LSAT Sample Question: Logical Reasoning

During the recent economic downturn, banks contributed to the decline by loaning less money. Prior to the downturn, regulatory standards for loanmaking by banks were tightened. Clearly, therefore, banks will lend more money if those standards are relaxed.

The argument assumes that

  • the downturn did not cause a significant decrease in the total amount of money on deposit with banks which is the source of funds for banks to lend
  • the imposition of the tighter regulatory standards was not a cause of the economic downturn
  • the reason for tightening the regulatory standards was not arbitrary
  • no economic downturn is accompanied by a significant decrease in the amount of money loaned out by banks to individual borrowers and to businesses
  • no relaxation of standards for loanmaking by banks would compensate for the effects of the downturn

And the answer is...

  • the downturn did not cause a significant decrease in the total amount of money on deposit with banks which is the source of funds for banks to lend

Why?

This is a pretty straightforward example of a causal argument. The conclusion is that banks will lend more money if regulatory standards are relaxed. The evidence for this is that before the downturn, the standards were tightened. In other words, according to this author, the tightening of the standards is what caused the banks to loan less money. And remember, one of the assumptions inherent in a causal argument is that no other factor caused the result in question, in this case, loaning less money. And that's the assumption that correct answer (A) identifies—it rules out an alternative explanation, namely that the downturn itself, not the regulations, caused the banks to have less money to lend.

B The author is arguing that the standards caused banks to loan less money. Therefore, if standards are loosened, banks will loan more money. The downturn doesn't come into play, and therefore the author doesn't have to assume anything about whether the standards caused the downturn.

C. is irrelevant. There is no need to assume anything about whether the reason for tightening the standards was arbitrary, or rational. The wisdom of the decision is outside the scope.

D. and E. are too extreme. The author doesn't have to assume that much for the argument to hold true. The author is making an argument about what happened in this particular case. Answer choices which read "no economic downturn . . ." , or "no relaxation of standards . . ." are really saying the author is making an assumption about every downturn, or every relaxation of standards. Clearly, the author doesn't need to do that to reach a conclusion in this single instance, so these answers are incorrect. Remember, extreme answers are almost always wrong on assumption questions.

Watch a Kaplan strategy video for the LSAT Logical Reasoning section.