medium · GMAT Verbal
Caspian Bank replaced a manual screening rule with an algorithm whose overall fraud-detection accuracy was 90%, compared with 84% for the old rule. An audit nevertheless found that false-positive rates for small nonprofit accounts were nearly twice those for commercial accounts. Aggregate accuracy thus improved, but it obscured a concentrated burden on one customer segment. Before expanding the model, the bank should determine whether threshold adjustments can preserve the gain while reducing that disparity.
Which new situation most closely follows the principle supported by the passage?
- A firm compares model revenue with manual-processing speed and calls the model fair.
- A hospital changes the model threshold until overall accuracy is highest without checking subgroup effects or disparity.
- A hospital compares an improved diagnostic model’s error rates across demographic groups before deploying it system-wide.
- A hospital deploys a model solely because its overall accuracy exceeds the old model’s.
- A bank discards every algorithm that produces any false positive.
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