Bunuel wrote:
History has shown that severe and sudden political instability strikes country Y roughly once every 50 years. The most recent example was the attempt on the president's life in 1992. The reaction of average investors in country Y to crisis situations in the country cannot be predicted in advance. The government's fiscal affairs department has introduced an electronic protection mechanism into the stock market of country Y in the hopes of avoiding a prolonged large-scale selloff. The mechanism is triggered in specific instances based on estimations of how average investors will react to changes in corporate data and economic indicators.
If the statements above are true, which of the following conclusions can be drawn regarding the electronic protection mechanism?
(A) Sometime within the next 50 years an attempt on the president's life will trigger the protection mechanism.
(B) Whether the protection mechanism will function appropriately in response to a sudden political event depends on whether the event is seen by investors as positive or negative.
(C) It is unclear how well the protection mechanism would work in the event of a sudden political coup if such an event is partially or wholly unrelated to changes in corporate data and economic indicators.
(D) There would be no way for the protection mechanism to differentiate between market fluctuations resulting from economic factors and those that are caused by political instability.
(E) The protection mechanism would be purposely destroyed by political insurgents if they were able to infiltrate the government's fiscal affairs department.
KAPLAN OFFICIAL EXPLANATION:
The president of country Y is sure having a hard time of it, being shot at and all. No matter. The real issue here is this electronic market regulation gizmo that's supposed to help the country avoid a major economic disaster. Our job is to draw a conclusion about it.
There's a lot going on here, so let's recap: Roughly every 50 years, country Y experiences political instability. The reaction of average investors to such crises cannot be predicted, so a crisis leads to, or causes, uncertainty. Country Y has created an electronic protection mechanism for its financial market that relies on estimates of how average investors will react to changes in corporate data and economic indicators. The purpose of the mechanism is to avoid a major market selloff. The correct answer will draw an inference that logically connects the different ideas stated in the evidence. It's difficult to prephrase the correct answer here, so your best bet is to test the choices rigorously, looking for the one that absolutely must be true.
(A) goes too far in its inference that an attempt on the president's life will happen within 50 years. The 1992 attempt was only an example of the political instability that occurs roughly every 50 years, and the 50-year period was an average, not an absolute limit. Furthermore, even if there is an attempt on the president's life, it is unclear how investors will react because their behavior in such situations cannot be predicted in advance. For all we know, the market will go up and the mechanism will not be needed.
(B) goes beyond the scope of the argument. Whether investors perceive sudden political events positively or negatively isn't mentioned in the stimulus, so we can't infer that that perception makes any difference to the accuracy of the mechanism.
(C) draws a reasonable conclusion based on the evidence. If political instability involves changes in corporate data and economic indicators, then the mechanism should work the way it is designed to work. But if the incident does not involve those elements, then the way the mechanism will work becomes unclear, because the behavior of investors will be unpredictable.
(C) wins.(D) This statement goes too far to be inferable. The mechanism might be able to differentiate between various types of market fluctuations, even though it might not be able to trigger appropriate responses to some of them.
(E) takes the argument far beyond its original scope. Nothing in the stimulus leads to a prediction of what might happen to the protection mechanism in the event of political instability.
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