To improve the long-term savings rate

[AmunaGmat]

To improve the long-term savings rate of the citizens of Levaska, the country's legislature decided to implement a plan that allows investors to save up to $1,000 per year in special accounts without paying taxes on the interest earned unless withdrawals are made before the investor reaches age sixty-five. Withdrawals from these accounts prior to age sixty-five would result in the investor's having to pay taxes on all the accumulated interest at the time of withdrawal.

Which of the following, if true, most strongly supports the prediction that the legislature's plan will have its intended effect?

A. The money saved in the tax-free savings accounts will be deposited primarily in those banks and financial institutions that supported the legislation instituting the plan.
B. The majority of people choosing to take advantage of the tax-free savings accounts will withdraw their money prior to age sixty-five.
C. A significant number of the citizens of Levaska will invest in the tax-free savings accounts well before they reach the age of sixty-five.
D. During the ten years prior to implementation of the plan, Levaskans deposited an increasingly smaller percentage of their annual income in long-term savings accounts.
E. People who are not citizens of Levaska are not eligible to invest in the tax-free savings accounts, even if their income is taxable in Levaska.

Hi guys,

I chose D which turned out to be the incorrect answer but I took longer debating about well in C. I finally thought that the position of the modifier well is the decider in this sentence and get convinced that it modifies before the age of 65, and I thought that will mean, if they invest at the age of 63 just before withdrawals, then this is not really a success. Can someone confirm my reasoning of the position of this modifier, and if there can be a way in which it can modify
tax-free savings.

For D, i thought if they do deposit money anyway, this can be a motivation!!

cheers for your help!!

[RonPurewal]

To improve the long-term savings rate of the citizens of Levaska, the country's legislature decided to implement a plan that allows investors to save up to $1,000 per year in special accounts without paying taxes on the interest earned unless withdrawals are made before the investor reaches age sixty-five. Withdrawals from these accounts prior to age sixty-five would result in the investor's having to pay taxes on all the accumulated interest at the time of withdrawal.

Which of the following, if true, most strongly supports the prediction that the legislature's plan will have its intended effect?

A. The money saved in the tax-free savings accounts will be deposited primarily in those banks and financial institutions that supported the legislation instituting the plan.
B. The majority of people choosing to take advantage of the tax-free savings accounts will withdraw their money prior to age sixty-five.
C. A significant number of the citizens of Levaska will invest in the tax-free savings accounts well before they reach the age of sixty-five.
D. During the ten years prior to implementation of the plan, Levaskans deposited an increasingly smaller percentage of their annual income in long-term savings accounts.
E. People who are not citizens of Levaska are not eligible to invest in the tax-free savings accounts, even if their income is taxable in Levaska.

Hi guys,

I chose D which turned out to be the incorrect answer but I took longer debating about well in C. I finally thought that the position of the modifier well is the decider in this sentence and get convinced that it modifies before the age of 65, and I thought that will mean, if they invest at the age of 63 just before withdrawals, then this is not really a success. Can someone confirm my reasoning of the position of this modifier, and if there can be a way in which it can modify
tax-free savings.

For D, i thought if they do deposit money anyway, this can be a motivation!!

cheers for your help!!

"well before X" means "for a long time before X".
in other words, choice (c) states that people are going to invest in these accounts when they are much younger than 65.
this would strengthen the argument in the sense that the penalty for early withdrawal will be much greater for these individuals (since their accounts have been accumulating interest for so long). this greater penalty will presumably act as an incentive to leave the saved money in the account until age 65.

[AmunaGmat]

Thanks a lot Ron, very helpful!!1

[RonPurewal]

you are very welcome.

[ven2]

cheers for your help!![/quote]

"well before X" means "for a long time before X".
in other words, choice (c) states that people are going to invest in these accounts when they are much younger than 65.
this would strengthen the argument in the sense that the penalty for early withdrawal will be much greater for these individuals (since their accounts have been accumulating interest for so long). this greater penalty will presumably act as an incentive to leave the saved money in the account until age 65.[/quote]



During the ten years prior to implementation of the plan, Levaskans deposited an increasingly smaller percentage of their annual income in long-term savings accounts


Ron - can you please explain why is D wrong

Does it mean that .. Levaskans will definitely invest so the govts plan will be successful

[RonPurewal]

(d) describes only what happened in the 10 years before the plan was implemented.
* it gives no concrete reason to assume that anything will happen after the plan is implemented.
* the trend of those 10 years goes in the wrong direction -- namely, in the direction of less investing. so, this observation doesn't support the plan unless you randomly assume that people will completely invert their previous investing habits, an assumption that is unlikely at best.

[hugo.inga]

I guess also that the goal (or the intended effect) is to improve the long term savings rate.
Then, the more people start savings, the faster the rate start to improve. Therefore, C is the choice!

[RonPurewal]

I guess also that the goal (or the intended effect) is to improve the long term savings rate.
Then, the more people start savings, the faster the rate start to improve. Therefore, C is the choice!

yep

[prashant.ranjan]

Greetings Ron,
Need your help in understanding why (A) is not the correct answer. Following is what I thought in attempting the incorrect choice (A).

I could understand why (C) is the correct answer. But I was very much confused on eliminating (A) as the incorrect answer. (A) basically says that the money in tax free savings accounts will primarily be deposited in the banks that support the legislation. This answer choice though doesn't prove that savings will go up, but does strengthen the fact that the money, where it is deposited, will be eligible to legislation proposed by the government. I don't know whether other banks, tax the interest on the savings or not - as far as the argument says that this legislation doesn't tax the interests earned from the savings, it means other institutions may be imposing tax on the interest rates earned - however here I know that the banks implementing the legislation will surely not tax the money and will help in improving the savings in the long run.
I can understand, that this choice does not guarantee the fact that consumers will not withdraw money from the bank before 65 (choice (C) does), but it does sort of help in improving the savings rate. On personalizing the argument, I would definitely like to invest in a bank that follows the legislation rather than invest a money in other banks' saving accounts that don't guarantee that savings will go up.

Thanks and Regards
Prashant
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Big Fan : )

[tim]

banks do not impose taxes, the government does. whether a bank likes the law has nothing to do with whether they will be subject to the law just like every other bank..