The downturn in the economy last year has prompted many companies to

Question

The downturn in the economy last year has prompted many companies to make widely publicized layoffs, resulting in thousands of lost jobs. Economists predicted that these layoffs would cause people generally to cut back on their discretionary spending, even if their jobs were secure, in anticipation of coming hard times. However, this prediction has not come to pass, since there has been no increase in the amount of money set aside by the general public in savings accounts.

Which one of the following is an assumption on which the argument depends?

A. The economy has not improved in recent months.
B. There has been no increase in the amount of money invested in stocks, certificates of deposit, or other savings vehicles.
C. Salaries have decreased as a result of the economic downturn.
D. No business sectors have seen growth in recent months.
E. Those who were laid off have been able to find other employment.

helipatel91198 · Answer

Can someone please help me here I am still unable to understand why can't the answer be A.
Also what is the general approach one can use for assumption questions?

thanks in advance

EtaCarnia · Answer

Hi  EMPOWERgmatVerbal   Bunuel   GMATNinja  ,

Can anyone of you help me with this one please.

I have some problem in understanding the passage .

" However, this prediction has not come to pass, since there has been no increase in the amount of money set aside by the general public in savings accounts."

This would mean that the money saved by the people in their accounts have not increased but still the prediction of the Economist was incorrect. This would mean that the money in the account was constant but still people were spending the money.

So how could the option B the right answer ? I am confused .

UMANGSURANA · Answer

A. The economy has not improved in recent months.
- Incorrect. Even if the economy has improved in recent months, the conclusion can still hold that people have not cut on their expenses.

B. There has been no increase in the amount of money invested in stocks, certificates of deposit, or other savings vehicles.
- Correct. Author says that because amount of savings has not increased in the savings account, prediction has not come to pass. The author assumes that people have not saved money through any other vehicle.

C. Salaries have decreased as a result of the economic downturn.
- Incorrect.

D. No business sectors have seen growth in recent months.
- Incorrect.

E. Those who were laid off have been able to find other employment.
- Incorrect.

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Bunuel · Answer

OFFICIAL EXPLANATION

The conclusion of the argument is that the prediction of decreased consumer spending has not come to pass. The evidence for this is that there has been no corresponding increase in the amount of money set aside in savings accounts by the general public. This question asks us to find an assumption on which this argument is based. The author assumes that the mere fact that people generally have not been adding more money to their savings accounts means they have not cut down on their discretionary purchases (i.e., non-essential items). In order for this to be valid, we must assume that a savings account is the only mechanism by which someone would save any extra money when reducing discretionary spending.

(A) The state of the economy in the last few months has no bearing on the claim that a lack of extra money deposited in consumer savings accounts is evidence that consumer spending has not decreased.

(B) CORRECT.  If there was an alternate explanation for the lack of increase in savings accounts, the claim that the decrease in spending has not taken place would be greatly weakened. This assumption guarantees us that at least one other possible explanation for the lack of increase in savings (i.e. an increase in stocks, certificates of deposit, or other savings vehicles) is NOT true.

(C) Assuming that salaries decreased would actually weaken this argument. If salaries decreased, that may explain the decrease in the amount of money being put aside in savings without necessarily implying a decrease in spending. People could be making less, spending the same, and therefore saving less.

(D) The lack of growth in business sectors has nothing to do with what consumers are doing with their money during the same time period.

(E) The argument says the prediction was made "even   jobs were secure." People who find other employment, therefore, would still fall under the economists' prediction and would, if the prediction were true, be expected to cut discretionary spending and save more money.

Vadera96 · Answer

They're saying that the prediction hasn't happened yet (ie, they are still expecting the hard times to happen because there has been no increase in the savings account). So if the general public had put money elsewhere, it would show that they are in fact saving and that the prediction would be coming to an end or has already ended. If you negate it, the AC would say that there is money being set aside for other savings accounts which would ruin their assumption.

Vadera96 · Answer

They're saying that the prediction hasn't happened yet (ie, they are still expecting the hard times to happen because there has been no increase in the savings account). So if the general public had put money elsewhere, it would show that they are in fact saving and that the prediction would be coming to an end or has already ended. If you negate it, the AC would say that there is money being set aside for other savings accounts which would ruin their assumption.

VerbalBot · Answer

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