batliwala wrote:
In the aftermath of a worldwide stock-market crash, Country T claimed that the severity of the stock-market crash it experienced resulted from the accelerated process of denationalization many of its industries underwent shortly before the crash.
Which of the following, if it could be carried out, would be most useful in an evaluation of Country T's assessment of the causes of the severity of its stock-market crash?
(A) Calculating the average loss experienced by individual traders in Country T during the crash
(B) Using economic theory to predict the most likely date of the next crash in Country T
(C) Comparing the total number of shares sold during the worst days of the crash in Country T to the total number of shares sold in Country T just prior to the crash.
(D) Comparing the severity of the crash in Country T to the severity of the crash in countries otherwise economically similar to Country T that have not experienced recent denationalization
(E) Comparing the long-term effects of the crash on the purchasing power of the currency of Country T to the immediate, more severe short-term effects of the crash on the purchasing power of the currency of Country T.
There was a worldwide stock market crash.
Country T experienced a severe crash.
Country T claims it is because of the accelerated process of denationalization many of its industries underwent shortly before the crash
What would be useful to evaluate Country T's assessment of the causes of the severity of its stock-market crash?
What would be useful to evaluate whether the denationalization (this is country T's assessment) was the cause of severe crash?
(A) Calculating the average loss experienced by individual traders in Country T during the crash
We already know the crash was severe. Avg loss of traders doesn't give us the reason of the severe crash.
(B) Using economic theory to predict the most likely date of the next crash in Country T
Irrelevant
(C) Comparing the total number of shares sold during the worst days of the crash in Country T to the total number of shares sold in Country T just prior to the crash.
Number of shares sold alone do not tell us anything. We need to know the number of shares bought, the price levels etc too. In any case, even if we have all that information, it will probably tell us how severe the crash was, not the reason for the crash. It will not tell us whether denationalisation was the reason for the severe crash.
(D) Comparing the severity of the crash in Country T to the severity of the crash in countries otherwise economically similar to Country T that have not experienced recent denationalization
Correct. So comparing T to other countries with similar economic situation but without denationalisation will tell us whether the severe crash of country T was because of denationalisation. If other countries with denationalisation but with similar economies have not seen severe crash, then it is likely that country T's severe crash is because of denationalisation. If other countries without denationalisation have also seen a sever crash, then some other factor seems to be likely.
(E) Comparing the long-term effects of the crash on the purchasing power of the currency of Country T to the immediate, more severe short-term effects of the crash on the purchasing power of the currency of Country T.
Effects of the crash are irrelevant. We need the reasons of the severe crash.
Answer (D)