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100 points for $49 worth of Veritas practice GMATs FREE VERITAS PRACTICE GMAT EXAMS Earn 10 Points Per Post Earn 10 Points Per Thanks Earn 10 Points Per Upvote ## out shopping ##### This topic has expert replies Senior | Next Rank: 100 Posts Posts: 72 Joined: 05 Nov 2013 Followed by:4 members ### out shopping by Ankitaverma » Sat Dec 07, 2013 12:24 pm Canadians now increasingly engage in "out shopping," which is shopping across the national border, where prices are lower. Prices are lower outside of Canada in large part because the goods-and-services tax that pays for Canadian social services is not applied. Which one of the following is best supported on the basis of the information above? (A) If the upward trend in out-shopping continues at a significant level and the amounts paid by the government for Canadian social services are maintained, the Canadian goods-and-services tax will be assessed at a higher rate. (B) If Canada imposes a substantial tariff on the goods bought across the border, a reciprocal tariff on cross-border shopping in the other direction will be imposed, thereby harming Canadian businesses. (C) The amounts the Canadian government pays out to those who provide social services to Canadians are increasing. (D) The same brands of goods are available to Canadian shoppers across the border as are available in Canada. (E) Out-shopping purchases are subject to Canadian taxes when the purchaser crosses the border to bring them into Canada. Q/A-a ### GMAT/MBA Expert Elite Legendary Member Posts: 10346 Joined: 23 Jun 2013 Location: Palo Alto, CA Thanked: 2867 times Followed by:503 members GMAT Score:800 by Rich.C@EMPOWERgmat.com » Sat Dec 07, 2013 7:00 pm Hi Ankitaverma, This CR prompt is an inference question, which means that the correct answer will logically "flow" from the given information. We need to know the "facts" in the prompt so we can figure out what "comes next." The Facts: -Canadians engage in "out shopping", shopping across the border, and this is happening more often -Prices across the border are lower (which is why Canadians shop across the border) -Shopping in Canada includes "the goods and services tax"; this tax pays for Canadian social services. The Logic: The logic here is heavily based on "causality" (the idea that one thing causes another). The goods and services tax pays for Canadian social services. If less tax money is collected, then Canadian social services would be affected. The correct answer A discusses the causality and what will likely occur next if "out shopping" continues. GMAT assassins aren't born, they're made, Rich Contact Rich at Rich.C@empowergmat.com Master | Next Rank: 500 Posts Posts: 379 Joined: 30 Sep 2008 Location: NY Thanked: 28 times Followed by:11 members by abhasjha » Mon Dec 09, 2013 1:01 am Hi Ankitaverma, Why are prices in Canada high ? Due to goods and services tax that account for social services. If more and more Canadians shop outside then the collection from goods and services tax will decrease ... If social services were to remain at same level then there is only one way we can compensate and that is by increasing the goods and services tax further. This is what option A states. Hence option A . Master | Next Rank: 500 Posts Posts: 359 Joined: 11 Mar 2009 Location: INDIA Thanked: 50 times Followed by:2 members by Abhishek009 » Mon Dec 09, 2013 7:12 am Ankitaverma wrote:Canadians now increasingly engage in "out shopping," which is shopping across the national border, where prices are lower. Prices are lower outside of Canada in large part because the goods-and-services tax that pays for Canadian social services is not applied. Out Shopping - Shopping outside Canada , where prices are low. Low cost since , Canadian goods and service tax for social services aren't imposed there. Consider the situation - Out of Factory Cost is$ 100

So Cost of the Goods in Canada is \$ 120

Which one of the following is best supported on the basis of the information above? - Suggests we must drive a mile and a half more with the same reasoning applied in the passage..

(B) If Canada imposes a substantial tariff on the goods bought across the border, a reciprocal tariff on cross-border shopping in the other direction will be imposed, thereby harming Canadian businesses.

Changes the direction or Course of flow by introducing new situations.

(C) The amounts the Canadian government pays out to those who provide social services to Canadians are increasing.

Not at all , if people are increasingly out shopping then they will not buy Canadian Goods , hence amount of Revenue generated will be significantly decrease.

(D) The same brands of goods are available to Canadian shoppers across the border as are available in Canada.

True , it's an assumption . Canadians are going for Out Shopping , because they are either finding better goods out of Canada/ the same Brands are available out of Canada at a cheaper Price.

(E) Out-shopping purchases are subject to Canadian taxes when the purchaser crosses the border to bring them into Canada.

This can be a potential solution to the said decrease in Government Revenue.

(A) If the upward trend in out-shopping continues at a significant level and the amounts paid by the government for Canadian social services are maintained, the Canadian goods-and-services tax will be assessed at a higher rate.

This sentence consists of 3 Parts -

1. If the Same trend continues...

2. Amount paid to Canadian Social Services remains constant.

3. Possible course of action which can be taken.

To explain it better -

IF the Same Trend ( Out shopping ) continues and if the amount paid to Social Services ( Out of Tax revenue generated from Sales in Canada ) remains constant then the government will have to increase the taxation liabilities further to compensate for the dip in Government revenue...

To me this can be a probable logic , plz correct me if I am wrong..
Abhishek

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