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07 Jul 2021, 06:00
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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:
43% (01:51) correct
57%
(02:08)
wrong
based on 274
sessions
History
Date
Time
Result
Not Attempted Yet
Economist: In a weak economy when the stock market is struggling, the U.S. dollar traditionally fails, and the price of gold rises in response to the declining dollar. Recent economic data indicate that the markets are currently struggling: the key stock indexes are lower than they have been in at least two years, and various market sectors are in decline. At the same time, the value of the dollar is still high, and the price of gold remains low. Therefore, the price of gold suggests that we are due for a market turnaround soon.
Given the information above, the economist’s argument is flawed because:
(A) He relies entirely on traditional data without considering the possibility for an anomaly in the market’s movement.
(B) He bases his commentary on stock indexes, which are traditionally unreliable for determining market direction.
(C) The price of gold is currently fixed at the government level, so it is impossible to rely on that as an indicator of market direction.
(D) He should be focusing more closely on the movement of certain market sectors instead of the price of gold.
(E) He fails to take other significant market indicators into effect and thus comes to a conclusion too quickly about the market’s movement.
Given the information above, the economist’s argument is flawed because:
(A) He relies entirely on traditional data without considering the possibility for an anomaly in the market’s movement.
(B) He bases his commentary on stock indexes, which are traditionally unreliable for determining market direction.
(C) The price of gold is currently fixed at the government level, so it is impossible to rely on that as an indicator of market direction.
(D) He should be focusing more closely on the movement of certain market sectors instead of the price of gold.
(E) He fails to take other significant market indicators into effect and thus comes to a conclusion too quickly about the market’s movement.
10 Jul 2021, 06:30
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Bunuel
OFFICIAL EXPLANATION
Overview:
This question is difficult because it requires the student to pay very careful attention both to the information in the passage and to the question itself in order to deduce the flaw in the economist’s reasoning. The economist makes a claim about traditional indicators during a weak economy: the value of the dollar fails, and the price of gold rises. The economist then notes that all economic indicators point to a weak economy, but the expected low dollar/high gold movement is absent. The economist then concludes that the market can be expected to turn around. From a purely economic perspective, there are a number of problems with the economist’s reasoning; however, the student does not need to know specific details about economics beyond the information contained in the passage. The most important consideration is that the economist notes a specific precedent: when there is a weak economy, the dollar should fail and gold should rise. Because gold is not rising, the economist concludes that the precedent still holds firm and that the market will be strong again. This conclusion raises the central question of whether the market precedent is still relevant, and this is an issue the economist fails to raise.
The Correct Answer:
A In deriving his conclusion, the economist discusses only the precedents that determine market movement. His information, however, suggests that the movements in the market might be anomalous and thus that precedent alone cannot determine the conclusion that he reaches. Therefore, the economist’s conclusion has the weakness of failing to consider the very anomalies he indicates. Answer choice (A) most clearly states this and is the correct answer.
The Incorrect Answers:
B, C Answer choices (B) and (C) require knowledge about economics in general (and the market in particular) that is not contained within the passage. Although both answer choices might very well be true, this cannot be determined from the information provided within the passage. Thus, answer choices (B) and (C) cannot be correct.
D Answer choice (D) suggests that the economist should focus on the movement of market sectors over stock market indicators and the prices of the dollar and gold. But the passage does not suggest anywhere that an economist should focus on one element of market movement over another, so this answer choice makes assumptions that cannot be inferred from the passage. Answer choice (D) is incorrect.
E Answer choice (E) is tempting because it suggests that the economist is overlooking key data in reaching his conclusion, but the passage offers no indication that certain data is required to reach a conclusion – only that certain precedents are traditional in reaching a conclusion. Therefore, answer choice (E) makes assumptions that cannot be inferred and is incorrect.
General Discussion
07 Jul 2021, 08:50
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Good afternoon, can anyone explain to me the correct answer? I'm between A and E, but since in answear E the indicators discussed in the statment ( "the key stock indexes are lower than they have been in at least two years, and various market sectors are in decline" ) are refered to, I'm more inclined towards answer E.
