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In the last clause of this prompt, we have "...seemed to be reverting to .... Here, we need to know who or what is doing this reverting. Hence, the subject of this clause must be present after the comma, as a part of this clause itself. therefore, (A) and (D) can be eliminated.

In (E), we have when "they" dropped the proposal, the Wilson administration. it is not clear as to whom "they" referring to. Hence, we can eliminate (E).

In (B), we have after "it" was dropped, the Wilson administration. here, it is not clear as to what the pronoun "it" is referring to. Hence, we can eliminate (B).

(C) is the right answer choice.
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daagh

Can we also drop A,D and E on the basis of the usage of when ?

When should refer to a specific time/era/year isnt it ? And the question in no way seems to indicate a year or time frame.

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In presenting his modus vivendi proposal, Lansing implied that the American government accepted the German view that armed merchant vessels were warships: however, when the proposal was dropped by the Wilson administration, it seemed to be reverting to the British view on this question.

(A) when the proposal was dropped by the Wilson administration, it
it we don't whether it's refering back to Wison administration or the proposal therefore out

(B) after it was dropped, the Wilson administration
it is not having the right reference therefore out

(C) by dropping the proposal, the Wilson administration
The meaning is perfect therefore let us hang on to it

(D) the Wilson administration dropped the proposal when it
THe sequence of events isn't correct along with the meaning therefore out

(E) when they dropped the proposal, the Wilson administration
THey is not having the right reference therefore out

Therefore IMO C
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In presenting his modus Vivendi proposal, Lansing implied that the American government accepted the German view that armed merchant vessels were warships; however, when the proposal was dropped by the Wilson administration, it seemed to be reverting to the British view on this question.

(A) when the proposal was dropped by the Wilson administration, it -- can't say whether 'it' stands for the proposal or the Wilson Admin.
(B) after it was dropped, the Wilson administration --'it' can stand for the proposal or for the German view

(C) by dropping the proposal, the Wilson administration -- Good God ! There is no pronoun here. The best answer.

(D) the Wilson administration dropped the proposal when it-- 'It' can stand for the proposal or the Wilson Admin. It looks as though the proposal veered towards the British view.

(E) when they dropped the proposal, the Wilson administration-- The only plural noun is warships, and it will be absurd to say the warships dropped the proposal rather than bombs

daagh
In option E, the pronoun "they" can't refer back to the American government?

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In presenting his modus Vivendi proposal, Lansing implied that the American government accepted the German view that armed merchant vessels were warships; however, when the proposal was dropped by the Wilson administration, it seemed to be reverting to the British view on this question.

(A) when the proposal was dropped by the Wilson administration, it -- can't say whether 'it' stands for the proposal or the Wilson Admin.
(B) after it was dropped, the Wilson administration --'it' can stand for the proposal or for the German view

(C) by dropping the proposal, the Wilson administration -- Good God ! There is no pronoun here. The best answer.

(D) the Wilson administration dropped the proposal when it-- 'It' can stand for the proposal or the Wilson Admin. It looks as though the proposal veered towards the British view.

(E) when they dropped the proposal, the Wilson administration-- The only plural noun is warships, and it will be absurd to say the warships dropped the proposal rather than bombs

============================

My Question is, If we replace It by Proposal , the sentence will be as such --
when the proposal was dropped by the Wilson administration, Proposal seemed to be reverting to the British view on this question.
Does it make any sense to say that the proposal seemed to revert ?

Now, If we replace It by Administration , the sentence will be as such --
when the proposal was dropped by the Wilson administration, Wilson Administration seemed to be reverting to the British view on this question.
Doesn't the 2nd sentence make more sense ?

In the above context, although C is a correct choice, how is A incorrect?
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In presenting his modus vivendi proposal, Lansing implied that the American government accepted the German view that armed merchant vessels were warships: however, when the proposal was dropped by the Wilson administration, it seemed to be reverting to the British view on this question.

(A) when the proposal was dropped by the Wilson administration, it (incorrect: meaning error)
Pronoun it refers to the proposal thus the meaning is proposal seemed to be reverting. The proposal itself cannot revert. It is Wilson who seems to revert
(B) after it was dropped, the Wilson administration (incorrect: pronoun error)
It does not have any antecedent
(C) by dropping the proposal, the Wilson administration (best option)
Dropping is modifying administration and administers is reverting
(D) the Wilson administration dropped the proposal when it (incorrect: meaning error)
The same as option A has error
(E) when they dropped the proposal, the Wilson administration (incorrect: pronoun error)
Pronoun they does not have any antecedent.
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