• Economist Test Prep
    Free Trial & Practice Exam
    BEAT THE GMAT EXCLUSIVE

    Available with Beat the GMAT members only code

    MORE DETAILS
    Economist Test Prep
  • PrepScholar GMAT
    5 Day FREE Trial
    Study Smarter, Not Harder

    Available with Beat the GMAT members only code

    MORE DETAILS
    PrepScholar GMAT
  • Magoosh
    Magoosh
    Study with Magoosh GMAT prep

    Available with Beat the GMAT members only code

    MORE DETAILS
    Magoosh
  • EMPOWERgmat Slider
    1 Hour Free
    BEAT THE GMAT EXCLUSIVE

    Available with Beat the GMAT members only code

    MORE DETAILS
    EMPOWERgmat Slider
  • Varsity Tutors
    Award-winning private GMAT tutoring
    Register now and save up to $200

    Available with Beat the GMAT members only code

    MORE DETAILS
    Varsity Tutors
  • Veritas Prep
    Free Veritas GMAT Class
    Experience Lesson 1 Live Free

    Available with Beat the GMAT members only code

    MORE DETAILS
    Veritas Prep
  • Kaplan Test Prep
    Free Practice Test & Review
    How would you score if you took the GMAT

    Available with Beat the GMAT members only code

    MORE DETAILS
    Kaplan Test Prep
  • Target Test Prep
    5-Day Free Trial
    5-day free, full-access trial TTP Quant

    Available with Beat the GMAT members only code

    MORE DETAILS
    Target Test Prep
  • e-gmat Exclusive Offer
    Get 300+ Practice Questions
    25 Video lessons and 6 Webinars for FREE

    Available with Beat the GMAT members only code

    MORE DETAILS
    e-gmat Exclusive Offer

OG12 Question 88 Reasoning

This topic has 1 expert reply and 4 member replies
GMATMadeEasy Legendary Member Default Avatar
Joined
30 Nov 2009
Posted:
768 messages
Followed by:
7 members
Upvotes:
21

OG12 Question 88 Reasoning

Post Mon Apr 25, 2011 6:32 am
Businesses are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpayers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers.
Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?
(A) When levels of personal retirement savings increase, consumer borrowing always increases
correspondingly.
(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan.
(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are
insufficient to meet their loan repayment schedules.
(E) The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings.

OA is A;
I have a question from Answer choice D. If Bankers do not continue to lend money to business whose prospective earnings are insufficient to meet their loan repayment schedules , wouldn't it be a hinderance to effectiveness of the plan.

OG explanation says: The plan would increase the money available specifically for development loans, not existing loans. Where does the question distinguish whether it talks about existing loans or new loans and where does it says that the existing loan are not development loans ?

The evidence that 'Businesses are suffering because of a lack of money available for development loans' does not help to answer the any of the above question.

However, I am absolutely fine with the right answer choice and understand that that clearly attacks the line of reasoning on which the argument is based. But have issues understanding D and to understand on what basis it should be removed.

  • +1 Upvote Post
  • Quote
  • Flag
Need free GMAT or MBA advice from an expert? Register for Beat The GMAT now and post your question in these forums!
Top Reply
Post Mon Apr 25, 2011 1:20 pm
GMATMadeEasy wrote:
Businesses are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpayers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers.
Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?

(A) When levels of personal retirement savings increase, consumer borrowing always increases
correspondingly.
(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan.
(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are
insufficient to meet their loan repayment schedules.
(E) The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings.

OA is A;
I have a question from Answer choice D. If Bankers do not continue to lend money to business whose prospective earnings are insufficient to meet their loan repayment schedules , wouldn't it be a hinderance to effectiveness of the plan.

OG explanation says: The plan would increase the money available specifically for development loans, not existing loans. Where does the question distinguish whether it talks about existing loans or new loans and where does it says that the existing loan are not development loans ?

The evidence that 'Businesses are suffering because of a lack of money available for development loans' does not help to answer the any of the above question.

However, I am absolutely fine with the right answer choice and understand that that clearly attacks the line of reasoning on which the argument is based. But have issues understanding D and to understand on what basis it should be removed.
Don't overthink arguments.
Learn to recognize the common flaws and assumptions and understand how the GMAT tends to weaken and strengthen each type.

Premise: The plan will induce individuals to put more money into their retirement accounts, making more funds available for borrowers.
Conclusion: There will be an increase in the amount of money available for businesses.

This argument exhibits a shift in scope and in language.
The premise is about X (borrowers). The conclusion is about Y (businesses).
The argument assumes that X and Y are connected. But borrowers and businesses are not the same thing.
The correct answer will break the connection between X and Y. It will show that the money available for borrowers will not necessarily be available for businesses.

Answer choice A does just what we need:
If the money put into retirement accounts leads to a corresponding increase in borrowing by consumers, then the money in the retirement accounts will not be available for businesses.

The correct answer is A.

Answer choice D is outside the scope and does not weaken the conclusion.
The conclusion is not about whether any particular business will be able to qualify for a loan.
The conclusion is only about whether there will be money available for businesses to borrow.
Not quite the same thing. Even if some businesses don't qualify, the money would still be available for businesses that do.
Thus, the conclusion would remain valid.

_________________
Mitch Hunt
GMAT Private Tutor
GMATGuruNY@gmail.com
If you find one of my posts helpful, please take a moment to click on the "Thank" icon.
Available for tutoring in NYC and long-distance.
For more information, please email me at GMATGuruNY@gmail.com.

  • +1 Upvote Post
  • Quote
  • Flag
Free GMAT Practice Test How can you improve your test score if you don't know your baseline score? Take a free online practice exam. Get started on achieving your dream score today! Sign up now.
GMATMadeEasy Legendary Member Default Avatar
Joined
30 Nov 2009
Posted:
768 messages
Followed by:
7 members
Upvotes:
21
Top Reply
Post Mon Apr 25, 2011 2:47 pm
@Mitch:
Quote:
The conclusion is not about whether any particular business will be able to qualify for a loan.
The conclusion is only about whether there will be money available for businesses to borrow.
Not quite the same thing.
Thanks a lot for pitching in. I re-read the question and realized in question stem , the scope is limited to available of money for loan. Trying to make CR a pleasure and my strong point but need to get it integrated a bit more to avoid such errors as overlooking a few things.

Part of question stem: The effectiveness of the government's plan is to increase the amount of money available for development loans for businesses

Conclusion is the KING, and GMAT takers are simple creatures who have to abide by KING'S laws Smile

  • +1 Upvote Post
  • Quote
  • Flag
Post Mon Apr 25, 2011 1:20 pm
GMATMadeEasy wrote:
Businesses are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpayers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers.
Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?

(A) When levels of personal retirement savings increase, consumer borrowing always increases
correspondingly.
(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan.
(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are
insufficient to meet their loan repayment schedules.
(E) The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings.

OA is A;
I have a question from Answer choice D. If Bankers do not continue to lend money to business whose prospective earnings are insufficient to meet their loan repayment schedules , wouldn't it be a hinderance to effectiveness of the plan.

OG explanation says: The plan would increase the money available specifically for development loans, not existing loans. Where does the question distinguish whether it talks about existing loans or new loans and where does it says that the existing loan are not development loans ?

The evidence that 'Businesses are suffering because of a lack of money available for development loans' does not help to answer the any of the above question.

However, I am absolutely fine with the right answer choice and understand that that clearly attacks the line of reasoning on which the argument is based. But have issues understanding D and to understand on what basis it should be removed.
Don't overthink arguments.
Learn to recognize the common flaws and assumptions and understand how the GMAT tends to weaken and strengthen each type.

Premise: The plan will induce individuals to put more money into their retirement accounts, making more funds available for borrowers.
Conclusion: There will be an increase in the amount of money available for businesses.

This argument exhibits a shift in scope and in language.
The premise is about X (borrowers). The conclusion is about Y (businesses).
The argument assumes that X and Y are connected. But borrowers and businesses are not the same thing.
The correct answer will break the connection between X and Y. It will show that the money available for borrowers will not necessarily be available for businesses.

Answer choice A does just what we need:
If the money put into retirement accounts leads to a corresponding increase in borrowing by consumers, then the money in the retirement accounts will not be available for businesses.

The correct answer is A.

Answer choice D is outside the scope and does not weaken the conclusion.
The conclusion is not about whether any particular business will be able to qualify for a loan.
The conclusion is only about whether there will be money available for businesses to borrow.
Not quite the same thing. Even if some businesses don't qualify, the money would still be available for businesses that do.
Thus, the conclusion would remain valid.

_________________
Mitch Hunt
GMAT Private Tutor
GMATGuruNY@gmail.com
If you find one of my posts helpful, please take a moment to click on the "Thank" icon.
Available for tutoring in NYC and long-distance.
For more information, please email me at GMATGuruNY@gmail.com.

  • +1 Upvote Post
  • Quote
  • Flag
Free GMAT Practice Test How can you improve your test score if you don't know your baseline score? Take a free online practice exam. Get started on achieving your dream score today! Sign up now.
GMATMadeEasy Legendary Member Default Avatar
Joined
30 Nov 2009
Posted:
768 messages
Followed by:
7 members
Upvotes:
21
Post Mon Apr 25, 2011 2:47 pm
@Mitch:
Quote:
The conclusion is not about whether any particular business will be able to qualify for a loan.
The conclusion is only about whether there will be money available for businesses to borrow.
Not quite the same thing.
Thanks a lot for pitching in. I re-read the question and realized in question stem , the scope is limited to available of money for loan. Trying to make CR a pleasure and my strong point but need to get it integrated a bit more to avoid such errors as overlooking a few things.

Part of question stem: The effectiveness of the government's plan is to increase the amount of money available for development loans for businesses

Conclusion is the KING, and GMAT takers are simple creatures who have to abide by KING'S laws Smile

  • +1 Upvote Post
  • Quote
  • Flag
mundasingh123 Legendary Member Default Avatar
Joined
15 Jan 2010
Posted:
2330 messages
Followed by:
26 members
Upvotes:
56
Post Mon Apr 25, 2011 9:36 am
There is no point contesting an OG OA

_________________
I Seek Explanations Not Answers

  • +1 Upvote Post
  • Quote
  • Flag

Best Conversation Starters

1 lheiannie07 116 topics
2 LUANDATO 67 topics
3 swerve 66 topics
4 ardz24 61 topics
5 AAPL 59 topics
See More Top Beat The GMAT Members...

Most Active Experts

1 image description Scott@TargetTestPrep

Target Test Prep

213 posts
2 image description Brent@GMATPrepNow

GMAT Prep Now Teacher

177 posts
3 image description Jeff@TargetTestPrep

Target Test Prep

168 posts
4 image description Rich.C@EMPOWERgma...

EMPOWERgmat

133 posts
5 image description GMATGuruNY

The Princeton Review Teacher

126 posts
See More Top Beat The GMAT Experts