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# In order to understand the dangers of the current real-estate bubble

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In order to understand the dangers of the current real-estate bubble  [#permalink]

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26 Feb 2016, 01:29
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Difficulty:

45% (medium)

Question Stats:

66% (01:54) correct 34% (01:53) wrong based on 382 sessions

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In order to understand the dangers of the current real-estate bubble in Country Y, one has only to look to the real-estate bubble of the last decade in Country Z. In that country, incautious investors used the inflated value of their real estate as collateral in risky margin loans. When the real-estate market collapsed, many investors went bankrupt, creating a major recession. Country Y is in real danger of a similar recession if more-stringent laws restricting margin loans are not enacted promptly.

The answer to which of the following questions would be most useful in evaluating the significance of the author’s claims?

(A) Was the real estate in Country Z located principally in rural areas or was it located in more urban communities?

(B) Could the bankruptcies in Country Z have been prevented by a private bailout plan by the nation’s banks?

(C) Does Country Y currently have any laws on its books regarding margin loans?

(D) Are there business ties and connections between Country Y and Country Z?

(E) Were there other factors in the case of Country Y that would make the comparison with Country Z less meaningful?

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Re: In order to understand the dangers of the current real-estate bubble  [#permalink]

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26 Feb 2016, 01:47
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E - Were there other factors in the case of Country Y that would make the comparison with Country Z less meaningful?
The author states "one has only to look to the real-estate bubble of the last decade in Country Z", are we sure we can compare the two countries? Isn't there any difference between them that could make the comparison not accurate?
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Re: In order to understand the dangers of the current real-estate bubble  [#permalink]

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26 Feb 2016, 03:33
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Premise: In order to understand the dangers of current real estate bubble in Country Y, one has to look at Country Z where recession was caused by the inflated real estate market.
Conclusion: If more stringent laws are not enacted, Country Y will face recession.

(A) Was the real estate in Country Z located principally in rural areas or was it located in more urban communities? - Incorrect - Irrelevant

(B) Could the bankruptcies in Country Z have been prevented by a private bailout plan by the nation’s banks? - Incorrect - We are concerned about Country Y. Country Z is used only for comparison purposed

(C) Does Country Y currently have any laws on its books regarding margin loans? - Incorrect - Doesn't answer whether country Y will sulk to recession

(D) Are there business ties and connections between Country Y and Country Z? - Incorrect - Irrelevant

(E) Were there other factors in the case of Country Y that would make the comparison with Country Z less meaningful? - Correct - If yes, then Country will not face recession. If no, country Y will face recession.

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Re: In order to understand the dangers of the current real-estate bubble  [#permalink]

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26 Feb 2016, 03:54
imo...it should be E.

but, could someone explain me on option C ?
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Re: In order to understand the dangers of the current real-estate bubble  [#permalink]

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26 Feb 2016, 04:35
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imo...it should be E.

but, could someone explain me on option C ?

This is just my opinion.

The argument states that "Country Y is in real danger of a similar recession if more-stringent laws restricting margin loans are not enacted promptly". - What does this mean? Country Y has laws governing margin loans or any other loans. But these laws have to be enacted promptly to avoid recession.

(C) Does Country Y currently have any laws on its books regarding margin loans? - Lets do a Yes/No test.
If yes - Country Y has laws on its books regarding margin loans - Does it help answer whether there Country Y faces recession? No.
If no - Country Y does not have any laws on its books regarding margin loans. So it has no laws and will it help avoid recession? Can't say because the argument does not state a relationship between absence of laws and recession. Instead the argument establishes the relationship between enactment of laws and recession.
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Re: In order to understand the dangers of the current real-estate bubble  [#permalink]

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26 Feb 2016, 07:01
"C" cannot be the answer as the conclusion mentions about MORE stringent laws. So definitely laws do exist.

However, I still don't understand how can E be correct. The conclusion is " if more stringent laws are not implemented country Y may face recession." The premise states that we can compare the country Y with country Z. I don't think we can challenge this.
So Evaluating other options for making meaningful comparisons ideally does not directly tell us whether implementing more stringent laws will be really helpful.
Any expert's suggestion for evaluation type question ?
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Re: In order to understand the dangers of the current real-estate bubble  [#permalink]

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26 Feb 2016, 08:10
hwgmat2015 wrote:
"C" cannot be the answer as the conclusion mentions about MORE stringent laws. So definitely laws do exist.

However, I still don't understand how can E be correct. The conclusion is " if more stringent laws are not implemented country Y may face recession." The premise states that we can compare the country Y with country Z. I don't think we can challenge this.
So Evaluating other options for making meaningful comparisons ideally does not directly tell us whether implementing more stringent laws will be really helpful.
Any expert's suggestion for evaluation type question ?

Hi,
here we are trying to look at the significance of author's claims...
and his claims are
1) Y has the same real estate bubble that Z had.
2) Z went into recession, so Y will also go into rcession..
3) conclusion: Y should have some stringent laws to avoid the recession..

Quote:
The premise states that we can compare the country Y with country Z. I don't think we can challenge this.

the premise talks of the real estate bubble..
But we do not say that the conditions leading to it or the outcome of this Real estate bubble will be the same.

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Re: In order to understand the dangers of the current real-estate bubble  [#permalink]

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26 Feb 2016, 10:39

1) Y is facing the danger of real estate bubble that Z had.
2) investors in Z used the inflated value of their real estate as collateral in risky margin loans.
3) Z went into recession, so Y is in danger of facing similar recession..
4) conclusion: Y should have some stringent laws to avoid the recession what Z has suffered.

argument assumes that scenario under which recession happened in Z can be same in country Y.

so, he may find whether there are conditions under which recession can be avoided in Z. so it can also be avoided in Y.

I can only find option B.
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Re: In order to understand the dangers of the current real-estate bubble  [#permalink]

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28 May 2017, 13:04
carcass wrote:
In order to understand the dangers of the current real-estate bubble in Country Y, one has only to look to the real-estate bubble of the last decade in Country Z. In that country, incautious investors used the inflated value of their real estate as collateral in risky margin loans. When the real-estate market collapsed, many investors went bankrupt, creating a major recession. Country Y is in real danger of a similar recession if more-stringent laws restricting margin loans are not enacted promptly.

The answer to which of the following questions would be most useful in evaluating the significance of the author’s claims?

(A) Was the real estate in Country Z located principally in rural areas or was it located in more urban communities?

(B) Could the bankruptcies in Country Z have been prevented by a private bailout plan by the nation’s banks?

(C) Does Country Y currently have any laws on its books regarding margin loans?

(D) Are there business ties and connections between Country Y and Country Z?

(E) Were there other factors in the case of Country Y that would make the comparison with Country Z less meaningful?

(A) Was the real estate in Country Z located principally in rural areas or was it located in more urban communities? Out of scope

(B) Could the bankruptcies in Country Z have been prevented by a private bailout plan by the nation’s banks? Out of scope

(C) Does Country Y currently have any laws on its books regarding margin loans? it is irrelevant whether Country Y had any laws about this in the first place

(D) Are there business ties and connections between Country Y and Country Z? Incorrect

(E) Were there other factors in the case of Country Y that would make the comparison with Country Z less meaningful? Correct
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Re: In order to understand the dangers of the current real-estate bubble  [#permalink]

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02 Jun 2017, 06:11
The answer must be option E. To evaluate we need to ask ourselves - Is it valid to compare Y and Z ? We realize that only E fits the bill !
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Re: In order to understand the dangers of the current real-estate bubble  [#permalink]

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05 Sep 2018, 08:30
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Re: In order to understand the dangers of the current real-estate bubble   [#permalink] 05 Sep 2018, 08:30
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