passage
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Re: Spending on research and development by United States  [#permalink]

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New post 29 Nov 2018, 08:54
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pun91 wrote:
ykaiim wrote:
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.


Since Option 2 and 3 are scenario outside our gameplay i.e years b/w 1980-1984 and tax credit >25%, how should one deal with such options? According to me Option 3 Supports but is not necessary whereas Option 2 tries to take a new value corresponding to the 1985 year and almost effects the premise not the conclusion of the passage


I'm not sure whether I can make a general statement on how to deal with such statements. However, in this context, option 3 is at best a weakener since it indicates that the tax credit does have an impact - if you increase the tax credit, business spending goes up. Option 2 doesn't impact either the conclusion or the premises.
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Re: Spending on research and development by United States  [#permalink]

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New post 13 Dec 2018, 12:59
pun91 wrote:
Since Option 2 and 3 are scenario outside our gameplay i.e years b/w 1980-1984 and tax credit >25%, how should one deal with such options? According to me Option 3 Supports but is not necessary whereas Option 2 tries to take a new value corresponding to the 1985 year and almost effects the premise not the conclusion of the passage

The reason this question is challenging is that it's extremely easy to lose track of the conclusion. When this happens, we can paint ourselves into a corner really quickly, spending precious time on factors that don't really matter and prematurely eliminating the correct answer choice that's right below our nose. So let's take this on from the start.

Quote:
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 passage repeatedly presents numbers: The year-over-year spending figures, the 25% tax credit, and the years passing by. But the conclusion is much simpler: the 25% tax credit enacted by Congress in 1981 did little or nothing to stimulate such spending.

Here's how the argument breaks down:
  • In 1981, Congress enacted a 25% tax credit, which was intended to promote spending on R&D.
  • Between 1981 and 1984, the growth of spending on R&D decreased each year. We don't have the full picture, but in 1981 this spending increased 16.4%. In 1984, outlays for R&D increased about 8%. And we know that these drops are part of a consistent decline.
  • Therefore, the tax credit did little or nothing to stimulate such spending.

Here's an even simpler breakdown of the logic:
  • In 1981, Congress enacted a tax credit to promote R&D spending.
  • Between 1981 and 1984, R&D spending increases went down, year over year.
  • Therefore, the tax credit did little or nothing to stimulate R&D spending.

Two things catch my eye here:
  • The conclusion is concerned with whether the credit did anything. The numbers are really only here to show us that R&D spending increases continued to go down, despite the credit.
  • R&D spending is still going up each year. It's just going up by less and less. So it's possible that this credit is actually promoting R&D spending! The thing is, we can't tell whether the spending increases are happening because of the credit or because of some other reason.

Quote:
The conclusion of the argument above cannot be true unless which of the following is true?

We're asked to identify an assumption the argument is making. So as we review each answer choice, let's see if any of them confirm that R&D spending increases are NOT caused by the credit.

Quote:
(A) Business spending on research and development is usually directly proportional to business profits.

This has absolutely nothing to do with whether businesses were influenced by the tax credit after it was passed. Eliminate (A).

Quote:
(B) Business spending for research and development in 1985 could not increase by more than 8.3%.

Here's that number trap again! Choice (B) adds a wrinkle to the downward trend that the author describes, but we're not concerned with that trend. We're trying to back up the conclusion that tax credit did little or nothing to stimulate R&D spending. So let's eliminate (B), too.

Quote:
(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.

Remember, the conclusion is that the tax credit did little or nothing to stimulate R&D spending. Does this conclusion depend on the statement given to us by (C)? Definitely not. If anything, (C) slightly weakens the conclusion, because it suggests that the tax credit had some role to play in the spending increases reported each year (thanks ChiranjeevSingh, for calling this out).

We're looking for information supporting the conclusion that the tax credit had little to no role in the spending increases. That's why we eliminate (C).

Quote:
(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.

Choice (D) says that without the tax credit, the size of annual increases in R&D spending would NOT have decreased substantially. In other words, if we took away the tax credit, we would not have seen a substantial change in R&D spending.

This fills our logical gap well! The conclusion states that the tax credit did little or nothing to stimulate R&D spending. (D) confirms that the R&D spending increases that did take place were NOT caused by the tax credit. So let's keep (D) around.

Quote:
(E) Tax credits market for specific investments are rarely effective in inducing businesses to make those investments.

Who cares? The conclusion we're evaluating has nothing to do with the general rate of efficacy for tax credits. We're interested in the impact of a specific tax credit on R&D spending increases between 1981 and 1984. As with choice (A), we can't say that the conclusion depends on (E) to be true, so we'll eliminate this choice as well.

The only good answer choice is (D). I hope this helps!
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Re: Spending on research and development by United States &nbs [#permalink] 13 Dec 2018, 12:59

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