PrepTest 130, Section 1, Question 19
Economist: Our economy's weakness is the direct result(60 more words not shown)
Which one of the following(8 more words not shown)
- AIncreasing consumer spending(9 more words not shown)
- BIf consumer spending(6 more words not shown)
- CIf income taxes(9 more words not shown)
- DConsumers will be(10 more words not shown)
- ELowering income taxes(7 more words not shown)
Reading the argument
Why are consumers reluctant to spend? If the economy is weak, perhaps people have less money in the first place. The economist does address that concern: goods and services are expensive, and average income is significantly lower than five years ago. Notice that high prices needn't mean prices have risen; the passage specifically establishes a decline in income.
Then the proposed remedy is a cut in income taxes. My first question is whether that would leave consumers with more money available. The premises talk about income, while the conclusion introduces taxes. That connection needs attention.
There could also be other effects. Lower taxes might reduce government revenue and affect spending on programs, for example. A policy can have several consequences, so we shouldn't assume that identifying one possible benefit settles all of them.
What we’re looking for
The question asks for a required assumption. I'd initially expect a connection from lower taxes to consumers having more money available. But we should check the entire explanation of the economy's weakness to see what the proposed remedy actually needs to change.
Working the answers
- A
Prices needn't fall for the economist's account of improvement to work. Consumers could spend more at the existing prices. The argument identifies reluctance to spend as the source of weakness; it doesn't require the remedy to make goods and services cheaper.
- B
This links increased spending to higher average income. It doesn't connect lowering taxes to the spending response on which the proposed remedy depends. The economist can rely on reduced reluctance to spend without assuming this further increase in average income.
- C
Without a tax cut, wages might remain at their present low level. Claiming that one action would help doesn't require claiming that the absence of that action would make wages fall further. Continued stagnation would be consistent with the argument.
- DCorrect
This connects the tax cut to a different part of the explanation than my initial income prediction: consumers' reluctance to spend. The economist attributes the weak economy directly to that reluctance. For lower taxes to improve the economy through this reasoning, consumers must become less reluctant to spend. More money left available would not complete the argument if consumers remained just as unwilling to use it.
- E
Government spending could change while the economy still improved overall. The argument doesn't need there to be no effect whatsoever on that spending. Our concern about other consequences is worth considering, but this absolute no-effect claim isn't a requirement of the economist's reasoning.
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