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Spending on research and development by United States businesses for 1984

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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?

(A) Business spending on research and development is usually directly proportional to business profits.

(B) Business spending for research and development in 1985 could not increase by more than 8.3%.

(C) 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.

(D) 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.

(E) Tax credits market for specific investments are rarely effective in inducing businesses to make those investments.

Official Answer

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flamingo
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the conclusion says tax credit did not have almost any effect on RnD. To this hold true, assumption has to tell that in absence of tax credit the behaviour of comapnies toward Rnd would be same.

which is indicated in D. Hence D is the answer.

answered Aug 21, 2014 by Guru (5,628 points)
selected Sep 11, 2014 by
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