Match fidelity to your question. Testing navigation? Use paper. Testing visual hierarchy? Use high-fidelity. Never polish what you have not validated.
Strong answers match fidelity to the question being answered: paper sketches for flow validation, wireframes for layout and information architecture, high-fidelity for visual design validation and usability testing. Best candidates discuss the danger of high-fidelity too early (anchoring, wasted effort) and when stakeholders need to see polish.
Tests process maturity. Designers who jump straight to high-fidelity waste time on unvalidated concepts. Those who stay lo-fi too long cannot sell their vision. The best match fidelity to the decision at hand.