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Economist A: Banks offer only small interest rates for money

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by BTGmoderatorDC » Sat Jun 15, 2019 4:51 pm
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Economist A: Banks offer only small interest rates for money being stored in savings accounts. It is much better to create an investment portfolio with a financial management company in order to take advantage of money that has been put aside.
Economist B: Investments require speculation. I advise that at the moment, storing money in a bank savings account is the wise thing to do.

Which of the following, if true, most weakens economist A's advice?

A) Maintaining a bank savings account requires the payment of handling fees which can be costly, depending on the bank.
B) Investment portfolios are designed to maximize profits while reducing the risk to a minimum by dividing the investments to cover a variety of markets.
C) A recent economic crisis led to the closing of several banks and to the subsequent loss of a great deal of the customers' savings.
D) Owners of savings accounts in banks are only allowed to withdraw their money on certain dates decided upon when the account was created.
E) A financial statistics report shows that 97% of all investment portfolios created in the last 3 years hold losses on their initial investments.

OA E

Source: Economist Gmat
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Source: — Critical Reasoning |

by deloitte247 » Sat Jun 22, 2019 5:01 am
We must find out what flaws the Economist A's arguably the most.
Premise:
-In order to take advantage of the money being put aside, it is better to create an investment portfolio with a financial management company.
-The wise thing to do is to store money in a bank's savings account.
Explanation 1: Due to the small interest rates, economist A believes in a better system than storing money in savings accounts.
Explanation 2: Due to the speculation required by investments, economist B believes storing money in the bank is the wise thing to do.

OPTION A - INCORRECT
If this is true, it gives a reason to support the economist advice of not saving money in the bank.

OPTION B - INCORRECT
If this is true, it supports explanation 1.

OPTION C - INCORRECT
The closing of banks and loss of customer's savings gives more reason why explanation 2 should be ignored and support explanation 1.

OPTION D - INCORRECT
If true, this doesn't seem to flaw the economist A's argument in any way.

OPTION E - CORRECT
The report showing the 97% loss in initial investments is a major flaw to the economist argument. It shows that it isn't better to invest in a financial management company.
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