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

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Bunuel
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In order to understand the dangers of the current real-estate bubble [#permalink] New post   07 Apr 2023, 01:30
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E

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45% (medium)

Question Stats:

66% (01:49) correct 34% (02:02) wrong based on 316 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] New post   08 Apr 2023, 10:47
Hi all,

Could someone help me understand why choice C is wrong? I think it would be helpful to know if there are already laws in place restricting margin loans. I understand the presence of "more stringent laws" implies that there are some laws in place, but we do not know if they are specific to margin loans.

Furthermore, choice E implies to examine factors making the comparison less meaningful - there could be such factors, however "less meaningful" does not make the claim entirely irrelevant - a factor could make the comparison less meaningful, but the recommendation could still be useful to prevent a scenario like Country Z.
Kudos to any explanation on this. Thanks
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In order to understand the dangers of the current real-estate bubble [#permalink] New post   13 Apr 2023, 23:48
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rad1601 wrote:
Hi all,

Could someone help me understand why choice C is wrong? I think it would be helpful to know if there are already laws in place restricting margin loans. I understand the presence of "more stringent laws" implies that there are some laws in place, but we do not know if they are specific to margin loans.

Furthermore, choice E implies to examine factors making the comparison less meaningful - there could be such factors, however "less meaningful" does not make the claim entirely irrelevant - a factor could make the comparison less meaningful, but the recommendation could still be useful to prevent a scenario like Country Z.
Kudos to any explanation on this. Thanks


This statement "if more stringent laws restricting margin loans are not enacted promptly" clearly implies that there already exist some laws restricting margin loans in Country Y, but, according to the author, they are not as strict as or they are not as strictly enforced as they should be in order to prevent a situation similar to a situation that occurred in Country Z.

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

Option C does not help because we already know this from the passage. But are these laws stringent enough to prevent the given situation? Neither this is explicitly stated in option C nor we can infer this information from it. Therefore, it is not helpful. That was my reasoning for eliminating C.
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Re: In order to understand the dangers of the current real-estate bubble [#permalink] New post   07 May 2023, 17:30
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Bunuel 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?



This is a CR Butler Question



OFFICIAL EXPLANATION



E

To evaluate the significance of the author’s claims, we need to recognize what kind of argument it is: an analogy. The author is saying that the situation in Country Y is analogous to that of Country Z. To weaken an analogy, you merely have to question whether the two situations were really analogous. Choices A and B are outside the scope of the argument. Choice C is incorrect because the author’s argument stated that more stringent laws were needed, making it irrelevant whether Country Y had any laws about this in the first place. Choice D goes off on an interesting tangent by asking if there were business ties between the two countries, but it does not weaken the argument’s analogy. Only choice E questions whether the two situations are in fact analogous. E is the best answer.
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Re: In order to understand the dangers of the current real-estate bubble [#permalink]
07 May 2023, 17:30
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