Practice GMAT Critical Reasoning Question

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Based upon the results of a recent study, the net value of assets held by young adults or for the benefit of young adults exceeds the net value of assets held by middle-age working professionals with children. The common notion that young adults or so-called "twenty somethings" are bigger spenders and smaller savers than middle-age adults is, therefore, false.

The argument is primarily flawed for which of the following reasons?

A)	The argument does not properly consider the impact of the debt financing of assets.
B)	The argument never discusses the effects of filing for bankruptcy and twenty somethings' proclivity for deficit spending leading to bankruptcy.
C)	The argument never discusses the role that the country's tax code, which encourages financial investment on the part of twenty somethings, plays.
D)	The argument does not specify the exact amounts of saving and spending on the part of each age group.
E)	The argument never considers that the study compares assets held both by or for the benefit of young adults with assets held by working adults.

Correct Answer: E

The fundamental flaw in the argument is that it is comparing unlike parts. Specifically, the argument is comparing the net value of assets held by or in the name of a group with the net value of assets held by (and not in the name of) another group. It is quite possible that the large value of assets held for children or beneficiaries (e.g., trusts and estates) comprise large amounts of money.

The argument notes that the study considered "the net value of assets" (i.e., assets minus liabilities). Consequently, the study did adequately account for the role of debt in acquiring assets.
Eliminating one's debt via bankruptcy would not be unique to the twenty something demographic nor would debt spending change the value of net assets held in one's name.
The information about the tax code does not undermine the conclusion of the study. Instead, it simply provides an explanation for why the value of assets (not necessarily net assets) is larger than expected among twenty somethings (i.e., tax incentives fueled it).
The argument is not based upon the exact amount of spending between age groups. Rather, the argument is based upon relative spending and saving between age groups.
The argument compares the assets held by and for the benefit of someone with the assets held by (and not for) a different type of person. This unlike comparison is not sufficient logical grounds to make an argument comparing the two groups.

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