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HOUSEHOLDS DEBT-CR

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HOUSEHOLDS DEBT-CR

by ansh.kumar » Fri Jul 16, 2010 2:43 am
3. Household indebtedness, which some theorists regard as causing recession, was high preceding the recent recession, but so was the value of assets owned by households. Admittedly, if most of the assets were owned by quite affluent households, and most of the debt was owed by low-income households, high household debt levels could have been the cause of the recession despite high asset values: low-income households might have decreased spending in order to pay off debts while the quite affluent ones might simply have failed to increase spending. But, in fact, quite affluent people must have owed most of the household debt, since money is not lent to those without assets. Therefore, the real cause must lie elsewhere.


Which one of the following, if true, casts the most doubt on the argument?
(A) Prior to the recent recession, middle-income households owed enough debt that they had begun to decrease spending.
(B) The total value of the economy's household debt is exceeded by the total value of assets held by households.
(C) Low-income households somewhat decreased their spending during the recent recession.
(D) During a recession the affluent usually borrow money only in order to purchase assets.
(E) Household debt is the category of debt least likely to affect the economy
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by ashish2104 » Fri Jul 16, 2010 4:14 am
I will go with option B.

I am caught between A and B, but b implies that tota household debt> total asset value. As per the argument, there is another cause for recession. But B shows that household debt caused recession.

E) strengthens the argument
D) 'only' flagged me
C) already mentioned in argument


What is the OA?
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by reply2spg » Fri Jul 16, 2010 4:49 am
I will go with D. Frankly, I didn't understand the passage. What is the source of this question?
ansh.kumar wrote:3. Household indebtedness, which some theorists regard as causing recession, was high preceding the recent recession, but so was the value of assets owned by households. Admittedly, if most of the assets were owned by quite affluent households, and most of the debt was owed by low-income households, high household debt levels could have been the cause of the recession despite high asset values: low-income households might have decreased spending in order to pay off debts while the quite affluent ones might simply have failed to increase spending. But, in fact, quite affluent people must have owed most of the household debt, since money is not lent to those without assets. Therefore, the real cause must lie elsewhere.


Which one of the following, if true, casts the most doubt on the argument?
(A) Prior to the recent recession, middle-income households owed enough debt that they had begun to decrease spending.
(B) The total value of the economy's household debt is exceeded by the total value of assets held by households.
(C) Low-income households somewhat decreased their spending during the recent recession.
(D) During a recession the affluent usually borrow money only in order to purchase assets.
(E) Household debt is the category of debt least likely to affect the economy
Sudhanshu
(have lot of things to learn from all of you)
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by adi_800 » Fri Jul 16, 2010 7:22 am
The passage contained many details but probably understandable conclusion.
The conclusion is house indebtedness is in fact not the cause of the economic recession. Something else is.

N we want to weaken this conclusion by showing that yes, indebtedness is the real cause and no alternative cause exists.
B says that debt > value of assets. So, B is the answer...
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by ansh.kumar » Fri Jul 16, 2010 9:02 am
hei, THIS IS A GMAT PREP QUESTION
and the answer is NOT = B.
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by FightWithGMAT » Fri Jul 16, 2010 9:20 am
ansh.kumar wrote:3. Household indebtedness, which some theorists regard as causing recession, was high preceding the recent recession, but so was the value of assets owned by households. Admittedly, if most of the assets were owned by quite affluent households, and most of the debt was owed by low-income households, high household debt levels could have been the cause of the recession despite high asset values: low-income households might have decreased spending in order to pay off debts while the quite affluent ones might simply have failed to increase spending. But, in fact, quite affluent people must have owed most of the household debt, since money is not lent to those without assets. Therefore, the real cause must lie elsewhere.


Which one of the following, if true, casts the most doubt on the argument?
(A) Prior to the recent recession, middle-income households owed enough debt that they had begun to decrease spending.
(B) The total value of the economy's household debt is exceeded by the total value of assets held by households.
(C) Low-income households somewhat decreased their spending during the recent recession.
(D) During a recession the affluent usually borrow money only in order to purchase assets.
(E) Household debt is the category of debt least likely to affect the economy
IMO A

A mentions the alternative reason that strengthen the fact that house indebtedness is the real cause of recession
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by ansh.kumar » Fri Jul 16, 2010 9:24 am
OA is = A
HEI , FIGHTWITHGMAT can u plz explain the option A
THNKS
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by deeyah » Fri Jul 16, 2010 9:33 am
I think the answer is B
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by diebeatsthegmat » Fri Jul 16, 2010 9:36 am
FightWithGMAT wrote:
ansh.kumar wrote:3. Household indebtedness, which some theorists regard as causing recession, was high preceding the recent recession, but so was the value of assets owned by households. Admittedly, if most of the assets were owned by quite affluent households, and most of the debt was owed by low-income households, high household debt levels could have been the cause of the recession despite high asset values: low-income households might have decreased spending in order to pay off debts while the quite affluent ones might simply have failed to increase spending. But, in fact, quite affluent people must have owed most of the household debt, since money is not lent to those without assets. Therefore, the real cause must lie elsewhere.


Which one of the following, if true, casts the most doubt on the argument?
(A) Prior to the recent recession, middle-income households owed enough debt that they had begun to decrease spending.
(B) The total value of the economy's household debt is exceeded by the total value of assets held by households.
(C) Low-income households somewhat decreased their spending during the recent recession.
(D) During a recession the affluent usually borrow money only in order to purchase assets.
(E) Household debt is the category of debt least likely to affect the economy
how come the OA is A? A seems out of scope.... i dont understand, please explain
IMO A

A mentions the alternative reason that strengthen the fact that house indebtedness is the real cause of recession
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by FightWithGMAT » Fri Jul 16, 2010 9:41 am
ansh.kumar wrote:OA is = A
HEI , FIGHTWITHGMAT can u plz explain the option A
THNKS
see.....

first the argument says that most of the debts would have been with Low income people and most of the assets with affluent people, leading to decreased spending----a cause of recession

but then the arguments takes a 180 degree turn and says that this was not the case (most of debts was with affluent people)-------so recession is not the result of the household indebtedness. there must be some other cause.

attack this conclusion and prove that household indebtedness, ultimately leading to low spending, is, in fact, the cause of this recession.

A does it most appropriately.

Now, actually we need not to analyze all this KAHANI...............

Simply use POE.

B--very general statement: whose total indebtedness and whose total assets. It does account for most of the elements of the argument (assets and debt distribution among people------important facts of the argument).

C-- Talks abt something during recession. whereas the argument says prior to recession.
D-- Same as in C
E-- talks abt economy-----we need to figure out the cause of the recent recession------no need to worry about the economy.
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