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"Although the term "supercomputer" may sound fanciful or exaggerated, IT is simply an extremely fast mainframe that can execute trillions of calculations every second."

According to MGMAT, 'IT' can not refer to 'term "supercomputer"' since it doesn't make sense.


I daresay the MGMAT point is simply saying, very literally, that a TERM cannot be a MAINFRAME.
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altairahmad


iv. The White Tiger is nicknamed “the Lightning” because it moves very quickly.

The pronoun “it” is ambiguous in its usage. It is not clear if “it” refers to “White Tiger” or “Lightning”. Observe that both the following sentences make perfect sense.

a. The White Tiger is nicknamed “the Lightning” because the white tiger moves very quickly.
b. The White Tiger is nicknamed “the Lightning” because lightning moves very quickly.

So there is a pronoun usage error in this sentence.
As you have rightly pointed out, the pronoun it is ambiguous here. It is normally suggested that options using ambiguous pronouns should not be immediately categorized as wrong.

Quote:
Where as in MGMAT the following example is cited,

"Although the term "supercomputer" may sound fanciful or exaggerated, IT is simply an extremely fast mainframe that can execute trillions of calculations every second."

According to MGMAT, 'IT' can not refer to 'term "supercomputer"' since it doesn't make sense.
Yes, but this sentence is wrong for a completely different reason; the pronoun it is not really an ambiguous pronoun here, since it has only one antecedent: term "supercomputer".

The problem here is logic: the term itself cannot be an extremely fast mainframe.

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