PrepTest 126, Section 2, Question 22
In economics, the term "speculative bubble" refers to(462 more words not shown)
Which one of the following(9 more words not shown)
- AThe seventeenth-century Dutch(17 more words not shown)
- BMackay did not(16 more words not shown)
- CA speculative bubble(16 more words not shown)
- DGarber argues that(19 more words not shown)
- EA tulip bulb(17 more words not shown)
Reading the passage
We've already predicted Garber's challenge to Mackay's view that this was a speculative bubble. Garber offers an explanation based on earnings from descendant bulbs. The answer should report that central challenge without turning it into a conclusion the writer explicitly endorses.
Working the answers
- A
This declares the usual classification mistaken. The writer tells us that Garber challenges it, not that his challenge has settled the dispute.
- B
This narrows the discussion to a defect in Mackay's assessment of earnings. Earnings matter because they support Garber's larger argument about whether the market was a speculative bubble. B never reaches that conclusion.
- C
This isn't even the complete definition. A sharp rise and fall aren't enough: the opening also specifies prices driven by “mere speculation” about resale rather than fundamentals. That distinction is exactly why Garber disputes the tulip example. C also leaves out the dispute itself.
- DCorrect
This identifies who is challenging whom and what the challenge concerns. It reports Garber's position without claiming that the writer has established its truth.
- E
This is a reason Garber gives for his conclusion. Being able to earn a return despite falling prices helps explain why the tulip market needn't have been a speculative bubble. The supporting point alone leaves out the larger argument.
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