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Spending on research and development by United States businesses for

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

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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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Originally posted by ykaiim on 08 May 2010, 05:35.
Last edited by Bunuel on 08 Apr 2019, 04:14, edited 2 times in total.
Renamed the topic and edited the question.
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Re: Spending on research and development by United States businesses for  [#permalink]

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New post 04 Jul 2013, 02:12
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jaituteja 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.



Can someone explain b/w C and D??

as per the argument.... tax credit ---> little or nothing to boost the spending on RnD

(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.
If tax credit are higher than 25%, then spending would have increased.. this states that the current 25% is not sufficient enough to boost.

(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.
Let us assume if there are no tax credit, then the little boost that happened would be minimized..... So, the business spending would have been lower...

this is not what D states...

I prefer C over D...
But OA is D..

Please let me know whats wrong in my explanations.... !! Thanks in advance..!! :)


Hi Jaituteja.

I'm glad to help.

Frankly, this one is tough. D is correct.

ANALYZE THE STIMULUS:
(I will reorganize the stimulus to help you see the logic clearly.)

Fact: Spending for RnD: 1980 ==> 1982 increased 16.4
Fact: Spending for RnD: 1983 ==> 1984 increased 8%
Fact: Spending for RnD actually increased, BUT followed a downward trend (the increase of the next year is less than the increase of the last year, and so on….)
Conclusion: the 25 % tax credit enacted by Congress in 1981 did little or nothing to stimulate such spending.

ANALYZE EACH ANSWER:

(A) Business spending on research and development is usually directly proportional to business profits.
Wrong. Out of scope. Nothing about business profits here.

(B) Business spending for research and development in 1985 could not increase by more than 8.3%.
Wrong. If the spending on RnD in 1985 increases 8.2% ==> NOT the downward trend, because the increase in 1984 was only 8%, hence The 25% tax credit helps to stimulate RnD spending. The conclusion fails.

(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.
Wrong. TEMPTING. But it’s wrong.
Please see my example below:
Drink 1 cup of Coke does not help me eat more.
Correct Assumption is: If I don’t drink 1 cup of Coke, I will not eat less.
Because if NO coke, I eat less than I eat with Coke, it means Coke actually help me eat more.
The wrong assumption is: drink 2 cup of Coke help me eat more. Because we just want to compare “drink 1 coke” VS “No Coke” to see whether drink 1 cup of coke help me eat more?.

The similar logic in C, we just want to compare the effect of “25% tax credit” vs “no tax credit” to make a conclusion whether the 25% tax credit actually helps?

(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.
Correct. This is exactly my example in C. The conclusion is: the 25% tax credit did not help stimulate spending on RnD. The assumption must be: If NO 25% tax credit, Spending NOT LESS than it was.
Use Negation technique: If No 25% tax credit, Spending LESS than it was ==> It means the 25% tax credit DID HELP. ==> conclusion fails

(E) Tax credits market for specific investments are rarely effective in inducing businesses to make those investments.
Wrong. Out of scope for sure. Nothing about “specific investment”

Hope it helps.
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Re: Spending on research and development by United States businesses for  [#permalink]

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New post 08 May 2010, 12:49
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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.


Conclusion : Tax credit didn't affected the spending..!!

IMHO Only C and D discuss the issue at hand.

Finally C: It means that "even 25% tax credit affected" the business spending...If tax credits would have been more, spending would have increased...!!
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Re: Spending on research and development by United States businesses for  [#permalink]

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New post 09 May 2010, 05:09
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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.


IMO D. the conclusion says tax credit did not have almost any effect on RnD. To this hold true, assumption has to tell that in absence of tax credit the behaviour of comapnies toward Rnd would be same.
and D says it all
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Re: Spending on research and development by United States businesses for  [#permalink]

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New post 24 May 2010, 20:33
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Mohit .. we need an assumption ... assumptions always support the conclusion .... so if we negate the assumption the entire argument (along with conclusion) will fall out.
Now, please read both C and D and see which supports the conclusion "the 25 percent tax credit did little or nothing to stimulate such spending."
Clearly D supports it as it shows that the 25% Tax credit doesn't has any effect.

Now to test D .. just negate it. Read it as "In the absence of the 25% tax credit, business spending for research and development after 1981 would [strike]not[/strike] have been substantially lower than it was."
Now this shows that our 25% Tax credit had some effect. this is opposite to our conclusion. Hence this is the right answer.

Hope it is clear else I'll explain it in a clearer manner.
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New post 03 Jul 2013, 00:03
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A Very good question...i must agree i have to reread the question 2-3 times...the figures really bugged me up

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?

So basically the trend is there is a decrease in the "increase in expenses in RnD ".. the autor is claiming that the 25% tax credit was not fruitful in promoting as expected...

We are looking for an assumption ... the author assumes if there was no tax credit then the results would have been the same

ykaiim wrote:
(A) Business spending on research and development is usually directly proportional to business profits.
We are talking about tax credit not on business profits


ykaiim wrote:
(B) Business spending for research and development in 1985 could not increase by more than 8.3%.
We are telling whatever it may be the value would have been no better -- it is basically weakening

ykaiim wrote:
(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.
as he is claiming the impact is negligible, so this claim actually is not the assumption

ykaiim wrote:
(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.

CORRECT-the author assumes if there was no tax credit then the results would have been the same

ykaiim wrote:
(E) Tax credits market for specific investments are rarely effective in inducing businesses to make those investments.
This is a conclusion that can be drawn but not an assumption on which my argument lies
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New post 04 Jul 2013, 00:09
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.



Can someone explain b/w C and D??

as per the argument.... tax credit ---> little or nothing to boost the spending on RnD

(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.
If tax credit are higher than 25%, then spending would have increased.. this states that the current 25% is not sufficient enough to boost.

(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.
Let us assume if there are no tax credit, then the little boost that happened would be minimized..... So, the business spending would have been lower...

this is not what D states...

I prefer C over D...
But OA is D..

Please let me know whats wrong in my explanations.... !! Thanks in advance..!! :)
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Re: Spending on research and development by United States businesses for  [#permalink]

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New post 05 Aug 2014, 23:25
pqhai wrote:
jaituteja 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.



Can someone explain b/w C and D??

as per the argument.... tax credit ---> little or nothing to boost the spending on RnD

(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.
If tax credit are higher than 25%, then spending would have increased.. this states that the current 25% is not sufficient enough to boost.

(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.
Let us assume if there are no tax credit, then the little boost that happened would be minimized..... So, the business spending would have been lower...

this is not what D states...

I prefer C over D...
But OA is D..

Please let me know whats wrong in my explanations.... !! Thanks in advance..!! :)


Hi Jaituteja.

I'm glad to help.

Frankly, this one is tough. D is correct.

ANALYZE THE STIMULUS:
(I will reorganize the stimulus to help you see the logic clearly.)

Fact: Spending for RnD: 1980 ==> 1982 increased 16.4
Fact: Spending for RnD: 1983 ==> 1984 increased 8%
Fact: Spending for RnD actually increased, BUT followed a downward trend (the increase of the next year is less than the increase of the last year, and so on….)
Conclusion: the 25 % tax credit enacted by Congress in 1981 did little or nothing to stimulate such spending.

ANALYZE EACH ANSWER:

(A) Business spending on research and development is usually directly proportional to business profits.
Wrong. Out of scope. Nothing about business profits here.

(B) Business spending for research and development in 1985 could not increase by more than 8.3%.
Wrong. If the spending on RnD in 1985 increases 8.2% ==> NOT the downward trend, because the increase in 1984 was only 8%, hence The 25% tax credit helps to stimulate RnD spending. The conclusion fails.

(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.
Wrong. TEMPTING. But it’s wrong.
Please see my example below:
Drink 1 cup of Coke does not help me eat more.
Correct Assumption is: If I don’t drink 1 cup of Coke, I will not eat less.
Because if NO coke, I eat less than I eat with Coke, it means Coke actually help me eat more.
The wrong assumption is: drink 2 cup of Coke help me eat more. Because we just want to compare “drink 1 coke” VS “No Coke” to see whether drink 1 cup of coke help me eat more?.

The similar logic in C, we just want to compare the effect of “25% tax credit” vs “no tax credit” to make a conclusion whether the 25% tax credit actually helps?

(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.
Correct. This is exactly my example in C. The conclusion is: the 25% tax credit did not help stimulate spending on RnD. The assumption must be: If NO 25% tax credit, Spending NOT LESS than it was.
Use Negation technique: If No 25% tax credit, Spending LESS than it was ==> It means the 25% tax credit DID HELP. ==> conclusion fails

(E) Tax credits market for specific investments are rarely effective in inducing businesses to make those investments.
Wrong. Out of scope for sure. Nothing about “specific investment”

Hope it helps.


I agree that D is the right choice but just to fine-tune my negation skills , how would you apply the same in C and get it wrong.

My understanding is : -

C states -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.
Negative C -- > Had/Even the 1981 tax credit been set higher than 25%, business spending for research and development after 1981 would NOT have increased more than it did.

now negative C states that even if the tax credit had increased more than 25 % , business spending would not have increased. This does not negate the conclusion that 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. It talks of a different slab so it is possible that till tax credit limit of 25% , it enhanced the spending and then the physical limit of the expenditure set in and so any more credit was simply unable to give any benefit.

Can you please comment on my thought process ? Is it right or am I tweaking my understanding after the knowing the answer to be able to justify the wrong options ?
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Re: Spending on research and development by United States businesses for  [#permalink]

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New post 29 Jun 2015, 22:16
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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.

Premise 1) : Spending on R&D for 1984 showed increase over 1983.
Premise 2) : Spending on R&D for 1981 showed decrease over 1980.
Conclusion : 25% tax credit didn't help.

Assumption is required to support the conclusion.


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.
This option is a general observation and it is not affecting the conclusion.

(B) Business spending for research and development in 1985 could not increase by more than 8.3%.
1985 is not in the context of the argument

(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.
This option says that if tax credit is > 25%, the spending will be > the actually observed spending.
But the context is we need a option which says 25% tax credit didn't affect the spending at all or affected by a small margin.
Hence it is the close option but incorrect option


(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.
This option says that if 25% tax credit is removed, the affect wouldn't be much. So the 25% has no impact on the spending and that is the assumption of the argument - Correct

(E) Tax credits market for specific investments are rarely effective in inducing businesses to make those investments.
Tax credit markets is out of the scope of the argument
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Re: Spending on research and development by United States businesses for  [#permalink]

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New post 12 Jun 2016, 02:54
This is a cheap question disguised in a lot of mumbo jumbo.
The question is asking :- "The conclusion of the argument above cannot be true unless which of the following is true"?
In other words :- IF THIS OPTIONS IS TRUE, THEN THE CONCLUSION IS ALSO TRUE.
So now first we have to isolate the conclusion and then look for a matching options.

The answer is D

Lets quickly simplify the premise and conclusion. The language is only a close approximation but good enough to understand the argument

Premise 1 ) In 1981 Congress gave 25% tax concession to companies to increase their research budget
Premise 2) But after 1981, Research budget started decreasing. (reverse of what was expected happened)

Conclusion) Congresss' 25% tax concession DID NOT lured companies to increase their research budget.


In other words===> This tax concession had no dramatic effect on research budget.


D) is saying exactly that :-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. -- or we can rephrase -- (EVEN if there was no tax 25 % concession, there would be little difference in companies research budget)




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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Re: Spending on research and development by United States businesses for  [#permalink]

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New post 26 Jul 2018, 19:31
Premise:
1984 showed an increase of about 8 percent over the 1983 level.
1981 – when outlays for research and development increased 16.4 percent over 1980 spending.
Clearly between these two there is a downward trend 16.4 to 8%

Conclusion:
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.

Pre-think:
This is an assumption question.
1. Tax in 1981 was introduced 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. --- business profits is not in scope.

(B) Business spending for research and development in 1985 could not increase by more than 8.3%. --- again 1985 is not in out scope.

(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. --- May be this is true, but again this situation has nothing to do with our case.

(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.--- this choice is saying that if this tax was not there then we would have done better in stimulating the spendings. definitely supporting the conclusion. Also its negation is breaking the conclusion. Must be the answer.

(E) Tax credits market for specific investments are rarely effective in inducing businesses to make those investments. --- I dont understand what this choice is saying, but Tax credit market is not in our scope ans i dnt know what it is .
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Re: Spending on research and development by United States businesses for  [#permalink]

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New post 27 Nov 2018, 01:23
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 businesses for  [#permalink]

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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 businesses for  [#permalink]

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New post 13 Dec 2018, 13:59
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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 businesses for  [#permalink]

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New post 02 Feb 2019, 23:16
A is wrong since it is out of scope. B is wrong since it goes against the conclusion. It tells us that Business spending on R&D DID increase from 1984 to 1985, which shows us that the tax cut did stimulate such spending. E is definitely out of scope too. D and C are confusing but I am going to go with D. D informs us about the behavior of the companies, stating that even if the tax credit was higher, they still would not have spent more on R&D. This strongly supports the argument.
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Re: Spending on research and development by United States businesses for   [#permalink] 02 Feb 2019, 23:16
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