PrepTest 109, Section 4, Question 24
Party spokesperson: The opposition party's proposal to stimulate(104 more words not shown)
The conclusion about whether there(13 more words not shown)
- Ataxpayers of the(17 more words not shown)
- Btaxpayers of the(17 more words not shown)
- Cprovince could assess(10 more words not shown)
- Dprovince could, instead(24 more words not shown)
- Eprovince could keep(18 more words not shown)
Reading the argument
The refund doesn't create $600 million out of nowhere. If the province gives taxpayers that money and then collects another $600 million in taxes, I can see why the spokesperson says the apparent benefit disappears. Likewise, if the refund replaces income paid to provincial workers, we can't count only the taxpayers' gain.
So the argument initially seems sensible. To challenge it, I'd look closely at the claim that the losses have to cancel the gains. Is there a way to fund the refund without removing an equal amount of spending from the provincial economy?
What we’re looking for
The question asks what would make the no-net-increase conclusion fail to follow. That directs us to the financial tradeoff. We need a fact that breaks the assumed offset, not just a different suggestion for how the government could spend its money.
Working the answers
- A
Money spent outside the province wouldn't contribute to the increase in spending within the province that the proposal promises. This gives us another reason to doubt the local benefit, not a reason the spokesperson's no-increase conclusion fails. It points in the wrong direction.
- B
Receiving the refund in installments changes when people receive it. It doesn't, by itself, change the $600 million total or show how the province would cover the shortfall without offsetting local spending. We would need additional information about timing effects to turn this into the required challenge.
- C
Taxpayers' anger isn't part of the calculation. Even a tax increase that everyone accepted calmly would still take money from them. C doesn't remove the spending offset the spokesperson identifies.
- D
Construction projects might provide another way to stimulate the economy. But the question concerns whether the refund could produce a net increase. An alternative use of the money doesn't show what is wrong with the argument against this use. We need to examine the refund's funding, not replace the proposal.
- ECorrect
Here is a way to balance the budget without either of the losses the spokesperson assumes. The province keeps its workers, so their income isn't removed. Using them more effectively saves $600 million that the province otherwise would spend outside the province. Those savings can fund the $600 million refund without replacement taxes.
The location of the savings matters. Money previously going outside the province can instead go to local taxpayers, while provincial workers remain employed. That opens the possibility of additional spending within the province, rather than merely transferring spending from one group of local residents to another.
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