levaska savings rate

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levaska savings rate

by kushal.adhia » Mon Sep 20, 2010 11:41 am
Source: GMAT Prep test 1

To improve the long-term savings rate of the citizens of Levaska, the country's legislature decided to implement a plan that allows investors to save up to $1,000 per year in special accounts without paying taxes on the interest earned unless withdrawals are made before the investor reaches age sixty-five. Withdrawals from these accounts prior to age sixty-five would result in the investor's having to pay taxes on all the accumulated interest at the time of withdrawal.

Which of the following, if true, most strongly supports the prediction that the legislature's plan will have its intended effect?

A. The money saved in the tax-free savings accounts will be deposited primarily in those banks and financial institutions that supported the legislation instituting the plan.
B. The majority of people choosing to take advantage of the tax-free savings accounts will withdraw their money prior to age sixty-five.
C. A significant number of the citizens of Levaska will invest in the tax-free savings accounts well before they reach the age of sixty-five.
D. During the ten years prior to implementation of the plan, Levaskans deposited an increasingly smaller percentage of their annual income in long-term savings accounts.
E. People who are not citizens of Levaska are not eligible to invest in the tax-free savings accounts, even if their income is taxable in Levaska.

Why is the answer not D?
OA is C

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by uwhusky » Mon Sep 20, 2010 11:59 am
The goal is to improve long-term savings rate, thus the trend that the people are putting in less money in the long-term savings account is more fitting as the reason to have this plan than supporting the intended effect of the plan.

Perhaps you should tell us why you think D could be the right answer, so maybe we can help to identify your reasoning flaws.
Yep.

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by g000fy » Mon Sep 20, 2010 1:13 pm
Their past saving habits can't predict Levaskian people's future action. Therefore D is out. C is very strong in providing a support that significant number of citizens will indeed invest in the new plan.

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by what? » Sat Jun 18, 2011 9:41 pm
Guys,

I am resurrecting this thread. Can one of the experts please provide explanation why C is the correct answer rather than explaining that the other 4 are not. I mean, I would like to get to C without using process of elimination, something that I am finding hard to do at the moment.

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by ranjithreddy.k9 » Sun Jun 19, 2011 6:09 am
Y is C right??..can somebody throw some light on this..

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by vikram4689 » Sun Jun 19, 2011 6:23 am
what? wrote:Guys,

I am resurrecting this thread. Can one of the experts please provide explanation why C is the correct answer rather than explaining that the other 4 are not. I mean, I would like to get to C without using process of elimination, something that I am finding hard to do at the moment.
Ok.. Lets proceed in systematic way
Plan proposed: Improve the health of people by giving them an option of tax-free health saving account

Now we want to strengthen this proposal

C says that a number of people will invest in tax free savings account and this is what the govt. wanted to do. So it is correct.
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by amit2k9 » Sun Jun 19, 2011 6:48 am
the conclusion is to improve long term savings.

B and C come close.

B actually gives a reason where people are withdrawing money and hence the goal is not fulfilled.

C gives the reason that people have started putting the money in the savings account and hence the purpose is resolved.

C it is.
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