Critical Reasoning

Public hospitals are suffering because of a lack of money available for physical expansion projects. To help hospitals, local governments plan to offer municipal bonds with above-average interest rates to induce individuals to buy these bonds, because as local governments get more money from municipal bonds, more money becomes available to public hospitals for physical expansion projects.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of local governments' plan to increase the amount of money available for hospital expansion projects?

• A)When local governments increase the interest on municipal bonds, the percentage of government funds allocated to non-expansion government projects increases correspondingly.
  B)The increased revenue local governments would receive as a result of offering municipal bonds with above-average interest rates would not offset the loss in revenue from personal income taxes during the first year of the plan.
  C)Even with interest rate incentives, some people will choose not to buy the municipal bonds.
  D)Individuals will generally not buy high-interest municipal bonds unless these bonds, when repaid, will help them cover home and healthcare payments.
  E)The municipal bonds would give all buyers, regardless of how many bonds they purchase, the same interest rate per bond.

[spoiler]
OA A[/spoiler]

My question :
Knewton Explanation
Choice A states that when local governments offer high-interest municipal bonds, the money given to other projects increases. If this were true, this undermines the assumption that more money will go to hospital expansion projects. Choice A is correct.
The validity of this hpice depends on to what extent does the percentage of government funds allocated to non-expansion government projects increase .It is possible for the money allocated for expansion projects to rise inspite of increase in percentage of government funds allocated to non-expansion government projects . What if the increase in persentage is not much .

The Knewton explanation for Option C is
Choice C states that even with interest rate incentives, some people will not purchase municipal bonds. The effectiveness of the plan would be determined not by what some people do, but by what most people do.
but some can range from 1% to 100% .
if more than 50% people do not buy , the argument is weakened

Option C says some people will choose not to buy the bonds. The same point holds good in any circumstances. there will be some people who will any way not buy something or other. But even if we assume there is one buyer there is some extra fund to spare for the expansion of hospital.

Now consider the option (A). If we have one buyer and we generate some fund for hospital expansion we are giving a bigger share to other projects. So although there is a possibility of some additional funds being generated but we are giving a large amount to other projects. Also assume a case when there is no buyer, still just because of increase in interest rate as per the option (A) we give bigger fund to other projects than what those used to get.

Public hospitals are suffering because of a lack of money available for physical expansion projects. To help hospitals, local governments plan to offer municipal bonds with above-average interest rates to induce individuals to buy these bonds, because as local governments get more money from municipal bonds, more money becomes available to public hospitals for physical expansion projects.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of local governments' plan to increase the amount of money available for hospital expansion projects?

• A)When local governments increase the interest on municipal bonds, the percentage of government funds allocated to non-expansion government projects increases correspondingly.
  B)The increased revenue local governments would receive as a result of offering municipal bonds with above-average interest rates would not offset the loss in revenue from personal income taxes during the first year of the plan.
  C)Even with interest rate incentives, some people will choose not to buy the municipal bonds.
  D)Individuals will generally not buy high-interest municipal bonds unless these bonds, when repaid, will help them cover home and healthcare payments. - not related
  E)The municipal bonds would give all buyers, regardless of how many bonds they purchase, the same interest rate per bond.- not related

Some people will not buy...but maybe few of them buy in lots......so C is not correct

garima99 wrote:Public hospitals are suffering because of a lack of money available for physical expansion projects. To help hospitals, local governments plan to offer municipal bonds with above-average interest rates to induce individuals to buy these bonds, because as local governments get more money from municipal bonds, more money becomes available to public hospitals for physical expansion projects.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of local governments' plan to increase the amount of money available for hospital expansion projects?

• A)When local governments increase the interest on municipal bonds, the percentage of government funds allocated to non-expansion government projects increases correspondingly.
  B)The increased revenue local governments would receive as a result of offering municipal bonds with above-average interest rates would not offset the loss in revenue from personal income taxes during the first year of the plan.
  C)Even with interest rate incentives, some people will choose not to buy the municipal bonds.
  D)Individuals will generally not buy high-interest municipal bonds unless these bonds, when repaid, will help them cover home and healthcare payments. - not related
  E)The municipal bonds would give all buyers, regardless of how many bonds they purchase, the same interest rate per bond.- not related

Some people will not buy...but maybe few of them buy in lots......so C is not correct

Did you read what i have written about option A

Public hospitals are suffering because of a lack of money available for physical expansion projects. To help hospitals, local governments plan to offer municipal bonds with above-average interest rates to induce individuals to buy these bonds, because as local governments get more money from municipal bonds, more money becomes available to public hospitals for physical expansion projects.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of local governments' plan to increase the amount of money available for hospital expansion projects?
A)When local governments increase the interest on municipal bonds, the percentage of government funds allocated to non-expansion government projects increases correspondingly.
B)The increased revenue local governments would receive as a result of offering municipal bonds with above-average interest rates would not offset the loss in revenue from personal income taxes during the first year of the plan.---inclusion of talks for first yr is meaningless-reject
C)Even with interest rate incentives, some people will choose not to buy the municipal bonds.---Doesnt talks about most--reject
D)Individuals will generally not buy high-interest municipal bonds unless these bonds, when repaid, will help them cover home and healthcare payments. ---we need surety not probability or sumthing kindda habit of people--reject
E)The municipal bonds would give all buyers, regardless of how many bonds they purchase, the same interest rate per bond.----doesnt effects--reject[/list]

After all dese operations we r left wid A.