OG 12 th edition :Bussiness

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Acorn: Senior | Next Rank: 100 Posts; Posts: 42; Joined: Fri Jan 07, 2011 9:58 am; Thanked: 2 times; GMAT Score:650

by Acorn » Tue Aug 30, 2011 3:25 am

Source: OG 12th Ed

Businesses are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpayers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?

(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.
(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan.
(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings.
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules.
(E) The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings.

OA is A

I got it right but I seek explaination for -why C is incorrect.

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Source: Beat The GMAT — Critical Reasoning | Tue Aug 30, 2011 3:25 am

GmatKiss: Legendary Member; Posts: 2789; Joined: Tue Jul 26, 2011 12:19 amFollowed by: 43 members; Location: Chennai, India; Thanked: 206 times; GMAT Score:640

by GmatKiss » Tue Aug 30, 2011 5:03 am

Acorn wrote:Source: OG 12th Ed

Businesses are suffering because of a lack of money available for development loans. To help businesses, the government plans to modify the income-tax structure in order to induce individual taxpayers to put a larger portion of their incomes into retirement savings accounts, because as more money is deposited in such accounts, more money becomes available to borrowers.

Which of the following, if true, raises the most serious doubt regarding the effectiveness of the government's plan to increase the amount of money available for development loans for businesses?

(A) When levels of personal retirement savings increase, consumer borrowing always increases correspondingly.
(B) The increased tax revenue the government would receive as a result of business expansion would not offset the loss in revenue from personal income taxes during the first year of the plan.
(C) Even with tax incentives, some people will choose not to increase their levels of retirement savings. - Contender, but not serious as A
(D) Bankers generally will not continue to lend money to businesses whose prospective earnings are insufficient to meet their loan repayment schedules.
(E) The modified tax structure would give all taxpayers, regardless of their incomes, the same tax savings for a given increase in their retirement savings.

OA is A

I got it right but I seek explaination for -why C is incorrect.

C is not incorrect, it is less serious than A.

Regards,
GK

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taneja.niks: Senior | Next Rank: 100 Posts; Posts: 70; Joined: Tue Jun 29, 2010 9:41 am; Thanked: 2 times

by taneja.niks » Tue Aug 30, 2011 11:22 am

with C -> some people is the word some can be very less i mean may be just 5% what if 95% are gonna do it so we aren bothered abt the 5% and specially cant base our conclusion on such a small percentage.

and the author already says that with the tax incentive people will deposit more money but with C the authors point is negated that more money will be available in the accounts which is a contradiction. so C is not even a contender here....

Hope is helps

Last edited by taneja.niks on Tue Aug 30, 2011 1:16 pm, edited 1 time in total.

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prateek_guy2004: Master | Next Rank: 500 Posts; Posts: 398; Joined: Tue Jul 26, 2011 11:39 pmFollowed by: 6 members; Location: India; Thanked: 41 times

by prateek_guy2004 » Tue Aug 30, 2011 12:50 pm

[spoiler]Well C is the only option which is doubting the authors suggestion to invite more tax and then allow it to the borrowers for the development.

Only C says that it not going to work.....

In typical flawed ques's one need a alternate cause ......which is sufficient.. [/spoiler]

Don't look for the incorrect things that you have done rather look for remedies....

https://www.beatthegmat.com/motivation-t90253.html

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saketk: Legendary Member; Posts: 608; Joined: Sun Jun 19, 2011 11:16 amFollowed by: 8 members; Thanked: 37 times

by saketk » Fri Sep 02, 2011 2:02 pm

prateek_guy2004 wrote:Well C is the only option which is doubting the authors suggestion to invite more tax and then allow it to the borrowers for the development.

Only C says that it not going to work.....

In typical flawed ques's one need a alternate cause ......which is sufficient..

First of all, sorry for removing the spoiler from your post... Since you are posting a reason and not an answer, I thought it will be better if I reply to something which is visible.

Now, the reason option C is incorrect because first of all it talks about Tax incentives. Where in the question stem the word "Tax Incentive" is mentioned? It simply says " modify the income-tax structure" - It could mean anything. Secondly, the mention of the word "Some People". Even if this statement weakens the argument, it is doing so in a Weaker way

Whereas, if you look at Option A, it gives you a reason that Consumer borrowing will increase, leading to depletion of the funds collected through Retirement money.

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