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# This is from a Kaplan Test: History has shown that severe

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Intern
Joined: 11 Jul 2007
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This is from a Kaplan Test: History has shown that severe [#permalink]

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08 Jan 2008, 11:07
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This is from a Kaplan Test:

History has shown that severe and sudden political instability strikes country X roughly once every 50 years. The most recent example was the attempt on the President's life a few years ago. The reaction of average investors in country X 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 market 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.

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VP
Joined: 22 Oct 2006
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Schools: Chicago Booth '11

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08 Jan 2008, 12:48
between C and D, hm

Ill go with C

In D I dont think you can conclude that the machine could not tell the difference between a market flucation and a crisis situation. It could very well be able to distinguish one from the other.

C is more vague in that it says it is unclear if both factors are mixed which I think is a better answer.

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Director
Joined: 14 Oct 2007
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08 Jan 2008, 15:01
I go with D. The passage explicitly states that the protection mechanism reacts to market fluctuations (based on corporate data and economic indicators). but it would not be able to differentiate between political and economic factors. so i go with D

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CEO
Joined: 29 Mar 2007
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08 Jan 2008, 17:32
fernandong wrote:
This is from a Kaplan Test:

History has shown that severe and sudden political instability strikes country X roughly once every 50 years. The most recent example was the attempt on the President's life a few years ago. The reaction of average investors in country X 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 market 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.

C.

I think D is too extreme.

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SVP
Joined: 28 Dec 2005
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08 Jan 2008, 18:53
i will say C. The stem tells us that the mechanism is triggered based on estimations of "corporate data and economic indicators".

If the event is partially or, in the worst case, totally unrelated to these indicators, then we cant say how well this model will work

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SVP
Joined: 04 May 2006
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08 Jan 2008, 19:15
one more for C
_________________

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Manager
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09 Jan 2008, 04:54
C it is

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.
Well because protection mechanism is designed to work by estimating the reaction for economic indicators and corporate data, if these two factors are unrelated to the political crisis occuring in the country, it would be unclear how the mech would work
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.
Well thats not only EXTREAM BUT OUT OF SCOPE as well. because the mechanism is not designed to analyze the market fluctuations BUT it is design to predict these market fluctuations besed on say a company's annual/quater result.

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Intern
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09 Jan 2008, 12:32
OA is C.

I incorrectly picked D, but thanks for the explanations above.

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