Some of the most prosperous nations in the world have experienced a pr

Question

Some of the most prosperous nations in the world have experienced a pronounced drop in national savings rates—the percentage of after-tax income an average household saves. This trend will undoubtedly continue if the average age of these nations’ populations continues to rise, since older people have fewer reasons to save than do younger people.

Which one of the following indicates an error in the reasoning leading to the prediction above?

(A) It fail to specify the many reasons younger people have for saving money, and it fails to identify which of those reasons is the strongest.

(B) It assumes that a negative savings rate—the result of the average household’s spending all of its after-tax income as well as some of its existing savings—cannot ever come about in any nation.

(C) It fails to cite statistics showing that the average age of the population of certain nations is rising.

(D) It only takes into account the comparative number of reasons older and younger people, respectively, have for saving, and not the comparative strength of those reasons.

(E) It uses after-tax income as the base for computing the national savings rate without establishing by argument that after-tax income is a more appropriate base than before-tax income.

Bunuel · Accepted Answer

Official Explanation

It is unwarranted to assume that older people’s reasons for saving are as compelling as those of younger people. Older people may have stronger reasons to save. For example, in their youth they may have learned the folly of not saving, or they may be more aware of the need for a retirement fund.  The answer is (D).

mehrotrayashraj · Answer

(A) It fail to specify the many reasons younger people have for saving money, and it fails to identify which of those reasons is the strongest. -- We do not really care about the quality of the reasons. Even if this were true, saying that the reason is not good enough does not help in pointing out an error.

(B) It assumes that a negative savings rate—the result of the average household’s spending all of its after-tax income as well as some of its existing savings—cannot ever come about in any nation. -- Completely out of scope. Lets say there can be a negative rate - Great! - Lets also say there cant be one - Great! - Does it really matter?

(C) It fails to cite statistics showing that the average age of the population of certain nations is rising. We believe everything that is there in the question stem.

(D) It only takes into account the comparative number of reasons older and younger people, respectively, have for saving, and not the comparative strength of those reasons. - CORRECT - It clearly says that the NUMBER of reasons to save is less for elder people. Lets say healthcare is costly - this alone could mean they save 100 and a young person would save only 30. Thus there is an apparent flaw.

(E) It uses after-tax income as the base for computing the national savings rate without establishing by argument that after-tax income is a more appropriate base than before-tax income. - Nonsensical statement.

CrackverbalGMAT · Answer

let us try to simplify the argument --

Older people have fewer reasons to save --> if average age of population increases, national savings rates (% of after-tax income saved) will drop

We have been asked to find a flaw in the reasoning above. Let us take a look at the answer options --

Option A - Incorrect

Ignoring the reasons that younger people have for saving money (and their priority) is not exactly going to destroy the argument. The argument and the conclusion still stand because older people have fewer reasons to save.

Option B - Incorrect

the argument does not assume that a negative savings rate (spending > savings) cannot occur.

Option C - Incorrect

The conclusion/argument is already predicated on the assumption that "the average age of these nation's populations continues to rise". "Citing statistics" is not going to add any new/relevant information.

Option D - Correct

Since the argument does NOT take into account the comparative strengths of "reasons for saving", the argument is not a very strong one. What if older people have fewer reasons but those reasons are far more compelling? We would then expect them to save more than younger people -- the conclusion then would be destroyed.

Option E - Incorrect

The conclusion is about whether national savings rate (% of after tax income saved) will increase or not; whether "after-tax income" is an effective base to calculate savings rate is not really relevant.

pkshankar · Answer

All other except D are clearly out.
Argument just compares the number of reasons without taking into account the relative strength of those reasons.

Sent from my SM-N960F using  GMAT Club Forum mobile app

Thekingmaker · Answer

Yes it was a sweet answer the reasons are as such , only choice that gives us a competiting comparison between old and young other than E hence IMO D

VerbalBot · Answer

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Some of the most prosperous nations in the world have experienced a pr

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Some of the most prosperous nations in the world have experienced a pr

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