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Chapter 2: Problem 15

. The $464 million “reserve” in the 2001–2002 budget adopted by the legislature in June turns out to have been based mainly on wishful thinking. Because of tax cuts approved by voters on the June ballot, along with the continuing recession and other events affecting income and expenses, the actual reserve in prospect may be as low as $7 million. The author is probably leading to which of the following conclusions? A. These facts warrant an investigation into who squandered $457 million. B. A reserve in the budget is not so necessary as we might wish it to be. C. The legislature would be wise not to add any new spending to the budget adopted in June. D. The recession will probably not last much longer, but while it does the legislature must adjust the budget accordingly. E. Legislative budgets are typically careless and unheeding of variable factors that may affect their accuracy.

Short Answer

Expert verified
The author is most likely leading to conclusion C: 'The legislature would be wise not to add any new spending to the budget adopted in June.'

Step by step solution

01

Identify key points

Read the passage and understand the key points: The initial reserve was $464 million. However, due to factors such as tax cuts, a recession, and other unnamed events, the prospective reserve has significantly dropped, potentially down to $7 million.
02

Analyze the multiple choice options

Review each of the multiple choice conclusions (options A-E) and consider which best fits with the author's implied argument or conclusion from the text.
03

Select the right answer

Option C: 'The legislature would be wise not to add any new spending to the budget adopted in June.' appears to be the conclusion most closely related to the author's argument. The author discusses the significant reduction of the reserve due to various factors, which suggests caution for future financial decisions, such as adding new spending.

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