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13 Jun 2023, 07:30
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Question 1
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
15%
(low)
Question Stats:
84% (02:35) correct
16%
(03:13) wrong
based on 99
sessions
History
Date
Time
Result
Not Attempted Yet
Question 2
A
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
55%
(hard)
Question Stats:
37% (00:54) correct 63%
(01:05) wrong
based on 99
sessions
History
Date
Time
Result
Not Attempted Yet
Question 3
A
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
85%
(hard)
Question Stats:
27% (01:00) correct 73%
(00:52) wrong
based on 102
sessions
History
Date
Time
Result
Not Attempted Yet
Question 4
E
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
5%
(low)
Question Stats:
89% (00:25) correct 11%
(00:46) wrong
based on 92
sessions
History
Date
Time
Result
Not Attempted Yet
Question 5
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
35%
(medium)
Question Stats:
57% (00:39) correct 43%
(00:57) wrong
based on 96
sessions
History
Date
Time
Result
Not Attempted Yet
Question 6
C
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
55%
(hard)
Question Stats:
57% (01:11) correct 43%
(01:30) wrong
based on 82
sessions
History
Date
Time
Result
Not Attempted Yet
In 1593, a botanist brought back samples of tulips to Holland from Constantinople. He planted them with the intent of studying their medicinal value. His garden was ransacked, the bulbs were stolen, and that was the beginning of the tulip trade in Holland.
The rather pretty alterations caused by a mosaic virus made the plants even more desirable, and shortly thereafter, prices began to rise out of control. By the year 1635, buyers were purchasing promissory notes while the bulbs were still in the ground. The trade in tulip futures became frenzied.
Tulips have a built-in rarity, in that it takes years to grow one from seed, and most bulbs produce only one or two bulb clones annually. That scarcity kept the value up even when new varieties were introduced on the market.
The tulip craze soon found ordinary citizens selling everything they owned for a single bulb; quite literally, bulbs were worth their weight in gold. People traded oxen, silver, land, and houses for one tulip bulb. During the winter of 1636, when the craze was at its peak, a single bulb future might change hands half a dozen times in one day.
As wild as this market was, it was transacted entirely outside of the established Stock Exchange in Amsterdam. It was a people’s exchange. Typically, sales took place at auctions, but often they were transacted at pubs or in town squares.
Like any craze in which potential profits seem too good to be true, tulipomania was doomed. In February 1637, at a bulb auction in Haarlem, the bottom fell out when no one agreed to pay the inflated prices. The ensuing panic took a matter of a few weeks; the government had to leap in to try to bail the country out, offering 10 cents on the dollar for bulb contracts until even that could not be sustained. Eventually, a panel of judges declared that all investment in tulips was gambling and not recoverable investment. Holland slowly fell into an economic depression that lasted for years and eventually overflowed its borders into the rest of Europe.
The rather pretty alterations caused by a mosaic virus made the plants even more desirable, and shortly thereafter, prices began to rise out of control. By the year 1635, buyers were purchasing promissory notes while the bulbs were still in the ground. The trade in tulip futures became frenzied.
Tulips have a built-in rarity, in that it takes years to grow one from seed, and most bulbs produce only one or two bulb clones annually. That scarcity kept the value up even when new varieties were introduced on the market.
The tulip craze soon found ordinary citizens selling everything they owned for a single bulb; quite literally, bulbs were worth their weight in gold. People traded oxen, silver, land, and houses for one tulip bulb. During the winter of 1636, when the craze was at its peak, a single bulb future might change hands half a dozen times in one day.
As wild as this market was, it was transacted entirely outside of the established Stock Exchange in Amsterdam. It was a people’s exchange. Typically, sales took place at auctions, but often they were transacted at pubs or in town squares.
Like any craze in which potential profits seem too good to be true, tulipomania was doomed. In February 1637, at a bulb auction in Haarlem, the bottom fell out when no one agreed to pay the inflated prices. The ensuing panic took a matter of a few weeks; the government had to leap in to try to bail the country out, offering 10 cents on the dollar for bulb contracts until even that could not be sustained. Eventually, a panel of judges declared that all investment in tulips was gambling and not recoverable investment. Holland slowly fell into an economic depression that lasted for years and eventually overflowed its borders into the rest of Europe.
1. Which of the following statements most accurately captures the central thesis of the passage?
(A) Tulipomania was a localized craze with localized effects.
(B) Tulipomania shows the potential devastating effects of a craze.
(C) The Stock Exchange cannot prevent unregulated trading.
(D) The Stock Exchange developed as an answer to unregulated trading.
(E) Before the flower trade, speculation did not exist in Europe.
(A) Tulipomania was a localized craze with localized effects.
(B) Tulipomania shows the potential devastating effects of a craze.
(C) The Stock Exchange cannot prevent unregulated trading.
(D) The Stock Exchange developed as an answer to unregulated trading.
(E) Before the flower trade, speculation did not exist in Europe.
2. The passage suggests that the author would most likely believe that
(A) trading in futures may be ill-advised
(B) trading in commodities is safer than trading stock
(C) trading stocks is relatively risk-free
(D) trading at auctions is usually unwise
(E) flowering plants are a bad investment
(A) trading in futures may be ill-advised
(B) trading in commodities is safer than trading stock
(C) trading stocks is relatively risk-free
(D) trading at auctions is usually unwise
(E) flowering plants are a bad investment
3. Which of the following assertions does the author support with an example?
I. Tulips have a built-in rarity.
II. Sales were transacted in pubs and town squares.
III. Holland fell into a depression.
(A) I only
(B) III only
(C) I and II only
(D) I and III only
(E) I, II, and III
I. Tulips have a built-in rarity.
II. Sales were transacted in pubs and town squares.
III. Holland fell into a depression.
(A) I only
(B) III only
(C) I and II only
(D) I and III only
(E) I, II, and III
4. The author refers to the trade in tulips as a “people’s exchange.” This term is used to indicate
(A) fairness
(B) class warfare
(C) low prices
(D) efficiency
(E) informality
(A) fairness
(B) class warfare
(C) low prices
(D) efficiency
(E) informality
5. The 17th-century speculation on prospective tulip growth might be compared to today’s
(A) fluctuation of oil and natural gas prices
(B) exchange trading of options and futures
(C) hedge funds in the foreign exchange market
(D) issuance of risk-free municipal bonds
(E) bundling of low-rate mortgages
(A) fluctuation of oil and natural gas prices
(B) exchange trading of options and futures
(C) hedge funds in the foreign exchange market
(D) issuance of risk-free municipal bonds
(E) bundling of low-rate mortgages
6. Auctions in the Netherlands continue to handle between 60 and 70 percent of the world’s flower production and export. What question might this information reasonably suggest about tulipomania?
(A) Whether it resulted not only in a depression but also in the death of the auction system of commodity trading
(B) Whether it led the Dutch government to take over substantial debt for bulb dealers and their patrons
(C) Whether it changed the Dutch way of doing business to one that was more formal and controlled
(D) Whether it forced the Dutch to look into new, nonagricultural products for export and import
(E) Whether it stimulated the Dutch to explore more exotic sources of foreign commodities
(A) Whether it resulted not only in a depression but also in the death of the auction system of commodity trading
(B) Whether it led the Dutch government to take over substantial debt for bulb dealers and their patrons
(C) Whether it changed the Dutch way of doing business to one that was more formal and controlled
(D) Whether it forced the Dutch to look into new, nonagricultural products for export and import
(E) Whether it stimulated the Dutch to explore more exotic sources of foreign commodities
RC Butler 2023 - Practice Two RC Passages Everyday.
Passage # 190 Date: 13-Jun-2023
This question is part of RC Butler 2023. Click here for Details
Passage # 190 Date: 13-Jun-2023
This question is part of RC Butler 2023. Click here for Details
21 Jun 2023, 12:44
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Ruchi007
Official Explanation
5. The 17th-century speculation on prospective tulip growth might be compared to today’s
Explanation
In the given passage, it is described how the trade in tulips in Holland became frenzied, with buyers purchasing promissory notes for tulip bulbs that were still in the ground. This speculative behavior, where people were trading future contracts based on the anticipated growth and value of tulips, is reminiscent of modern exchange trading of options and futures. In both cases, investors are making bets on the future price movements of an asset without owning the actual asset itself.
Furthermore, the passage highlights the wild market behavior and the eventual collapse of the tulip market when inflated prices could no longer be sustained. This resembles the inherent risk and potential for speculative bubbles in exchange trading of options and futures, where prices can be driven to unsustainable levels before a market correction occurs.
The other options presented in the question are not as closely related to the tulip speculation described in the passage. Fluctuations of oil and natural gas prices (A), hedge funds in the foreign exchange market (C), issuance of risk-free municipal bonds (D), and bundling of low-rate mortgages (E) do not align as directly with the historical tulip trade and its speculative nature as exchange trading of options and futures does.
Answer: B
Explanation
In the given passage, it is described how the trade in tulips in Holland became frenzied, with buyers purchasing promissory notes for tulip bulbs that were still in the ground. This speculative behavior, where people were trading future contracts based on the anticipated growth and value of tulips, is reminiscent of modern exchange trading of options and futures. In both cases, investors are making bets on the future price movements of an asset without owning the actual asset itself.
Furthermore, the passage highlights the wild market behavior and the eventual collapse of the tulip market when inflated prices could no longer be sustained. This resembles the inherent risk and potential for speculative bubbles in exchange trading of options and futures, where prices can be driven to unsustainable levels before a market correction occurs.
The other options presented in the question are not as closely related to the tulip speculation described in the passage. Fluctuations of oil and natural gas prices (A), hedge funds in the foreign exchange market (C), issuance of risk-free municipal bonds (D), and bundling of low-rate mortgages (E) do not align as directly with the historical tulip trade and its speculative nature as exchange trading of options and futures does.
Answer: B
