Lawmaker: Raising taxes is not the only means of reducing

Question

Lawmaker: Raising taxes is not the only means of reducing government debt. The government’s stockpile of helium is worth 25 percent more, at current market prices, than the debt accumulated in acquiring and storing it. Therefore, by selling the helium, the government can not only pay off that debt but reduce its overall debt as well.

Which of the following is an assumption on which the argument depends?

A. The government has no current need for helium.
B. Twenty-five percent of the debt the government has accumulated in Stockpiling helium is not an insignificant portion of the government’s Total debt.
C. It is not in the lawmaker’s interest to advocate raising taxes as a Means of reducing government debt.
D. Attempts to sell the government’s helium will not depress the market Price of helium by more than 25 percent.
E. The government will not incur any costs in closing its facilities for stockpiling helium.

abhimahna · Accepted Answer

Notice, conclusion is that selling helium will reduce the overall debt of the government.

In B, we are given that 25% of the total debt the government has accumulated in Stockpiling helium is not an insignificant portion.

Negate it, 25% of the total debt the government has accumulated in Stockpiling helium is an insignificant portion. So, what is insignificant here?? Is it 1% or 30% or what? We don't know. May be its 30%. So, selling it may reduce that 30% amount. We are no where given the conclusion that the larger portion of the overall debt is reduced. So, whether its insignificant or significant, the debt is obviously going to reduce. hence, this statement doesn't shatter the conclusion. Hence, incorrect.

Now, option D : Attempts to sell the government’s helium will not depress the market Price of helium by more than 25 percent.

Negate it : Attempts to sell the government’s helium will depress the market Price of helium by more than 25 percent. Now, since we are saying that the market price will be reduced by more than 25%, so it casts doubt whether we will be able to pay the debt. We are given that it is currently at 25% higher than its actual price. So, if the price is reduced by 25%, we may actually get the lower amount of money that would lead to not able to pay the helium price as well. Hence, the conclusion is shattered.

lets say Helium bought at 100, Current price = 125, after selling reduced price = 93.75, which is less than the original price. I hope its clear now.

shalva · Answer

Main conclusion of the argument says that helium can be sold to pay off the government debt (well some part of it).

Let's assume that government does in fact have some urgent need of helium. Does this fact change anything? You can still sell the helium and pay off the debt (as long as market price are high enough). The conclusion still holds.

The crucial assumption argument depends on concerns market prices. If prices decrease by more than 25%, there will be no more money left to pay off public debt.

So IMO it should be (D)

BarneyStinson · Answer

A is simple and straight-forward. What is wrong with it? Why can't it be the correct answer?

nishant12600 · Answer

I m confused between B and D, need expert opinion.
 sayantanc2k  please help

sayantanc2k · Answer

In addition to the explanation by  abhimahna  above, please note that an assumption MUST BE TRUE. Whenever a specific number or percentage is observed in an option of an assumption question, there are chances that by changing the number or percentage the implication of the option does not change. Hence assumption of  that particular number or percentage  need not necessarily be required. Such options can then be easily eliminated. Here instead of 25% mentioned in option B take any other larger percentage - the implication does not change. So the assumption of that specific 25% is not required. Without further analysis this option can be dropped.

KarishmaB · Answer

Premises  : 
Raising taxes is not the only means of reducing government debt
Government’s stockpile of helium is worth 25 percent more, at current market prices, than the debt accumulated in acquiring and storing it.

Conclusion  :
By selling the helium, the government can not only pay off that debt but reduce its overall debt as well.

Let's say when the Govt acquired and stored the helium, it incurred a debt of $100. Now the value of that helium is $125.
So the conclusion says that if you sell the helium, you can pay off the $100 debt AND you can further pay off $25 of the Govt debt.

A. The government has no current need for helium.

We need to worry only about how selling off helium will impact the current debt level of the Govt. Whether selling off helium is ok from other angles is not relevant to our argument.

B. Twenty-five percent of the debt the government has accumulated in Stockpiling helium is not an insignificant portion of the government’s Total debt.

The figure of 25% given here is just to confuse you. It has no relevance and no connection to the 25% increase in value of helium. The option could very well have been "the debt the government has accumulated in Stockpiling helium is not an insignificant portion of the government’s Total debt". It doesn't matter whether this debt is a small or big part of the overall debt. The conclusion only says that "this debt" can be taken care of and its overall debt can be reduced. That will be true irrespective of the relative size of this debt.

C. It is not in the lawmaker’s interest to advocate raising taxes as a Means of reducing government debt.

The lawmaker's interest is irrelevant.

D. Attempts to sell the government’s helium will not depress the market Price of helium by more than 25 percent.

The impact of selling helium on Govt's debt is based on the current price of helium. If the current price of helium depresses because of too much helium supply in the market, it may not sell at the current price. If the reduction in price is more than the "25% that it was extra", selling off helium may not be able to take care of "this debt". 
This is a valid assumption.

E. The government will not incur any costs in closing its facilities for stockpiling helium.

The costs incurred in closing facilities are irrelevant. We just need to worry about what we will get when we sell the helium.

Answer (D)

KarishmaB · Answer

No, option (B) is not against what is mentioned in the argument.

The argument tells us that the helium's current market price is 25% more than the debt incurred in buying and storing it. 
Option (B) says that 25% of the debt incurred in buying and storing helium is a significant amount, a relatively big amount. So it will bring down the debt by a significant amount if helium is sold. This is additional info. But it is not an assumption and hence not the answer. 
Whether the decrease in debt is a big amount or a small amount, it doesn't matter to our argument. The fact remains that the debt will come down.

ktzsikka · Answer

VeritasKarishma I understand why option D is correct but I am unable to eliminate option E (even by negation) What if the costs incurred in closing the facilities are more than the 25% profit that the govt. will earn on selling the stockpiled Helium? In that case, it becomes essential to know that government will not incur any costs in closing its facilities for stockpiling helium. Please help! Thanks in advance.

KarishmaB · Answer

We are told that currently the Govt is incurring costs for storing helium. If we sell it, we will be able to eliminate the acquisition & storage cost debts and some more. 
What we do with the premises where we currently store helium is irrelevant. It is beyond the scope of our argument. It is not discussed. Perhaps something else will be stored there. Perhaps it will be closed down. Perhaps it will be torn down and a residential complex will be made in its place. We don't know.
The point is that we don't need to assume what might happen to it and what may the cost of that be. It is out of scope for us. The argument does not discuss it.

KarishmaB · Answer

Also, note that even if it were relevant and you did negate it, you would get:

Negated E. The government will incur some cost in closing its facilities for stockpiling helium.

What that cost is, we don't know. It may be very little. Our conclusion can still stand. We could still wipe out acquisition and storage debt and some more. 
We do not need to assume that there will be no costs associated with it. Hence, even then, (E) would not be an assumption.

Nipunh · Answer

KarishmaB   MartyMurray   GMATNinja  I have the same reasoning, please help. this is the reason why I eliminated it because it looks like it is a can be true, and doesnt have to be a must be true.... if we say 25% being refered here is actually only the 25% extra (which by the language of it, I am unable to bridge the gap).. then it will make sense... but I thought about it in the same manner as  moonriver0523  did. hence, I went with A, even though it was extreme...

KarishmaB · Answer

Negation of (D):  Attempts to sell the government’s helium WILL depress the market Price of helium by more than 25 percent.

If cost of acquiring and storing is say $100 (debt), the current price is $125.

The argument says that govt should sell it at $125 and remove its debt and then some.
 
What if helium's price reduces by more than 25% of $125? Then helium's price will become $93.75 and it won't even take care of helium debt. It is likely that when the option says 25%, it means the extra price of $25 only and hence the assumption is that helium's price will not go below $100 because that means debt will not be completely wiped off, but even if we take it as 25% of market price, that is certainly an assumption too. The argument is assuming that price of helium will not reduce by more than 20%, so certainly it is assuming that it will not reduce by more than 25% too.

SolomiiaF · Answer

A.  The government has no current need for helium.

If they had needed it, they would have used it instead of storing it.

D.  Attempts to sell the government’s helium will not depress the market Price of helium by more than 25 percent.

If the supply depresses the prices by 25%, the government will not be able to cover the debt for acquiring and storing helium.

E.  The government will not incur any costs in closing its facilities for stockpiling helium.

Even if they incur some costs for closing facilities, they could have covered it by the profit they earn from selling helium, and would still be able to reduce the overall cost

Lawmaker: Raising taxes is not the only means of reducing

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Lawmaker: Raising taxes is not the only means of reducing

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