Country X's recent stock-trading scandal should not diminish investors' confidence in the country's stock market. For one thing, the discovery...

GMAT Critical Reasoning : (CR) Questions

Source: Official Guide

Critical Reasoning

Boldface

MEDIUM

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Country X's recent stock-trading scandal should not diminish investors' confidence in the country's stock market. For one thing, the discovery of the scandal confirms that Country X has a strong regulatory system, as the following considerations show. In any stock market, some fraudulent activity is inevitable. If a stock market is well regulated, any significant stock-trading fraud in it will very likely be discovered. This deters potential perpetrators and facilitates improvement in regulatory processes.

In the argument, the portion in boldface plays which of the following roles?

It is the argument's only conclusion.

It is the conclusion for which the argument provides support and which itself is used to support the argument's main conclusion.

It is argument's main conclusion and is supported by another explicitly stated conclusion for which further support is provided.

It is an assumption for which no explicit support is provided and is used to support the argument's only conclusion.

It is a compound statement containing both the argument's main conclusion and an assumption used to support that conclusion.

Solution

Understanding the Passage

Text from Passage	Analysis
"Country X's recent stock-trading scandal should not diminish investors' confidence in the country's stock market."	What it says: The author argues that a recent stock-trading scandal in Country X should not reduce investor confidence in that country's stock market. Visualization: Before scandal: Investor confidence 85% → After scandal: Should remain 85% (not drop to 60%) What it does: This establishes the author's main position - defending Country X's stock market despite a scandal. Source: Author's view
(Boldface 1) "the discovery of the scandal confirms that Country X has a strong regulatory system"	What it says: Finding the scandal actually proves that Country X has effective regulation and oversight. Visualization: Scandal discovered → Strong regulation confirmed (like security cameras catching a thief proves good security system) What it does: This provides the main reason supporting why investor confidence should remain intact. Source: Author's view
"as the following considerations show."	What it says: The author signals that supporting evidence will follow to back up the previous claim. What it does: This introduces the reasoning that will support the boldface statement. Source: Author's view
"In any stock market, some fraudulent activity is inevitable."	What it says: Fraud happens in all stock markets as a natural occurrence. Visualization: Stock Market A: 2% fraud rate, Stock Market B: 1.5% fraud rate, Stock Market C: 3% fraud rate - all have some fraud What it does: This establishes a general principle about fraud being universal in markets. Source: Author's view
"If a stock market is well regulated, any significant stock-trading fraud in it will very likely be discovered."	What it says: Good regulation means fraudulent activities will probably be found and exposed. Visualization: Well-regulated market: 90% of significant fraud discovered vs. Poorly-regulated market: 30% of significant fraud discovered What it does: This creates a logical connection between good regulation and fraud detection. Source: Author's view
"This deters potential perpetrators and facilitates improvement in regulatory processes."	What it says: Discovering fraud has two positive effects: it scares away future fraudsters and helps improve the regulatory system. Visualization: Discovery → Future fraudsters deterred (from 100 potential attempts to 40) + Regulatory improvements (system upgraded from version 1.0 to 2.0) What it does: This explains the beneficial outcomes of fraud discovery, completing the logical chain. Source: Author's view

Overall Structure

The author is defending Country X's stock market against potential loss of investor confidence following a scandal. The logical flow moves from stating the main position, to providing the key reason (discovering fraud shows strong regulation), to supporting that reason with general principles about fraud detection and its benefits.

Main Conclusion: Country X's recent stock-trading scandal should not diminish investors' confidence in the country's stock market.

Boldface Segments

Boldface 1: the discovery of the scandal confirms that Country X has a strong regulatory system

Boldface Understanding

Boldface 1 Analysis:

Function: This serves as the primary reason supporting the author's conclusion that investor confidence should not decrease
Direction: Same direction - it directly supports the author's ultimate position by providing a positive interpretation of the scandal discovery

Structural Classification

Boldface 1:

Structural Role: Primary evidence/reason supporting the main conclusion
Predicted Answer Patterns: "evidence in favor of the conclusion" or "reason supporting the author's position"

Answer Choices Explained

It is the argument's only conclusion.

'It is the argument's only conclusion' - ✗ WRONG - This is incorrect because there are actually two conclusions in the argument: the main conclusion about investor confidence and the boldface statement. The boldface is not the only conclusion, nor is it the main one.

It is the conclusion for which the argument provides support and which itself is used to support the argument's main conclusion.

'It is the conclusion for which the argument provides support' - ✓ CORRECT - The boldface receives support from the detailed reasoning about fraud detection and regulatory systems that follows it. 'and which itself is used to support the argument's main conclusion' - ✓ CORRECT - The boldface serves as the primary reason why investor confidence should not diminish, directly supporting the main conclusion.

It is argument's main conclusion and is supported by another explicitly stated conclusion for which further support is provided.

'It is argument's main conclusion' - ✗ WRONG - The main conclusion is about investor confidence not diminishing, not about the regulatory system being strong. 'and is supported by another explicitly stated conclusion for which further support is provided' - ✗ WRONG - Since the boldface isn't the main conclusion, this entire characterization is incorrect.

It is an assumption for which no explicit support is provided and is used to support the argument's only conclusion.

'It is an assumption for which no explicit support is provided' - ✗ WRONG - The boldface is not an assumption; it's an explicitly stated conclusion that receives clear support from the reasoning that follows ('as the following considerations show'). 'and is used to support the argument's only conclusion' - ✗ WRONG - While it does support a conclusion, there isn't just one conclusion in the argument.

It is a compound statement containing both the argument's main conclusion and an assumption used to support that conclusion.

'It is a compound statement containing both the argument's main conclusion' - ✗ WRONG - The boldface statement is about regulatory strength, while the main conclusion is about investor confidence. These are separate statements. 'and an assumption used to support that conclusion' - ✗ WRONG - The boldface doesn't contain an assumption; it's a single conclusion that receives support.

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