OG 47 - 3

The function of capital markets is to facilitate an exchange of funds among all participants, and yet in practice we find that certain participants are not on a par with others. Members of society have varying degrees of market strength in terms of information they bring to a transaction, as well as of purchasing power and creditworthiness, as defined by lenders.

For example, within minority communities, capital markets do not properly fulfill their functions; they do not provide access to the aggregate flow of funds in the United States. The financial system does not generate the credit or investment vehicles needed for underwriting economic development in minority areas. The problem underlying this dysfunction is found in a rationing mechanism affecting both the available alternatives for investment and the amount of financial resources. This creates a distributive mechanism penalizing members of minority groups because of their socioeconomic differences from others. The existing system expresses definite socially based investment preferences that result from the previous allocation of income and that influence the allocation of resources for the present and future. The system tends to increase the inequality of income distribution. And, in the United States economy, a greater inequality of income distribution leads to a greater concentration of capital in certain types of investment.

Most traditional financial-market analysis studies ignore financial markets’ deficiencies in allocation because of analysts’ inherent preferences for the simple model of perfect competition. Conventional financial analysis pays limited attention to issues of market structure and dynamics, relative costs of information, and problems of income distribution. Market participants are viewed as acting as entirely independent and homogeneous individuals with perfect foresight about capital-market behavior. Also, it is assumed that each individual in the community at large has the same access to the market and the same opportunity to transact and to express the preference appropriate to his or her individual interest. Moreover, it is assumed that transaction costs for various types of financial instruments (stocks, bonds, etc.) are equally known and equally divided among all community members.

278. The author’s main point is argued by

(A) giving examples that support a conventional generalization

(B) showing that the view opposite to the author’s is self-contradictory

(C) criticizing the presuppositions of a proposed plan

(D) showing that omissions in a theoretical description make it inapplicable in certain cases（D）

(E) demonstrating that an alternative hypothesis more closely fits the data

答案为什么是D?

解這一題，第一段是關鍵

第一句說The function of capital markets is to facilitate an exchange of funds among all participants，但是事實上，很多參與市場的人卻是資訊不對稱或是缺乏資訊(作者在第二段舉例)，第三段再進一步少傳統分析師都忽略了.....

所以選D，講作者舉出很多傳統理論忽略的例子...

这一题在考结构。

The function of capital markets is to facilitate an exchange of funds among all participants, and yet in practice we find that certain participants are not on a par with others. Members of society have varying degrees of market strength in terms of information they bring to a transaction, as well as of purchasing power and creditworthiness, as defined by lenders. （作者的main point）

（第二段举例解释member has vary degree of market strength）

For example, within minority communities, capital markets do not properly fulfill their functions; they do not provide access to the aggregate flow of funds in the United States. The financial system does not generate the credit or investment vehicles needed for underwriting economic development in minority areas. The problem underlying this dysfunction is found in a rationing mechanism affecting both the available alternatives for investment and the amount of financial resources. This creates a distributive mechanism penalizing members of minority groups because of their socioeconomic differences from others. The existing system expresses definite socially based investment preferences that result from the previous allocation of income and that influence the allocation of resources for the present and future. The system tends to increase the inequality of income distribution. And, in the United States economy, a greater inequality of income distribution leads to a greater concentration of capital in certain types of investment.

(第三段通过传统理论的忽略说明member has vary degree of market strength)

Most traditional financial-market analysis studies ignore financial markets’ deficiencies in allocation because of analysts’ inherent preferences for the simple model of perfect competition. Conventional financial analysis pays limited attention to issues of market structure and dynamics, relative costs of information, and problems of income distribution. Market participants are viewed as acting as entirely independent and homogeneous individuals with perfect foresight about capital-market behavior. Also, it is assumed that each individual in the community at large has the same access to the market and the same opportunity to transact and to express the preference appropriate to his or her individual interest. Moreover, it is assumed that transaction costs for various types of financial instruments (stocks, bonds, etc.) are equally known and equally divided among all community members.

1， 这样D的“showing that omissions in a theoretical description ” 很明显对，

2，文中第三段“assumes the community at large has the same access to the market and the same opportunity ”，而第二段 “they do not provide access to the aggregate flow of funds in the United States”，这样 “inapplicable in certain cases”。

所以D对。如果要是用排除法，很容易就看出ABCE都不是2，3段所说的。