PrepTest 126, Section 2, Question 25
In economics, the term "speculative bubble" refers to(462 more words not shown)
The passage states that Mackay(6 more words not shown)
- AThe rapid rise(17 more words not shown)
- BThe prices of(19 more words not shown)
- CThe Netherlands was(15 more words not shown)
- DThe very high(12 more words not shown)
- EBuyers of rare(19 more words not shown)
Reading the passage
Now switch speakers. Mackay calls this a speculative bubble: rising prices attracted speculators, prices surged, and then they collapsed. Garber gives the competing explanation about earnings from reproduced bulbs. We need a claim attributed to Mackay.
Working the answers
- A
This is tempting: if Mackay explains the rise through speculation, does that exclude fashionability? No. Fashion could have helped make people expect that someone else would pay more. Mackay's account doesn't rule it out. We shouldn't add that denial for him.
- BCorrect
This restates the role of speculation in his account. The second paragraph says “rapid price rises attracted speculators” before prices surged. That fits his classification of the market as a speculative bubble.
- C
Being a center of tulip cultivation doesn't establish being the only one. No comparison with every other possible center is provided.
- D
The defense of the high prices as potentially rational belongs to Garber. It isn't the claim attributed to Mackay.
- E
Earnings from descendant bulbs also belong to Garber's explanation. Familiar information can still be the wrong answer when the question asks which person said it.
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