Here we have a strengthen with necessary premise question. Remember that a premise is necessary for a conclusion if the falsity of the premise guarantees or brings about the falsity of the conclusion. First we check to see if the answer choice strengthens the passage, and then, if it doesstrengthen, we negate the answer choice to see if its negation makes the argument fall apart. If the answer choice does both those things then it is our correct answer.
Conclusion: government should take steps to ensure that depositors who want this security bear the cost of it and thus should make depositors pay the premiums for insuring their own accounts.
Why? Depositors primarily benefit from the security this insurance provides and at this point the government provides insurance for individuals' bank deposits, but requires the banks to pay the premiums for this insurance.
Answer choice (C): "Banks do not always cover the cost of the deposit-insurance premiums by paying depositors lower interest rates on insured deposits than the banks would on uninsured deposits."
Does this strengthen? Yes. The argument assumes that the banks do not make up for paying the premiums in some way. Answer choice (C) explains that the banks are not always charging differing interest rates on insured deposits versus uninsured deposits, i.e. the banks are not always covering the cost of the premiums on other ends of the process. Thus, answer choice (C) helps strengthen.
Negation: Banks always cover the cost of the deposit-insurance premiums by paying depositors lower interest rates on insured deposits than the banks would on uninsured deposits.
Does the negation make the argument fall apart? Yes.
If the banks are always covering the cost of the deposit-insurance premiums, then there's no reason that depositors who want security need to bear the cost of it because the banks are not at a deficit since the cover the cost on a different end.
Hope that clears things up! Please let us know if you have any other questions.
filozinniFebruary 26, 2020
I didn't quite understand this explanation. Could anyone explain again why C is correct?
filozinniJune 3, 2020
Never mind, I just figured it out!
hochakinSeptember 28, 2020
I eliminated C because I think even if the banks always cover the cost, they can still make the customers pay for it. Just because banks can cover the cost doesn't mean they don't have the right to make the customers pay, especially in this case since the customers are the primary beneficiaries. Banks don't need to be at a deficit to shift the cost to the customers. So the negation doesn't seem to make the argument fall apart. But since it does, is that because LSAT is as mentioned in the video always morally correct?
In this case, "if banks can cover the cost, there's no reason for the depositors to bear the cost" is right because it is morally correct?
VictoriaOctober 2, 2020
Hi @hochakin,
Thanks for your question.
The stimulus concludes that the government should make depositors pay premiums for insuring their own accounts.
Why? Because the government currently requires banks to pay premiums for this insurance, but it is the depositors who primarily benefit from the security provided by the insurance.
This question has nothing to do with the morality of charging customers. There is a gap in the reasoning above. The author of the passage assumes that depositors are not already paying premiums for the insurance.
Answer choice (C) eliminates one way that depositors could already be paying for the insurance i.e. through lower interest rates.
If we negate answer choice (C), then we learn that banks always cover the cost of these premiums by paying depositors lower interest rates.
In this way, the reason the answer is correct has nothing to do with the morality of the banks charging their customers for the premiums. The answer is correct because its negation tells us that banks always shift the cost of the premium to their customers. If this is the case, then there is no reason for the government to make depositors pay insurance premiums because they are already paying them through the bank.
Negating answer choice (C) means that we can no longer draw the conclusion that the government should make depositors pay for their own premiums because they are already paying for them.
Hope this helps! Please let us know if you have any further questions.
