Vincen wrote:During the recent economic downturn, banks contributed to the decline by loaning less money. Prior to the downturn, regulatory standards for making bank loans were tightened. Clearly, therefore, banks will lend more money if those standards are relaxed.

The argument assumes that...

A. The downturn did not cause a significant decrease in the total amount of money on deposit with banks, which is the source of funds for banks to lend.

B. The imposition of the tighter regulatory standards was not a cause of the economic downturn.

C. The reason for tightening the regulatory standards was not arbitrary.

D. No economic downturn is accompanied by a significant decrease in the amount of money loaned out by banks to individual borrowers and to businesses.

E. No relaxation of standards for bank loans would compensate for the effects of the downturn

The Official Answer is A.

What is wrong with B?

PREMISE #1: During downturn, banks lended less money.
PREMISE #2: Before downturn, lending rules were tightened.
IMPLIED CONCLUSION: The lending rules CAUSED banks to lend less money

Let's using the NEGATION technique

A. The downturn DID cause a significant decrease in the total amount of money on deposit with banks, which is the source of funds for banks to lend.
So, the downturn reduced the amount of money the banks had on hand to lend
In other words, the downturn (not the new lending rules) CAUSED banks to loan less money
Since this negated statement destroys the argument, answer choice A must be the correct answer.

Since you asked about answer choice B, let's negate that choice as well...
B. The imposition of the tighter regulatory standards (lending rules) WAS a cause of the economic downturn.
Sure, the lending rules caused the downturn, but the conclusion concerns what caused the banks to lend less money
Since the negated premise does not destroy the conclusion, then B cannot be the correct answer.

Answer: A