The economic recession of the last year has prompted many organization

Question

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?

SVaidyaraman · Accepted Answer

This type of question can be handled as follows:

Step 1: Identifying the premise and the conclusion

Prediction: layoffs would cause people to cut back on their discretionary spending even if their jobs were secure, in anticipation of coming hard times

Fact : But there has been no increase in the amount of money set aside by the general public in savings accounts.

The above prediction and fact can be restated as premise and conclusion as follows:

Premise : there has been no increase in the amount of money set aside by the general public in savings accounts.

Conclusion: layoffs did not cause people to cut back on their discretionary spending in anticipation of coming hard times

Step 2 - Finding the type of question:

The question asks how important is the explanation that layoffs would cause people to cut back on their discretionary spending? The conclusion in step 1 says that the explanation was not significant. We are always looking for something that strengthens the conclusion. So the question effectively is  which choice strengthens the fact that the explanation was not significant i.e., people would not cut back on the discretionary spending

Step 3: Finding the right choice

Since this is treated as a strengthen question, the next step is to negate each choice and see which (i) weakens the premise or (ii) negates the conclusion underlined in step 2.

Choice C seems best because if you negate it which is, " There has been no increase in the cost of necessities during the period since the layoffs" means people have money to save and that might as predicted make them to save for future security by cutting on their discretionary spending. Thus the negation satisfies (i) above i.e., weakens the premise.

None of the other choices do the above.

Therefore the answer is choice C.

neha24 · Answer

my take C 
because  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.

so knowing C will help us to evaluate as in we can know if at all they were in position to save money in first place

rishiroadster · Answer

The answer should be B. Savings have not increased as people know how much money will be required to sustain them though the period they are frictionally unemployed.

insanejuxtapose · Answer

The argument is based on the entire set of people - employed and unemployed as indicated by the line "even if their job was secure" where as B just addresses the unemployed people. Hence it cant be the right choice.

I think C is correct as it clearly gives a reason as to why people may not have saved.

Archit143 · Answer

Hi
I would like to vote for C.
A theory is presented, wherein it says, the savings must increase, when lay offs increase. But the current situation goes against the theory. To come to a generalization , I must have the info as to why is such a difference this time. And i think C fills up the gap in the most efficient manner.

Consider Kudos if my post helps!!!

Archit

Carcass · Answer

The strategy id : first of all do not take in account answer to far from the scope of the argument.

Strengthen an weaken the conclusion at the same time.

C straight

Vercules · Answer

Hi Folks,

Updated the post with OA and OE.

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) What business sectors were most affected by the layoffs?

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) How much of their savings, on average, do laid-off employees deplete before finding new employment?

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

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) What percentage of people laid off have savings accounts?

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) What has been the average salary during the period since the layoffs?

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.

Vercules

Carcass · Answer

Thanks Vercules for the explanation

Indeed it seems simple as question but was tough

aj33 · Answer

I wish after 3 years the GMAT exam was similar to the questions that vercules has posted. 
So here we want to know why there has been no money in savings account.
Inflation led to price rise and i don't have money to save. Similar to the company i work in . They make me do work like crazy and don't pay me. These companies i tell you.

Pray for me brothers that i get through

arirux92 · Answer

For evaluation, the best way is to find an alternative reason :

Question : No increase in saving acc hence no cost cutting.

Now think of alternative reasons why there is no increase in saving account even if there is cost cutting

Attacking the saving part :a) Are they investing elsewhere? Maybe they are buying stocks and houses to prepare better
Attacking the cost cutting part : a) Is there a reason why cost cutting is not manifesting to saving? Has the cost of necessities gone up? So even if they are giving up on luxuries, savings remain the same

We can easily eliminate all options talking about laid off employees only. Cost cutting is mention with relevance to general public

C is the only option left

chesstitans · Answer

C shows the direct link with the argument.

JS1290 · Answer

Hi  GMATNinja   GMATNinja Two,

Could you please explain why option C is correct? I eliminated option C because I thought it required too many assumptions. If we say that there has been a 50% increase in the cost of necessitites, there may still have been an increase in the amount of the money saved. If the initial salary was let's say a million dollar/year and total expenses were 100k a year, even with a 50% increase in the total expenses, they may still have been able to save the money in the savings account. If we say, there has been 0% increase in the cost of necessities, the conclusion is not affected and we can say they may still have been able to save the amount in their savings account. Could you please explain where am I going wrong in my thinking? Would greatly appreciate it!

vojsnacks · Answer

I think that there's a far simpler way to look at this:

Only thousands of people lost their jobs. There are millions of people in a country.

As a result, you can eliminate all choices which refer to the the people that lost their job since they represent a very small proportion of total NATIONAL savings.

vojsnacks · Answer

I think that there's a far simpler way to look at this:

Only thousands of people lost their jobs. There are millions of people in a country.

As a result, you can eliminate all choices which refer to the the people that lost their job since they represent a very small proportion of total NATIONAL savings.

VerbalBot · Answer

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