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Refer to the Following Paragraph to Answer the Questions Below

question 9

Multiple Choice

Refer to the following paragraph to answer the questions below.
Maria Valencia developed a new test to measure intelligence or I.Q. She claimed that using her test, someone with an I.Q. of 180 would be considered twice as intelligent as someone with an I.Q. of 90. Someone with a score of 0, had absolutely no intelligence. In order to see how good it was, she tested two groups of students with her new test during the first week of the semester. One group scored low on existing I.Q. tests. The other scored very high. She found that those who scored low on old tests usually scored low on her new test, while those who scored very high on old tests usually scored high on the new test. In addition, she had the group of people who took the new test retake it at the midterm and again at the end of the semester. She found that a person's I.Q. score did not change across the three times it was measured during the semester.
-By comparing it with an old test, she has shown the new measure to have

Definitions:

Signaling Function

The act of conveying information indirectly through actions or behaviors, often used in economics and finance to indicate future intentions or the current state of affairs.

Steady Flow

implies a constant and uniform rate of flow in processes, often used in the context of fluid dynamics and economic models.

Debt Covenants

Provisions agreed upon in debt contracts that place restrictions or obligations on the borrower to either do or not do certain actions.

Default Risk

The risk that a borrower will not make the required payments on their debt obligations.