Study the graphs given below : The first graph depicts a hypothetical movement of Bombay Stock Exchange Sensitive index which is an indicator of the average price movement of a representative set of stocks. The second graph depicts the averaged price of a

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Q: 134 (IAS/1994)
Study the graphs given below : The first graph depicts a hypothetical movement of Bombay Stock Exchange Sensitive index which is an indicator of the average price movement of a representative set of stocks. The second graph depicts the averaged price of all automobile manufacturing companies.
Which one of the following is a valid inference ?

question_subject: 

Logic/Reasoning

question_exam: 

IAS

stats: 

0,11,38,11,11,6,21

keywords: 

{'average price movement': [0, 1, 0, 0], 'major market movements': [0, 1, 0, 0], 'stocks': [1, 1, 2, 0], 'automobile shares': [0, 2, 0, 0], 'bombay stock exchange sensitive index': [0, 1, 0, 0], 'market': [0, 0, 1, 0], 'graphs': [0, 0, 1, 0], 'shares': [0, 3, 3, 6], 'second graph': [0, 1, 0, 0], 'prices': [0, 5, 4, 14], 'first graph': [0, 1, 0, 0], 'automobile': [2, 1, 0, 3], 'indicator': [1, 1, 1, 2], 'hypothetical movement': [0, 2, 0, 0], 'companies': [0, 0, 0, 1], 'price': [0, 3, 1, 12], 'valid inference': [0, 1, 0, 0], 'major political change': [0, 2, 0, 0]}

The correct answer is option 1 `The market is unstable because prices are continuously fluctuating`. We can infer this from the first graph which shows a clear fluctuation of the Bombay Stock Exchange Sensitive index. If the average price movement of a representative set of stocks is constantly changing, it implies instability in the market.

Option 2 `Automobile shares are more stable than shares in general` could be plausible based on the graphs. However, without information regarding the stability of other types of shares, we can`t confidently make this inference.

Option 3 `There was a major political change in June/July` cannot be inferred solely from these graphs. While it`s possible that changes in the stock market correspond to political events, these graphs do not provide direct evidence of any political changes.

Option 4 `Automobile shares have been steadily improving in price rather than being affected by major market movements` cannot be inferred from the graphs because while the price of automobile shares are improving, the second graph shows they are indeed affected by market fluctuations.

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