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Re: Community spokesperson: After a recent surge of [#permalink]
D
Reason: stem asking issue with plan: after 2 year high interest rate will be issue since in stimulus it is clearly mentioned it is for 2 years only
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Community spokesperson: After a recent surge of [#permalink]
Try this one. Similar to the discussed question, but with a nuance
https://gmatclub.com/forum/qotd-248691.html?fl=similar
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Re: Community spokesperson: After a recent surge of [#permalink]
Sudhanshuacharya wrote:
Community spokesperson: After a recent surge of foreclosures, many homes in our community are vacant and falling into disrepair. Property values are already falling, and, if action is not taken quickly, will fall even further when panicked residents begin to leave. Clearly the only way to prevent a snowball effect is to make it easy to purchase these vacant homes by offering potential buyers special mortgages with a low interest rate for the first two years.

Which of the following, if true, represents the most significant potential problem with the plan to attract buyers through special mortgage offers?

A) Interest rates in the area are already at a 5-year low, and it would be foolish of lenders to lower them even more.
B) Crime rates in the area have risen by 1% in the last year, making it less likely that potential buyers will be interested in moving to the area.
C) Most residents have lived in the area for over 20 years and do not want to leave their homes.
D) Low interests rates will likely attract buyers who will be unable to make payments when the interest rate goes up after the first two years.
E) There are few mortgage brokers in the area, making it unlikely that there will be enough personnel to assist a rush of potential home buyers.

Please help with the solution

The answer is D
Due to recent events, people are leaving. It further states if we provide low interest rates and special mortage there would be an increase in the demand to move into the community.
Need to find potential problem with the plan

A. Strengthens the plan
B. Is not relevant to the discussion
C. Is not relevant
D. If this were true then within two years time, the same scenario could play out, with people leaving as they wont be able to make payments
E. Is not relevant
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Re: Community spokesperson: After a recent surge of [#permalink]
Why is B not the answer?If the people are less likely to move because of the increase in crime rate then the interest rate shouldn't matter.
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Re: Community spokesperson: After a recent surge of [#permalink]
Sudhanshuacharya wrote:
Community spokesperson: After a recent surge of foreclosures, many homes in our community are vacant and falling into disrepair. Property values are already falling, and, if action is not taken quickly, will fall even further when panicked residents begin to leave. Clearly the only way to prevent a snowball effect is to make it easy to purchase these vacant homes by offering potential buyers special mortgages with a low interest rate for the first two years.

Which of the following, if true, represents the most significant potential problem with the plan to attract buyers through special mortgage offers?

A) Interest rates in the area are already at a 5-year low, and it would be foolish of lenders to lower them even more.
B) Crime rates in the area have risen by 1% in the last year, making it less likely that potential buyers will be interested in moving to the area.
C) Most residents have lived in the area for over 20 years and do not want to leave their homes.
D) Low interests rates will likely attract buyers who will be unable to make payments when the interest rate goes up after the first two years.
E) There are few mortgage brokers in the area, making it unlikely that there will be enough personnel to assist a rush of potential home buyers.

Please help with the solution


Well I googled the term "snowball effect" and this is what showed up: a snowball effect is a process that starts from an initial state of small significance and builds upon itself, becoming larger (graver, more serious), and also perhaps potentially dangerous or disastrous (a vicious circle), though it might be beneficial instead (a virtuous circle).

The conclusion says that "to prevent a snow ball effect..............................". Now, if you read option D, it actually gives rise to a snowball effect which would definitely undermine the conclusion of the argument. The sad part I picked E :| because of the long term and short term effect thing.
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Re: Community spokesperson: After a recent surge of [#permalink]
Community spokesperson: After a recent surge of foreclosures, many homes in our community are vacant and falling into disrepair. Property values are already falling, and, if action is not taken quickly, will fall even further when panicked residents begin to leave. Clearly the only way to prevent a snowball effect is to make it easy to purchase these vacant homes by offering potential buyers special mortgages with a low interest rate for the first two years.

Which of the following, if true, represents the most significant potential problem with the plan to attract buyers through special mortgage offers?


A) Interest rates in the area are already at a 5-year low, and it would be foolish of lenders to lower them even more.

Even if the interest rates are low, they can be further lowered to arrest snowball effect, even if that means a loss of lenders.
Question stems asks us to locate a potential problem to the plan. It doesn't matter whether plan will be profitable or not.

B) Crime rates in the area have risen by 1% in the last year, making it less likely that potential buyers will be interested in moving to the area.

Pay close attention to words - less likely.
Potential buyers are "less likely" to buy properties in the area; they may still buy some.
Even if only few houses are sold, snowball effect can be resisted.
Another prompt, as applicable in many CR questions, is that - "less likely" ≠ not buying!
A probability of an event is not equal to the happening of the event. Similarly, a less probability of event is not equal to non-occurance of event.

C) Most residents have lived in the area for over 20 years and do not want to leave their homes.

This is not a problem; in fact, it will only contribute to the effectiveness of the plan.

D) Low interests rates will likely attract buyers who will be unable to make payments when the interest rate goes up after the first two years.

New buyers will be able to buy the property, helping to hamper the snowball effect.
But option prompt says - they'll be unable to make payments later.
Since it's option prompt, we've to assume it true.
So, the arrest [of snowball effect] will be temporary; the effect will start again after two years and the issue will remain unresolved.

E) There are few mortgage brokers in the area, making it unlikely that there will be enough personnel to assist a rush of potential home buyers.

As in option [B], Even if only few houses are sold, snowball effect can be resisted. So, this contributes to resolution of problem.

Hope it helps.
Cheers :exclamation
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Re: Community spokesperson: After a recent surge of [#permalink]
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Re: Community spokesperson: After a recent surge of [#permalink]
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