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Difficulty:
95%
(hard)
Question Stats:
28% (02:16) correct
72%
(02:45)
wrong
based on 393
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Economist: Currently the interest rates that banks pay to borrow are higher than the interest rates that they can receive for loans to large, financially strong companies. Banks will not currently lend to companies that are not financially strong, and total lending by banks to small and medium-sized companies is less than it was five years ago. So total bank lending to companies is less than it was five years ago.
The economist's conclusion follows logically if which one of the following is assumed?
(A) Banks will not lend money at interest rates that are lower than the interest rates they pay to borrow.
(B) Most small and medium-sized companies were financially stronger five years ago than they are now.
(C) Five years ago, some banks would lend to companies that were not financially strong.
(D) The interest rates that banks currently pay to borrow are higher than the rates they paid five years ago.
(E) The interest rates that small and medium-sized companies pay to borrow are higher than those paid by large, financially strong companies.
The economist's conclusion follows logically if which one of the following is assumed?
(A) Banks will not lend money at interest rates that are lower than the interest rates they pay to borrow.
(B) Most small and medium-sized companies were financially stronger five years ago than they are now.
(C) Five years ago, some banks would lend to companies that were not financially strong.
(D) The interest rates that banks currently pay to borrow are higher than the rates they paid five years ago.
(E) The interest rates that small and medium-sized companies pay to borrow are higher than those paid by large, financially strong companies.
08 Jan 2024, 18:11
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Claim: “Total bank lending to companies is less than it was five years ago.”
Key evidence: “Total lending by banks to small and medium-sized companies is less than it was five years ago.”
Counterpoint: What if the current number of loans to large-sized companies is gigantic? It’s possible that total lending is the same as, if not greater than, it was five years ago.
Assumption: The total lending to large-sized companies today is not large enough to offset the decrease in total lending to small-and-medium-companies.
This links back to the paragraph’s first sentence: “Currently the interest rates that banks pay to borrow are higher than the interest rates that they can receive for loans to large, financially strong companies.” In other words, banks are lending money at interest rates that are lower than the interest rates they pay to borrow. If A) is true, then currently, banks are not lending money to large, financially strong companies. This matches the required assumption — The total lending to large-sized companies today is not large enough. (Note that we don’t need to account for large, financially-average-or-weak companies: “Banks will not currently lend to companies that are not financially strong.”)
Thus, A is correct.
Posted from my mobile device
Key evidence: “Total lending by banks to small and medium-sized companies is less than it was five years ago.”
Counterpoint: What if the current number of loans to large-sized companies is gigantic? It’s possible that total lending is the same as, if not greater than, it was five years ago.
Assumption: The total lending to large-sized companies today is not large enough to offset the decrease in total lending to small-and-medium-companies.
Quote:
This links back to the paragraph’s first sentence: “Currently the interest rates that banks pay to borrow are higher than the interest rates that they can receive for loans to large, financially strong companies.” In other words, banks are lending money at interest rates that are lower than the interest rates they pay to borrow. If A) is true, then currently, banks are not lending money to large, financially strong companies. This matches the required assumption — The total lending to large-sized companies today is not large enough. (Note that we don’t need to account for large, financially-average-or-weak companies: “Banks will not currently lend to companies that are not financially strong.”)
Thus, A is correct.
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