GMAT Critical Reasoning
In the country of Veltria, the past two years' broad economic recession has included a business downturn in the clothing trade, where sales are down by about 7 percent as compared to two years ago. Clothing wholesalers have found, however, that the proportion of credit extended to retailers that was paid off on time fell sharply in the fi rst year of the recession but returned to its prerecession level in the second year.
Which of the following, if true, most helps to explain the change between the fi rst and the second year of the recession in the proportion of credit not paid off on time?
- A The total amount of credit extended to retailers by clothing wholesalers increased between the fi rst year of the recession and the second year.
- B Between the fi rst and second years of the recession, clothing retailers in Veltria saw many of their costs, rent and utilities in particular, increase.
- C Of the considerable number of clothing retailers in Veltria who were having fi nancial diffi culties before the start of the recession, virtually all were forced to go out of business during its first year.
- D Clothing retailers in Veltria attempted to stimulate sales in the second year of the recession by discounting merchandise.
- E Relatively recession-proof segments of the clothing trade, such as work clothes, did not suffer any decrease in sales during the fi rst year of the recession.
Correct Answer: C