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by beater » Thu Mar 12, 2009 9:53 am
Businesses are suffering because of 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 large 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 most seriously undermines the effectiveness of the govt. plan to increase the amount of money available for development loans for business?

a. When level of personal retirement savings increase, consumer borrowing always increases correspondingly.

b. The increased tax revenue the govt. would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of its 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.
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by moorthy76 » Thu Mar 12, 2009 9:58 am
is it C?
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by nitya34 » Thu Mar 12, 2009 10:02 am
Is it C?
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by santoshnavale » Thu Mar 12, 2009 10:51 am
The idea of the government is to change tax structure to induce more people to save. This will fail if people will not save money no matter what

Hence I believe C iscorrect
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by delhiboy1979 » Fri Mar 13, 2009 2:56 am
A looks correct to me as it implies that the business will still have a problem borrowing loans.
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by bmlaud » Fri Mar 13, 2009 7:37 am
I guess A

I doubt C because it says about some people - not all people.

Even with tax incentives, some people will choose not to increase their levels of retirement savings.
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by S0laris » Fri Mar 13, 2009 7:55 am
Main source in government's plan are taxpayers, and government wants to induce(not to force or oblige) them put some money into pension fund.
One may refuse government's proposition to pile up additional amount of retirement savings.
In this case, government's won't work out.
IMO C
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E

by gmat740 » Fri Mar 13, 2009 8:04 am
I will go with E

This weakening question is having cause and effect analogy. Take a look.

The conclusion of the argument is:
More money in Savings(cause) ==> More money for Borrowing(effect)


We have to undermine this conclusion.....

As some of you think C is the answer
Look out for Option C again
Some People

this word some makes this Option out due to obvious reasons.

B.

during the first year


What about after first year?? No details. SO this Option is also out.

D. This Option hardly effects the argument,so this is also out


We are left with A and E.

Now (A) I t would be better If we personalize this.
Lets say level of personal retirement savings increases from $50 to $100, consumer borrowing also increases, but nothing has been told about to what extent the consumer borrowing increases!!
if the consumer borrowing increases more than savings only then it can undermine the conclusion otherwise not.

(E)
Again Personalize the argument

I am having a salary of $1000 and there is another person who is having a salary of $100


Since the new pay structure is giving the same tax incentive to both of us(lets say we both can save $10 when we invest in savings)

So why will a person with higher income invest, and the people with high income who actually can contribute more to the savings will shy away, thus the conclusion " more money in savings account " gets undermined and so as the argument.


I think now everything is clear hopefully
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Answer

by gmat740 » Fri Mar 13, 2009 8:06 am
Beater can we have the answer.
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by odod » Fri Mar 13, 2009 8:07 am
IMO A

a. When level of personal retirement savings increase, consumer borrowing always increases correspondingly.

If more money is deposited into RSAst, the goal is encourage busines loans but it has a unforseen consquence of consumer loans increasing. Meaning there the plan did not have the desired outcome. Instead of increasing business loans, personal loans increased. The proposed plan having an opposite effect weakens the argument

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by vanessa.m » Sat May 14, 2016 2:31 am
A looks better
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