Spending on research and development by United States businesses for 1984 showed an increase of about 8 percent over the...
GMAT Critical Reasoning : (CR) Questions
Spending on research and development by United States businesses for 1984 showed an increase of about 8 percent over the 1983 level. This increase actually continued a downward trend evident since 1981 – when outlays for research and development increased 16.4 percent over 1980 spending. Clearly, the 25 percent tax credit enacted by Congress in 1981, which was intended to promote spending on research and development, did little or nothing to stimulate such spending.
The conclusion of the argument above cannot be true unless which of the following is true?
Passage Analysis:
| Text from Passage | Analysis |
|---|---|
| Spending on research and development by United States businesses for 1984 showed an increase of about \(8\%\) over the 1983 level. |
|
| This increase actually continued a downward trend evident since 1981 – when outlays for research and development increased \(16.4\%\) over 1980 spending. |
|
| Clearly, the \(25\%\) tax credit enacted by Congress in 1981, which was intended to promote spending on research and development, did little or nothing to stimulate such spending. |
|
Argument Flow:
The argument starts with recent data (1984 R&D spending increase), then reframes this as part of a declining trend since 1981, and finally connects this trend to a 1981 tax policy to conclude the policy failed.
Main Conclusion:
The \(25\%\) tax credit enacted by Congress in 1981 did little or nothing to stimulate R&D spending.
Logical Structure:
The author uses declining growth rates in R&D spending (from \(16.4\%\) in 1981 to \(8\%\) in 1984) as evidence that the 1981 tax credit policy was ineffective at achieving its goal of promoting R&D spending.
Prethinking:
Question type:
Assumption - We need to find what MUST be true for the conclusion to hold. This is a necessary assumption question, so we're looking for statements that, if false, would make the conclusion fall apart.
Precision of Claims
The argument makes quantitative claims about R&D spending growth rates (\(16.4\%\) in 1981 vs \(8\%\) in 1984) and connects this declining trend to the effectiveness of a 1981 tax credit policy. The conclusion specifically claims the tax credit did 'little or nothing' to stimulate spending.
Strategy
For assumption questions, we identify ways the conclusion could be falsified while respecting the given facts. The author concludes that because growth rates declined from \(16.4\%\) to \(8\%\), the tax credit failed. We need to find what must be true for this logic to work - essentially, what assumptions make this cause-and-effect relationship valid.
Business spending on research and development is usually directly proportional to business profits.
This choice discusses the relationship between R&D spending and business profits, but the argument doesn't rely on any connection between profits and R&D spending. The conclusion is about whether the tax credit stimulated spending, not about what drives R&D spending in general. Whether or not R&D spending correlates with profits doesn't affect the logic connecting declining growth rates to tax credit effectiveness.
Business spending for research and development in 1985 could not increase by more than \(8.3\%\).
This choice makes a specific prediction about 1985 R&D spending levels, but the argument doesn't depend on future spending predictions. The conclusion is based on the trend from 1981-1984, and whether 1985 spending increases or decreases by any particular amount doesn't impact the validity of concluding that the 1981 tax credit was ineffective.
Had the 1981 tax credit been set higher than \(25\%\), business spending for research and development after 1981 would have increased more than it did.
This choice suggests that a higher tax credit would have produced better results, but this isn't necessary for the argument's conclusion. The author could conclude the 25% credit was ineffective regardless of whether a higher credit might have worked better. The argument only needs to show the actual 25% credit failed, not that no possible credit level could have succeeded.
In the absence of the \(25\%\) tax credit, business spending for research and development after 1981 would not have been substantially lower than it was.
This is the necessary assumption. The argument concludes the tax credit 'did little or nothing' based on declining growth rates, but this logic only works if we assume the spending levels weren't actually supported by the tax credit. If spending would have been substantially lower without the credit, then the credit actually was effective at maintaining higher spending levels, which would contradict the conclusion. For the conclusion to hold, we must assume spending wouldn't have been substantially lower without the credit.
Tax credits market for specific investments are rarely effective in inducing businesses to make those investments.
This choice makes a broad generalization about tax credits being rarely effective, but the argument doesn't require this sweeping claim. The conclusion is specifically about this particular 25% R&D tax credit, not about tax credits in general. The argument could conclude this specific credit failed even if other tax credits are typically effective.