V01-24

Official Solution:


The economic recession of the last year has prompted many organizations to make a large number of publicized layoffs, resulting in thousands of lost jobs. Analysts 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.

The answer to which of the following questions would be most useful in evaluating the significance of the savings patterns described above?


A. What business sectors were most affected by the layoffs?
B. How much of their savings, on average, do laid-off employees deplete before finding new employment?
C. What has been the percent increase in the cost of necessities such as food, housing, and utilities during the period since the layoffs?
D. What percentage of people laid off have savings accounts?
E. What has been the average salary during the period since the layoffs?


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 choose a question whose answer will provide information relevant to evaluating the significance of the fact that the amount of money placed in savings accounts has not increased. The author mentions this savings pattern to support the claim that people have not been cutting their discretionary spending. So we need to find a question whose answer will relate to savings and spending patterns.

A. Information about which business sectors were most affected by the layoffs will not help us establish the relevance of the savings pattern to the claim.

B. The savings used by those who are laid off has no bearing on the savings patterns of those who are not laid off, which is the group this argument addresses ("even if their jobs were secure").

C. CORRECT. This question asks about the prices of necessities such as food and utilities. If people have not been saving their money, perhaps they have been spending it on necessities (as opposed to spending it on discretionary items). If these items have become more expensive, then perhaps people have not been able to save money despite cutting their discretionary spending.

D. The percentage of people with savings accounts is not related to the question of whether people have curtailed their discretionary spending or increased the amount they save.

E. Knowing the statistics for average salaries during the period since the layoffs will not help us evaluate the significance of the spending and savings patterns during that time. It might help to be able to compare the statistics for the periods before and after the layoffs, but knowing just one of those statistics tells us nothing about the trends.


Answer: C
_________________

In E, we have

Savings = Salary - Expenditure

We were given that Savings were constant.

If we get to know that Salary has decreased, we will be able to conclude that Expenditure is also decreased because savings is constant. Alternatively, if we get to know that Salary has increased, we can conclude that Expenditure is also increased.

Through this we can say that change in average salary during the period will help us in getting some insight in saving patterns.

Where is wrong in this argument?
_________________

Do you have a question about choice E?
_________________

Hi souvik101990, sorry for the ambiguity. I reiterated my question.
_________________

Ah, now I get what you mean. Good eye there! But note that the option only talks about the average salary AFTER the lay off. In that case you don't have salary figures before the layoffs to compare with, so you won't know whether they have gone up or down.

Does that help?
_________________

Hi guys,

I have a concern.

In this information "no increase in the amount of money set aside by the general public in savings accounts", "general public" here means everybody including those who are laid-off. So answer B should also right because:

- If those who are laid-off withdraw a lot of money from their saving account, meanwhile the rest of people did cut off in spending and save more, the total of saving accounts of general public will not increase

In context of the previous sentence "Analysts 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", "general public" refers to people with jobs - the contrasting word "however" indicates that the discussion is about people whose jobs are secure.

IMO OA C is correct if following statement in argument is in the context of individual's saving :

"since there has been no increase in the amount of money set aside by the general public in savings accounts"

if above statement is in the context of cumulative saving then D will be more better ANS.
even in the argument says "set aside by the general public in savings accounts" doesn't implies fact presented by observing every individual saving account.
generally this kind of increase/decrease of percentage or number calculated on cumulative balance of all individual of diff type of back accounts.

in real gmat, questions usually have mixing types. In other words, the types of the question will be often combinations of different types. For example, in this question, the question is the combination of evaluation and the explanation.
Hence, C is the right answer.

In other questions, it may cause many troubles identifying the question.

I don't agree with the answer.. If the majority of individuals don't have savings accounts but saved money in cash form.. and the minority of individuals who had savings accounts didn't save money.. this would make it seem like the prediction did not come to pass... do D should definitely be considered

I concur with this thought. What's your reasoning sayantanc2k ?

I also agree. If the people who are laid off don't have savings accounts anyway, then using savings account data is useless.

Can anyone please explain why D is not correct?

How did we infer that we have to consider the situation after the layoff?
In the passage it is written that people should cut back their salaries even if their job is secure anticipating that you never know what happens in the future when they don't have any job. That means they have to cut their salaries while being in the job to be anticipating about the hard times. Right?

Where did I go wrong in understanding?

Bunuel souvik101990 GMATNinja

Can somebody please explain is my reasoning for rejecting D is correct?

I understand that nowhere in the question it is mentioned that people have all their money in the savings account. Savings can also be in other forms. Agreed. However, option D talks about percentage of people having savings account. Even if I know the percentage of people that have savings account, it does not help me determine why the money in the bank was constant when the expenditure was less. Whereas option C is more correct in that it provides a reason for the same.

Option C says "What has been the percent increase in the cost of necessities such as food, housing, and utilities during the period since the layoffs?"

SInce it focus on increase only, there wouldn't be increase in saving at all. Had the option been what hasbeen the percent change in the cost... it would seem correct

Am I missing anything?

Also, can you please shed some light on how to use variance test here

I think this is a poor-quality question and I don't agree with the explanation. The wording of this question is ambiguous. It is not clear to who the "general public" refers. As a result, the correct answer could be B as well.

Hi. Thank you for the feedback and your comment.

1. General public is an expression used to refer to everyone living in the country. It is basically all residents.

2. The question does not ask anything related to the laid off workers. It rather asks about a pattern in saving money:

1. Some people are laid off
2. Everyone else gets scared
3. They expect everyone to stop spending and start saving because fear drives this behavior
4. However there is no increase in savings.

Hope this somewhat clarifies.
Thank you for the feedback again - really appreciate it. We regularly review questions (not me, I am just replying) to update and revise them.

Posted from my mobile device
_________________

Thank you. This is a nice suggestion to update it to “change”.

This will make the question harder actually since “increase” is a tip.

PS. Not familiar with “variance” test. What is it?




Posted from my mobile device
_________________