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# V01-24

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Math Expert
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16 Sep 2014, 01:55
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25% (medium)

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76% (01:31) correct 24% (01:55) wrong based on 46 sessions

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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?

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16 Sep 2014, 01:55
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.
1. 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.
2. 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").
3. 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.
4. 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.
5. 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.

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Updated on: 14 Oct 2015, 22:43
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?
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Originally posted by rohitmanglik on 10 Oct 2015, 11:02.
Last edited by rohitmanglik on 14 Oct 2015, 22:43, edited 1 time in total.
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14 Oct 2015, 22:25
rohitmanglik wrote:
In E, we have

Savings = Salary - Expenditure

If we get to know that post recession, salary has actually decreased then it that as expenditure has decreased, savings (Salary - Expenditure) has also decreased. So the net effect is zero i.e. no delta in total money in savings account.

Do you have a question about choice E?
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14 Oct 2015, 22:46
Hi souvik101990, sorry for the ambiguity. I reiterated my question.
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15 Oct 2015, 02:25
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rohitmanglik wrote:
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?
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13 Sep 2016, 00:27
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
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13 Sep 2016, 10:30
gomax1199 wrote:
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.
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10 May 2017, 08:01
Bunuel wrote:
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?

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.
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01 Jun 2017, 16:02
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.
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04 Jan 2018, 13:51
1
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
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23 Apr 2018, 14:51
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YYZ wrote:
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 ?
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03 Nov 2018, 10:16
YYZ wrote:
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 also agree. If the people who are laid off don't have savings accounts anyway, then using savings account data is useless.
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09 Mar 2019, 04:42
Can anyone please explain why D is not correct?
Re: V01-24   [#permalink] 09 Mar 2019, 04:42
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# V01-24

Moderators: chetan2u, Bunuel