CR 1000 Test 2 q 17

khurram · Posted: Wed Mar 26, 2008 2:48 pm Post subject: CR 1000 Test 2 q 17

Ronald: According to my analysis of the national economy, housing prices should not increase during the next six months unless interest rates drop significantly.
Mark: I disagree. One year ago, when interest rates last fell significantly, housing prices did not increase at all.
It can be inferred from the conversation above that Mark has interpreted Ronald’s statement to mean that
(A) housing prices will rise only if interest rates fall
(B) if interest rates fall, housing prices must rise
(C) interest rates and housing prices tend to rise and fall together
(D) interest rates are the only significant economic factor affecting housing prices
(E) interest rates are likely to fall significantly in the next six months

C D and E are out, A and B sound the same except the use of word Must in B.

ANS is B

Can anyone explain.

Thanks
Khurram

prachipareekh · Posted: Wed Mar 26, 2008 11:55 pm Post subject:

According to Ronald: If interest rates do not drop housing prices should not increase
According to Mark: When interest rates dropped, housing prices did not increase

Thus Mark's and Ronald's statements are in a way converse of each other

Thus Mark's interpretation of Ronald's argument = If rates drop, housing prices will increase

A - incorrect - only if is the culprit here..we cannot infer that it is only because of the interest rates from the argument

Hope this explains

boston_mba · Posted: Sun Apr 13, 2008 4:02 pm Post subject:

Another way of looking at it

I = Interest rates drop
H = housing prices increase

Ronald: If not I, then not H (which is equivalent to saying "If H, then I" - search for Modus tollens to learn more about this)

Mark says "When I, then not H" and he says that this contradicts Ronald.

In other words, Mark believes Ronald said "If I, then H" (which is the converse of what Ronald really said).

Mark believes Ronald said "If interest rates drop, housing prices must increase" (B).

Good luck.

timepass · Posted: Sat May 17, 2008 8:35 pm Post subject:

i will say think like this..
there are A, B and interest rate - total 3 factors which will make the rising of housing price.
A, B is already in place ...ronald says we just need interest rate..
A, B, Interest --------> housing price will go up

but mark thoght Interest rate ---------> go up..

which means ans is B

nil4700 · Posted: Tue May 20, 2008 8:06 pm Post subject: The correct answer is B

(A) housing prices will rise only if interest rates fall
(B) if interest rates fall, housing prices must rise
(C) interest rates and housing prices tend to rise and fall together
(D) interest rates are the only significant economic factor affecting housing prices
(E) interest rates are likely to fall significantly in the next six months

Options C, D and E are irrelevant here. We are not talking about the factors affecting housing prices (D id out), we are not talking about the relation between interest rates and housing prices (C is out) and we are not guessing about anything on interest rates (E is out.)

Now the only thing we have to do is to read Mark's mind. What is he thinking about Ronald's statement. Option A says, HOUSING PRICES WILL RISE ONLY IF INTEREST RATES FALL, that means interest rate's fall is the only thing that affects housing prices, which cannot be taken for granted. If it is taken for, then the previous year there should have been a price rise. There can be several other factors that may cause the housing prices to go up. Option B, which says, IF INTEREST RATES FALL, HOUSING PRICES MUST RISE, clearly mentions that in case there is a fall in interest rates it should definitely trigger a rise in housing price. Mark has taken this assumption and replied back with examples.