Events & Promotions
|
|
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.
Customized
for You
Track
Your Progress
Practice
Pays
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Nov 1912:30 PM EST
-01:30 PM EST
Learn how Keshav, a Chartered Accountant, scored an impressive 705 on GMAT in just 30 days with GMATWhiz's expert guidance. In this video, he shares preparation tips and strategies that worked for him, including the mock, time management, and more
Nov 2007:30 AM PST
-08:30 AM PST
Learn what truly sets the UC Riverside MBA apart and how it helps in your professional growth
Nov 2001:30 PM EST
-02:30 PM IST
Learn how Kamakshi achieved a GMAT 675 with an impressive 96th %ile in Data Insights. Discover the unique methods and exam strategies that helped her excel in DI along with other sections for a balanced and high score.
Nov 2211:00 AM IST
-01:00 PM IST
Do RC/MSR passages scare you? e-GMAT is conducting a masterclass to help you learn – Learn effective reading strategies Tackle difficult RC & MSR with confidence Excel in timed test environment- Nov 23
11:00 AM IST
-01:00 PM IST
Attend this free GMAT Algebra Webinar and learn how to master the most challenging Inequalities and Absolute Value problems with ease. 
Nov 2407:00 PM PST
-08:00 PM PST
Full-length FE mock with insightful analytics, weakness diagnosis, and video explanations!
Nov 2510:00 AM EST
-11:00 AM EST
Prefer video-based learning? The Target Test Prep OnDemand course is a one-of-a-kind video masterclass featuring 400 hours of lecture-style teaching by Scott Woodbury-Stewart, founder of Target Test Prep and one of the most accomplished GMAT instructors.
13 Sep 2024, 19:20
Kudos
Bookmarks
Question 1
A
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
15%
(low)
Question Stats:
80% (02:01) correct
20%
(01:53) wrong
based on 165
sessions
History
Date
Time
Result
Not Attempted Yet
Question 2
D
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
15%
(low)
Question Stats:
79% (00:52) correct 21%
(01:10) wrong
based on 171
sessions
History
Date
Time
Result
Not Attempted Yet
Question 3
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
15%
(low)
Question Stats:
77% (00:56) correct 23%
(01:04) wrong
based on 168
sessions
History
Date
Time
Result
Not Attempted Yet
Question 4
D
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
55%
(hard)
Question Stats:
55% (01:13) correct 45%
(01:24) wrong
based on 176
sessions
History
Date
Time
Result
Not Attempted Yet
The financial markets in London underwent significant development during the late 17th and early 18th centuries. The establishment of the Bank of England in 1694, amidst the Nine Years' War, marked the creation of a national debt system and introduced Bills of Exchange, which became the foundation of modern banking. London's financial landscape was further invigorated by overseas investments, particularly from Amsterdam and France, and by the Treaty of Utrecht (1713), which granted Britain the right to supply slaves to Spanish America. This influx of capital, combined with other financial innovations like joint-stock companies, lotteries, and insurance firms, fueled London’s rise as a global financial center.
Among these ventures was the South Sea Company, founded in 1711 with the purpose of managing part of Britain’s national debt and exploiting lucrative trade opportunities in Spanish South America. The Company quickly became the subject of intense speculation, with its stock prices soaring in 1720. Investors from all classes, including royalty, were swept into a speculative frenzy. John Blunt, one of the company’s leaders, was even knighted for his role in elevating public credit.
However, the South Sea Company’s promises of vast profits proved hollow. The stock price, artificially inflated through loans and speculative trading, eventually collapsed. By late 1720, shares had plummeted, leaving many investors, including brilliant physicists such as Isaac Newton, in financial ruin. The fallout led to a parliamentary inquiry that uncovered widespread corruption, including insider trading and political bribery. Key figures, such as the Chancellor of the Exchequer, faced impeachment and punishment.
Despite the catastrophic impact on investors, the broader economic system endured. The South Sea Company itself continued to operate until 1853, serving as a sobering reminder of the dangers inherent in speculative financial bubbles. The event also sparked public debate about the need for stricter regulation and transparency in financial markets.
Among these ventures was the South Sea Company, founded in 1711 with the purpose of managing part of Britain’s national debt and exploiting lucrative trade opportunities in Spanish South America. The Company quickly became the subject of intense speculation, with its stock prices soaring in 1720. Investors from all classes, including royalty, were swept into a speculative frenzy. John Blunt, one of the company’s leaders, was even knighted for his role in elevating public credit.
However, the South Sea Company’s promises of vast profits proved hollow. The stock price, artificially inflated through loans and speculative trading, eventually collapsed. By late 1720, shares had plummeted, leaving many investors, including brilliant physicists such as Isaac Newton, in financial ruin. The fallout led to a parliamentary inquiry that uncovered widespread corruption, including insider trading and political bribery. Key figures, such as the Chancellor of the Exchequer, faced impeachment and punishment.
Despite the catastrophic impact on investors, the broader economic system endured. The South Sea Company itself continued to operate until 1853, serving as a sobering reminder of the dangers inherent in speculative financial bubbles. The event also sparked public debate about the need for stricter regulation and transparency in financial markets.
Q1. Which of the following is most likely the reason for the passage’s mention of Isaac Newton’s involvement in the South Sea Company?
(A) To demonstrate that even highly intelligent individuals were not immune to the speculative frenzy of the time.
(B) To suggest that scientific figures played a key role in the financial development of 18th-century Britain.
(C) To imply that Newton’s financial expertise contributed to his wealth during the South Sea Bubble.
(D) To criticize the involvement of prominent public figures in corrupt financial practices.
(E) To illustrate how the failure of the South Sea Company impacted Britain’s scientific community.
(A) To demonstrate that even highly intelligent individuals were not immune to the speculative frenzy of the time.
(B) To suggest that scientific figures played a key role in the financial development of 18th-century Britain.
(C) To imply that Newton’s financial expertise contributed to his wealth during the South Sea Bubble.
(D) To criticize the involvement of prominent public figures in corrupt financial practices.
(E) To illustrate how the failure of the South Sea Company impacted Britain’s scientific community.
Q2. According to the passage, which of the following was NOT a contributing factor to London’s rise as a global financial center during the late 17th and early 18th centuries?
(A) Overseas investments from Amsterdam and France
(B) The creation of Bills of Exchange
(C) The Treaty of Utrecht, which granted Britain the right to supply slaves to Spanish America
(D) Financial support from the South Sea Company’s trading ventures
(E) The establishment of the Bank of England in 1694
(A) Overseas investments from Amsterdam and France
(B) The creation of Bills of Exchange
(C) The Treaty of Utrecht, which granted Britain the right to supply slaves to Spanish America
(D) Financial support from the South Sea Company’s trading ventures
(E) The establishment of the Bank of England in 1694
Q3. Which of the following best describes the organization of the passage?
(A) A chronological description of financial innovations in London, followed by an analysis of the South Sea Company’s role in shaping modern financial systems.
(B) An introduction to the development of London’s financial markets, followed by a detailed case study of a specific speculative bubble and its aftermath.
(C) A discussion of the economic impact of the Nine Years' War on Britain, followed by an explanation of how financial institutions helped restore economic stability.
(D) An overview of the early financial system in London, followed by a comparison between the South Sea Company and other joint-stock companies of the era.
(E) A description of Britain’s rise as a financial power, followed by an exploration of how international trade agreements contributed to its success.
(A) A chronological description of financial innovations in London, followed by an analysis of the South Sea Company’s role in shaping modern financial systems.
(B) An introduction to the development of London’s financial markets, followed by a detailed case study of a specific speculative bubble and its aftermath.
(C) A discussion of the economic impact of the Nine Years' War on Britain, followed by an explanation of how financial institutions helped restore economic stability.
(D) An overview of the early financial system in London, followed by a comparison between the South Sea Company and other joint-stock companies of the era.
(E) A description of Britain’s rise as a financial power, followed by an exploration of how international trade agreements contributed to its success.
Q4. Which of the following, if true, would most strengthen the argument that the broader economic system endured in the long-term despite the collapse of the South Sea Company?
(A) The British government continued to issue Bills of Exchange and develop new financial products even after the collapse of the South Sea Company.
(B) Most of the investors who suffered losses in the South Sea Company were able to recover their fortunes through investments in other joint-stock companies.
(C) The South Sea Company was able to avoid bankruptcy and continued its trading ventures well into the 19th century.
(D) The collapse of the South Sea Company led to stricter financial regulations, which resulted in a more resilient financial market over time.
(E) International investors continued to view London as a stable financial center, but foreign capital inflows never recovered.
(A) The British government continued to issue Bills of Exchange and develop new financial products even after the collapse of the South Sea Company.
(B) Most of the investors who suffered losses in the South Sea Company were able to recover their fortunes through investments in other joint-stock companies.
(C) The South Sea Company was able to avoid bankruptcy and continued its trading ventures well into the 19th century.
(D) The collapse of the South Sea Company led to stricter financial regulations, which resulted in a more resilient financial market over time.
(E) International investors continued to view London as a stable financial center, but foreign capital inflows never recovered.
14 Sep 2024, 06:51
Kudos
Bookmarks
Here are the official solutions:
Q1. Which of the following is most likely the reason for the passage’s mention of Isaac Newton’s involvement in the South Sea Company?
Correct Answer: (A)
Explanation:
(A): Correct. The passage uses Newton as an example of an intelligent individual caught in the speculative frenzy, showing that even brilliant minds were not immune to poor financial decisions.
(B): Incorrect. The passage does not suggest that scientists like Newton influenced financial development.
(C): Incorrect. Newton is mentioned for his financial losses, not for any financial expertise or wealth gained.
(D): Incorrect. The passage does not criticize Newton’s involvement in corrupt practices.
(E): Incorrect. There is no reference to the broader scientific community being affected by the South Sea Company’s collapse.
Q2. According to the passage, which of the following was NOT a contributing factor to London’s rise as a global financial center during the late 17th and early 18th centuries?
Correct Answer: (D)
Explanation:
(A): Incorrect. The passage explicitly mentions overseas investments from Amsterdam and France as key factors contributing to London’s financial growth.
(B): Incorrect. The creation of Bills of Exchange is highlighted as part of the foundational innovations that supported modern banking in London.
(C): Incorrect. The Treaty of Utrecht, which allowed Britain to supply slaves to Spanish America, is mentioned as a significant factor that contributed to an influx of capital, boosting London's financial position.
(D): Correct. While the South Sea Company is mentioned, its trading ventures are not described as a major factor in London's rise as a financial center. Instead, the company became infamous for speculative trading and financial collapse, not for contributing to London's financial growth.
(E): Incorrect. The establishment of the Bank of England in 1694 is clearly identified as a crucial step in London’s development as a global financial hub.
Q3. Which of the following best describes the organization of the passage?
Correct Answer: (B)
Explanation:
(A): Incorrect. While the passage does describe some financial innovations chronologically, it does not analyze how the South Sea Company shaped modern financial systems. Instead, the passage focuses on the speculative bubble and the subsequent collapse.
(B): Correct. The passage begins with a discussion of London's financial development and then transitions into a detailed examination of the South Sea Company as a specific example of speculative excess, making this the most accurate description of the passage's organization.
(C): Incorrect. Although the passage mentions the Nine Years' War in the context of the Bank of England's creation, it does not focus on the economic impact of the war or financial institutions restoring economic stability.
(D): Incorrect. The passage does not compare the South Sea Company to other joint-stock companies in detail. It focuses primarily on the South Sea Company's rise and collapse, without making direct comparisons to other companies.
(E): Incorrect. While international trade agreements like the Treaty of Utrecht are mentioned, the passage does not primarily explore Britain’s rise as a financial power through trade agreements. The focus is more on financial innovation and speculative bubbles.
Q4. Which of the following, if true, would most strengthen the argument that the broader economic system endured in the long-term despite the collapse of the South Sea Company?
Correct Answer: (D)
Explanation:
(A): Incorrect. While this option suggests that financial practices continued after the collapse, it focuses on short-term endurance rather than long-term resilience. The development of new financial products does not necessarily indicate that the system became stronger over time.
(B): Incorrect. The recovery of individual investors doesn’t directly address the broader economic system’s endurance in the long term. This option focuses on personal financial recovery, which is separate from the system’s overall resilience.
(C): Incorrect. The survival of the South Sea Company itself does not directly relate to the broader economic system’s endurance. The focus of the argument is on the financial market as a whole, not the survival of a single company.
(D): Correct. The introduction of stricter financial regulations that made the market more resilient over time directly supports the idea that the broader economic system endured in the long term. This shows that the collapse led to reforms that strengthened the overall system, ensuring its survival and future stability.
(E): Incorrect. The mention that foreign capital inflows never recovered contradicts the argument that the broader economic system endured in the long term. This option weakens, rather than strengthens, the argument.
Q1. Which of the following is most likely the reason for the passage’s mention of Isaac Newton’s involvement in the South Sea Company?
Correct Answer: (A)
Explanation:
(A): Correct. The passage uses Newton as an example of an intelligent individual caught in the speculative frenzy, showing that even brilliant minds were not immune to poor financial decisions.
(B): Incorrect. The passage does not suggest that scientists like Newton influenced financial development.
(C): Incorrect. Newton is mentioned for his financial losses, not for any financial expertise or wealth gained.
(D): Incorrect. The passage does not criticize Newton’s involvement in corrupt practices.
(E): Incorrect. There is no reference to the broader scientific community being affected by the South Sea Company’s collapse.
Q2. According to the passage, which of the following was NOT a contributing factor to London’s rise as a global financial center during the late 17th and early 18th centuries?
Correct Answer: (D)
Explanation:
(A): Incorrect. The passage explicitly mentions overseas investments from Amsterdam and France as key factors contributing to London’s financial growth.
(B): Incorrect. The creation of Bills of Exchange is highlighted as part of the foundational innovations that supported modern banking in London.
(C): Incorrect. The Treaty of Utrecht, which allowed Britain to supply slaves to Spanish America, is mentioned as a significant factor that contributed to an influx of capital, boosting London's financial position.
(D): Correct. While the South Sea Company is mentioned, its trading ventures are not described as a major factor in London's rise as a financial center. Instead, the company became infamous for speculative trading and financial collapse, not for contributing to London's financial growth.
(E): Incorrect. The establishment of the Bank of England in 1694 is clearly identified as a crucial step in London’s development as a global financial hub.
Q3. Which of the following best describes the organization of the passage?
Correct Answer: (B)
Explanation:
(A): Incorrect. While the passage does describe some financial innovations chronologically, it does not analyze how the South Sea Company shaped modern financial systems. Instead, the passage focuses on the speculative bubble and the subsequent collapse.
(B): Correct. The passage begins with a discussion of London's financial development and then transitions into a detailed examination of the South Sea Company as a specific example of speculative excess, making this the most accurate description of the passage's organization.
(C): Incorrect. Although the passage mentions the Nine Years' War in the context of the Bank of England's creation, it does not focus on the economic impact of the war or financial institutions restoring economic stability.
(D): Incorrect. The passage does not compare the South Sea Company to other joint-stock companies in detail. It focuses primarily on the South Sea Company's rise and collapse, without making direct comparisons to other companies.
(E): Incorrect. While international trade agreements like the Treaty of Utrecht are mentioned, the passage does not primarily explore Britain’s rise as a financial power through trade agreements. The focus is more on financial innovation and speculative bubbles.
Q4. Which of the following, if true, would most strengthen the argument that the broader economic system endured in the long-term despite the collapse of the South Sea Company?
Correct Answer: (D)
Explanation:
(A): Incorrect. While this option suggests that financial practices continued after the collapse, it focuses on short-term endurance rather than long-term resilience. The development of new financial products does not necessarily indicate that the system became stronger over time.
(B): Incorrect. The recovery of individual investors doesn’t directly address the broader economic system’s endurance in the long term. This option focuses on personal financial recovery, which is separate from the system’s overall resilience.
(C): Incorrect. The survival of the South Sea Company itself does not directly relate to the broader economic system’s endurance. The focus of the argument is on the financial market as a whole, not the survival of a single company.
(D): Correct. The introduction of stricter financial regulations that made the market more resilient over time directly supports the idea that the broader economic system endured in the long term. This shows that the collapse led to reforms that strengthened the overall system, ensuring its survival and future stability.
(E): Incorrect. The mention that foreign capital inflows never recovered contradicts the argument that the broader economic system endured in the long term. This option weakens, rather than strengthens, the argument.
divyasingh24
Joined: 16 Aug 2024
Last visit: 13 Nov 2025
Posts: 4
Given Kudos: 6
Location: India
Schools: HEC MiM '26 LBS
GMAT Focus 1: 615 Q79 V81 DI81 
GPA: 8.14
07 Aug 2025, 10:41
Kudos
Bookmarks
For Q4: The passage states that the event Sparked public debate about the need for stricter regulation and transparency in financial markets". Why is it being inferred that the stricter financial regulations had been certainly introduced? Let me know if my understanding is incorrect 
catinabox
