Robin: When a region’s economy is faltering, many people lose their jo

Question

Robin: When a region’s economy is faltering, many people lose their jobs. As a result, spending on consumer goods declines, leading in turn to more lost jobs and a worsening of the economy. Eventually, the economy becomes so bad that prices collapse; the lower prices encourage people to increase spending on consumer goods, and this higher spending results in economic improvement.

Terry: People cannot increase their spending if they have no jobs and no money for anything other than basic necessities, so price collapses cannot lead to economic improvement.

Which one of the following, if true, most undermines Terry’s objection to Robin’s analysis?

(A) Companies hire more workers after the economy starts to improve again, and many newly hired workers then make long-deferred purchases.

(B) Even when economic conditions are worsening, consumers realize that the economy will eventually improve.

(C) Even people who do not lose their jobs spend less in bad economic times and thus have savings available to spend when prices collapse.

(D) People who have lost their jobs must continue to buy some basic goods such as food, even during bad economic times.

(E) The prices of some consumer goods remain stable, even during a general price collapse.

Bunuel · Answer

EXPLANATION FROM Fox LSAT

Robin says the economy is in a constant state of bust and boom. Job losses lead to declining consumer spending, which in turn leads to more job losses, which leads to an even worse economy. Eventually prices collapse. And when prices collapse, consumer spending finally picks back up, leading to economic improvement overall.

Terry says this is bullshit, because people can’t spend more money if they don’t have jobs in the first place. These people will buy only necessities, so price collapses can’t lead to economic improvement.

We’re asked to “undermine” Terry’s reasoning, and my first thought is, hey Terry—can’t the economy improve if people just buy  more  necessities? I mean it might not be the sexiest economic recovery of all time, but isn’t it possible that long lines at Costco, hordes of people buying bulk macaroni and cheese and toilet paper, is still good for the economy overall? I mean Costco does employ people, right?

A) Nah. Terry’s specific objection was about the initial wave of people spending more money after prices collapse. This answer is only relevant to what would happen after the economy has  already  started to improve, so it doesn’t address Terry’s point.

B) Again, this doesn’t address Terry’s point. We need an answer that explains how people  will  spend more money when prices collapse.

C) OK. Not exactly what we were looking for, but it will definitely work. This one actually acknowledges Terry’s point, but says Terry’s point isn’t dispositive of the issue. This answer says, “Terry, it’s true that people without jobs probably aren’t going to rush to the store when prices collapse. But people with jobs will also have been tightening their belts, and when prices collapse those folks are going to have money burning a hole in their pocket.” Terry wouldn’t have much to say back to that, so this is a good answer.

D) No, I don’t think this is it. Terry has already acknowledged that everyone needs to buy some necessities, even during tough times. That doesn’t undermine his point.

E) I don’t see how this strengthens, or weakens, or does anything. Irrelevant.

Our answer is C.

agrasan · Answer

Hi  KarishmaB   MartyMurray

I selected (B) with the reasoning that consumers (when conditions worsen) who realise that the economy will eventually improve will spend their money on goods, this weakens the point made by Terry who objected that price collapse (during worsening conditions) cannot lead to the economic improvement.

Can you please help me understand the flaw in my reasoning? Did I make an unwarranted assumption that those consumers in (B) will eventually spend their money?

guddo · Answer

Robin: When a region’s economy is faltering, many people lose their jobs. As a result, spending on consumer goods declines, leading in turn to more lost jobs and a worsening of the economy. Eventually, the economy becomes so bad that prices collapse; the lower prices encourage people to increase spending on consumer goods, and this higher spending results in economic improvement.

Terry: People cannot increase their spending if they have no jobs and no money for anything other than basic necessities, so price collapses cannot lead to economic improvement.

Which one of the following, if true, most undermines Terry’s objection to Robin’s analysis?

Robin argues that a severe economic downturn leads to price collapses, which then encourage increased consumer spending and economic recovery. Terry objects that unemployed people with no money for non-essentials cannot increase spending, so price collapses cannot spark improvement.

We need to find the option that most undermines Terry's objection.

Terry assumes that because many people are unemployed and have no money beyond necessities, they cannot increase spending even if prices drop. Thus, price collapses cannot trigger the increased spending Robin predicts.

(A) Companies hire more workers after the economy starts to improve again, and many newly hired workers then make long-deferred purchases.

This describes what happens after improvement has begun, but Terry’s objection is about the start of improvement. It does not show how spending could increase when prices first collapse, so it does not undermine Terry.

(B) Even when economic conditions are worsening, consumers realize that the economy will eventually improve.

Consumer optimism does not provide them with money to spend. Even if people expect recovery, Terry’s point about lacking funds still holds. This does not address the ability to spend.

(C) Even people who do not lose their jobs spend less in bad economic times and thus have savings available to spend when prices collapse.

Correct.  This directly counters Terry’s assumption. It shows that a group of people (those still employed) have accumulated savings because they reduced spending during the downturn. When prices collapse, these savings enable them to increase spending, potentially kickstarting economic improvement. Thus, price collapses can lead to higher spending even if the unemployed cannot spend more.

(D) People who have lost their jobs must continue to buy some basic goods such as food, even during bad economic times.

This confirms that the unemployed spend on necessities, but it does not show they can increase overall spending. Lower prices might reduce their necessary spending, but that does not guarantee they will spend more on other goods, especially if they have no extra money. It does not undermine Terry.

(E) The prices of some consumer goods remain stable, even during a general price collapse.

This weakens Robin’s premise that lower prices encourage spending, but it does not address Terry’s objection about the inability to spend. Terry’s argument is about lack of money, not about price changes. This option does not undermine Terry.

So, option (C) undermines Terry’s objection by providing a mechanism through which spending can increase after price collapses, employed individuals with savings can spend more. This shows that price collapses can indeed lead to increased spending and economic improvement, even if the unemployed cannot contribute.

Answer: (C)

guddo · Answer

I think your reasoning contains an unwarranted assumption. Option (B) only states that consumers realize the economy will eventually improve. It does not say they will spend money because of that realization. Terry’s objection is specifically about the lack of money to spend, even if people are optimistic, without cash they cannot increase spending. Realizing the economy will improve does not provide funds, nor does it guarantee anyone will actually buy more. Therefore, (B) does not address Terry’s core point.

In contrast, option (C) directly supplies the missing element: it identifies a group (employed people) who have savings because they spent less during the downturn. When prices collapse, they have money available to spend. This directly undermines Terry’s claim that no one can increase spending.

In contrast, option (C) directly supplies the missing element: it identifies a group (employed people) who have  savings  because they spent less during the downturn. When prices collapse, they have money available to spend. This directly undermines Terry’s claim that no one can increase spending.

agrasan · Answer

Thanks  guddo , quite helpful to me.

Robin: When a region’s economy is faltering, many people lose their jo

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