Development Loans availability
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.
I chose D because conclusion states: More money in account -> More money available for borrower. I think D breaks this link by saying that if more money is available for development loans, it will still not be given to businesses. What dd I do wrong?
couple of things —
- what if the overwhelming majority of borrowers have sufficient earnings to meet repayment schedules?
- read the conclusion very carefully. the conclusion as you have mentioned is “more money available for borrowers” (you are asked to weaken this) — you are not concerned with whether it will or will not be given to businesses.