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Can we eliminate D on the basis that needed (verb -ed modifier) modifies only spiritual inspiration and depicts meaning that only spiritual inspiration was needed by Native Americans as opposed to all three?
Hm, good question. I don't think that "needed" is really the biggest problem with (D). Strictly speaking, "-ed" modifiers don't always have to "touch" the thing they're modifying -- they just have to be close enough to make sense. So in the phrase "the saguaro cactus provided food, water, and spiritual inspiration needed by the Native Americans", I'm willing to accept that "needed" could modify all three things, and not just the "spiritual inspiration." I don't love it, but I wouldn't jump too quickly to assume that the "needed" is 100% wrong here.
So what's the bigger issue between (C) and (D)?
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(C) the saguaro cactus provided Native Americans with food, water, and spiritual inspiration.
(D) the saguaro cactus provided food, water, and spiritual inspiration needed by the Native Americans.
When you're down to two answer choices like this, sometimes there's no absolute grammar error. If we're being completely strict and literal with the meaning of the two sentences, they're saying subtly different things. (C) is very clear about the fact that these three things (food, water, spiritual inspiration) are provided to Native Americans. (D) is murkier: technically speaking, the sentence never actually tells us that the saguaro provides these things to Native Americans -- it just says that Native Americans needed them. So (C) is much clearer in terms of meaning.
More on "-ing" words coming in next Monday's Topic of the Week -- and we'll hit "-ed" words the following week.