PrepTest 58, Section 2, Question 19
Economist: Our economy's weakness is the direct result of consumers' continued reluctance to spend, which in turn is caused by factors such as high-priced goods and services. This reluctance is exacerbated by the fact that the average income is significantly lower than it was five years ago. Thus, even though it is not a perfect solution, if the government were to lower income taxes, the economy would improve.
Economist: Our economy's weakness is the direct result of consumers' continued reluctance to spend, which in turn is caused by factors such as high-priced goods and services. This reluctance is exacerbated by the fact that the average income is significantly lower than it was five years ago. Thus, even though it is not a perfect solution, if the government were to lower income taxes, the economy would improve.
Economist: Our economy's weakness is the direct result of consumers' continued reluctance to spend, which in turn is caused by factors such as high-priced goods and services. This reluctance is exacerbated by the fact that the average income is significantly lower than it was five years ago. Thus, even though it is not a perfect solution, if the government were to lower income taxes, the economy would improve.
Economist: Our economy's weakness is the direct result of consumers' continued reluctance to spend, which in turn is caused by factors such as high-priced goods and services. This reluctance is exacerbated by the fact that the average income is significantly lower than it was five years ago. Thus, even though it is not a perfect solution, if the government were to lower income taxes, the economy would improve.
Which one of the following is an assumption required by the economist's argument?
Increasing consumer spending will cause prices for goods and services to decrease.
If consumer spending increases, the average income will increase.
If income taxes are not lowered, consumers' wages will decline even further.
Consumers will be less reluctant to spend money if income taxes are lowered.
Lowering income taxes will have no effect on government spending.
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