PrepTest 8 - Section 1 - Question 14 | Explanation & Discussion

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Economist: Some policymakers believe that our country’s continued economic growth requires a higher level of personal savings than we currently have. █ ██████ ███████████ ████████ █████ █████ ███████████ ██ ███ ██ ███████ ████████ ██ █████ ████████ ██████ █████ ██ ██████ ████ █████ █████ █████ ██ █████████ ████ ███ ████████ ███████ ██ ████ ████████ █████ ████ ███ ██████████████ █████ ████████ ███ ██████ ██ █████ █████████ ███ █████ ██ ████ ██ █ ██████████ █████ ████ ██ ███ ██████████ ██ ████ ███ █████████ ████ ████ ███████ █████████████ ████████ ████ █████ ██ ███ █████ █████████ ███ ██ ███ █████ ████████ ███████ ████ ███ ████████ ████ █████ ████████ ████████ ███ ███ ███████ █████ ██ ████████ ███████ ███ ██████████

Stimulus Structure

The economist starts by explaining a view some policymakers hold: for the country to continue growing economically, the level of personal savings needs to increase. The economist then discusses a recent legislative proposal designed to incentivize people to put money into savings accounts by letting them earn interest tax-free until they withdraw the money.

The supporters of this proposal say that it will allow banks to have more money to loan, at a "relatively small" loss to the government in tax revenue. The economist responds by pointing out that similar tax-incentive programs in the past haven't actually increased the overall level of personal savings, since the money people put into these programs usually just comes from their other personal savings: i.e., they just move money from their regular savings accounts into the tax-advantaged ones, instead of saving more money overall.

14.

The passage as a whole ████████ ███ ████ ███████ ███ █████ ███ ██ ███ █████████ ████████████

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Most strongly supported

Notice that there's no explicit conclusion in this stimulus. Instead, the first three sentences of the stimulus relate to the plan to increase the level of personal savings by creating special tax-advantaged savings accounts, and the last sentence counters the predicted results of the program by an analogy with similar programs in the past. So though the economist does not state a main point directly, it seems like the direction of this argument is to imply that because past programs like this have not increased the overall savings level, this program won't, either, contrary to what the backers of this proposal claim.

Backers of the █████████████ ████████ ███████████ ████ ████ ██████ █████ ████ █████ █████████ ███ ██ ██████████ ███ ██████ ██ █████ █████████ ███ █████ ██ █████

Incorrect. Nothing in the stimulus suggests that the backers of this proposal have some other motive than their stated goal.

The proposed tax █████████ ██ ████████ ██ ███████ ██████ ██████████ █████ ████ ████████ ███████ ████████ ██ ████ ██ ███ ███ █████████ ████ ██ ███ █████████

Correct. (B) is even more specifically directed against the prediction made by the backers of this proposal than what we pre-phrased in our analysis, but it's definitely supported by the stimulus. Remember that the backers of this proposal claim that this program will increase the amount of money available for banks to loan "at a relatively small cost" in lost tax revenues. But the author is suggesting, based on the results of past programs, that there will be no increase in overall savings levels, which suggests, as (B) says, that even if the loss in tax revenues is relatively small, there won't be enough of an increase in savings to make up for it.

84%

A tax-incentive program ████ ████████ ██ ███████████ ████ ██ ███ ████████ █████ ██ ██████ ██ ████████ █ █████ ████████ ██ ████████ ████████

Incorrect. The stimulus doesn't talk about any tax-incentive programs that would result in "substantial loss" of tax revenues, or give us any reason to think that such programs would create a large increase in personal savings.

The economy will ██ ██ ██████ ██████ ████ ███████████ ██ █████████ ████████ ███████ ███ ██ █████ ██ █████████ ███████

Incorrect. The stimulus doesn't suggest any conclusions about the economy definitely being in danger if no alternative to savings is found. All we know about the state of the economy is that "some policymakers" think increased savings are essential to continued economic growth. But we don't know if this is true.

The government has ██ █████████ █████ ██ ███████████ ███ ██████ ██ █████ ████ ██████ ███ ███████ ██ ███ ████ ███████ █████████

Incorrect. All we know from the stimulus is that this specific type of tax-incentive program hasn't worked in the past to increase the level of savings. The stimulus doesn't give us any reason to rule out the possibility that the government has some other means of influencing the level of personal savings.

PrepTest 8 - Section 1 - Question 14

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