It is currently 12 Dec 2017, 19:39

Close

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

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Close

Request Expert Reply

Confirm Cancel

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

The National Bank Act was passed in 1864 to provide a uniform currency

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:

Hide Tags

VP
VP
User avatar
G
Status: Learning
Joined: 20 Dec 2015
Posts: 1088

Kudos [?]: 89 [0], given: 564

Location: India
Concentration: Operations, Marketing
GMAT 1: 670 Q48 V36
GRE 1: 314 Q157 V157
GPA: 3.4
WE: Manufacturing and Production (Manufacturing)
CAT Tests
The National Bank Act was passed in 1864 to provide a uniform currency [#permalink]

Show Tags

New post 23 Jun 2017, 07:05
2
This post was
BOOKMARKED
Question 1
00:00
A
B
C
D
E

Question Stats:

63% (02:01) correct 37% (01:37) wrong based on 121

HideShow timer Statistics

Question 2
00:00
A
B
C
D
E

Question Stats:

31% (00:32) correct 69% (01:05) wrong based on 115

HideShow timer Statistics

Passage

The National Bank Act was passed in 1864 to provide a uniform currency, to eliminate the overissuance of bank notes, and to create a market for government bonds. Up to this point, the United States had some 1,500 state banks issuing their own notes, which circulated as money – not government money, but bank money. At the time of the Civil War, there were about 7,000 different types of legitimate bank notes in circulation, to say nothing of several thousand kinds of counterfeit notes. Thus, conditions were confusing, and businessmen – among others – demanded a uniform currency. Also, during the Civil War, the Union was having trouble selling its bonds, at least until Jay Cooke took them off its hands. Thus, in answer to its problems and those of businessmen, the government enacted the National Banking Act.

This Act permitted five or more persons to charter a national bank, the charter being issued by the federal government. The bank’s capitalization depended upon the size of the town in which the bank was located, with the capitalization level going higher for larger cities. For example, banks in towns of less than 6,000 people had to have a minimum capitalization of $50,000; banks in cities of 50,000 people or more had to have a minimum capitalization of $200,000.

Upon passage of the Act, it was felt that there would be a rush of state banks to take out national charters. At first, however, most state banks kept their state charters. A fair number of them had traditional, respected names, and they had no wish to exchange them for names like the First National Bank of Chicago. Other state banks, of course, stood to gain in prestige and customer confidence by making a name change, and so they switched over. The federal government, in any way, was determined to do away with the heterogeneous note issues of state banks and, to do so, in 1865 placed a prohibitive tax of 10% per year on state bank notes. The tax was effective. Not only were state bank notes made unprofitable and driven out of circulation, but a majority of state banks immediately shifted over to federal jurisdiction. Those banks that retained state charters were, for the most part, banks in big cities which had been rapidly replacing their notes with check transactions, anyway. So checks, based on bank deposits, displaced state bank notes as the most convenient form of money in state banks, and the use of checks did much to save the stronger state banks after 1865.

Question 1
Which of the following can be inferred about the period prior to 1864?

A There was not a federal tax on state bank notes.
B Most small town banks were capitalized with less than $50,000.
C State banks relied heavily on check transactions.
D Bank notes were issued more often than was ideal.
E The capitalization of a bank was directly correlated to the size of the town or city it was in.

Question 2
Which of the following can be logically deduced from the passage?

A Prior to 1864, some state banks issued more than one type of bank note.
B The National Bank Act decreased the number of counterfeit bank notes in circulation.
C Had Jay Cooke not purchased Union Civil War bonds, the Union would have been unable to sell them.
D Up until the National Bank Act, counterfeiting bank notes was a profitable enterprise.
E The majority of businessmen were pleased by the passage of the National Bank Act.
[Reveal] Spoiler: Question #1 OA
[Reveal] Spoiler: Question #2 OA

_________________

We are more often frightened than hurt; and we suffer more from imagination than from reality

Kudos [?]: 89 [0], given: 564

Intern
Intern
avatar
B
Joined: 20 Mar 2017
Posts: 7

Kudos [?]: 0 [0], given: 6

Re: The National Bank Act was passed in 1864 to provide a uniform currency [#permalink]

Show Tags

New post 22 Oct 2017, 11:11
How is 'A' correct for Q2. Please explain.

Kudos [?]: 0 [0], given: 6

3 KUDOS received
Verbal Forum Moderator
User avatar
V
Status: Greatness begins beyond your comfort zone
Joined: 08 Dec 2013
Posts: 1765

Kudos [?]: 1061 [3], given: 90

Location: India
Concentration: General Management, Strategy
GPA: 3.2
WE: Information Technology (Consulting)
GMAT ToolKit User Reviews Badge CAT Tests
Re: The National Bank Act was passed in 1864 to provide a uniform currency [#permalink]

Show Tags

New post 23 Oct 2017, 19:05
3
This post received
KUDOS
tam1na wrote:
How is 'A' correct for Q2. Please explain.


Hi tam1na,

Up to this point, the United States had some 1,500 state banks issuing their own notes, which circulated as money – not government money, but bank money. At the time of the Civil War, there were about 7,000 different types of legitimate bank notes in circulation, to say nothing of several thousand kinds of counterfeit notes.

Thus Prior to 1864, some state banks issued more than one type of bank note.

Hope this helps!!
_________________

When everything seems to be going against you, remember that the airplane takes off against the wind, not with it. - Henry Ford
The Moment You Think About Giving Up, Think Of The Reason Why You Held On So Long
+1 Kudos if you find this post helpful

Kudos [?]: 1061 [3], given: 90

Intern
Intern
avatar
B
Joined: 13 Oct 2014
Posts: 3

Kudos [?]: [0], given: 11

Location: India
GMAT 1: 610 Q46 V28
GPA: 4
Re: The National Bank Act was passed in 1864 to provide a uniform currency [#permalink]

Show Tags

New post 24 Oct 2017, 20:33
Which of the following can be inferred about the period prior to 1864?

A There was not a federal tax on state bank notes.
B Most small town banks were capitalized with less than $50,000.
C State banks relied heavily on check transactions.
D Bank notes were issued more often than was ideal.
E The capitalization of a bank was directly correlated to the size of the town or city it was in.

Q1- I marked opt A for Q1. Can someone explain how opt D is correct?

Kudos [?]: [0], given: 11

Senior Manager
Senior Manager
User avatar
G
Joined: 03 Apr 2013
Posts: 291

Kudos [?]: 51 [0], given: 862

GMAT ToolKit User
Re: The National Bank Act was passed in 1864 to provide a uniform currency [#permalink]

Show Tags

New post 29 Oct 2017, 00:42
gmattarget2017 wrote:
Which of the following can be inferred about the period prior to 1864?

A There was not a federal tax on state bank notes.
B Most small town banks were capitalized with less than $50,000.
C State banks relied heavily on check transactions.
D Bank notes were issued more often than was ideal.
E The capitalization of a bank was directly correlated to the size of the town or city it was in.

Q1- I marked opt A for Q1. Can someone explain how opt D is correct?


Hi..let me give it a try.

I will talk about options A and D only as it seems you have eliminated the others.

A - We know for certain that the govt. did impose a prohibitive tax on the bank notes after the passage of the national bank act..but can we say for sure that there was no tax on these notes prior to this? We cannot, because the passage does not indicate that the prohibitive tax was the first tax on the bank notes.

D - Read the first line. It says that the national bank act was passed in order to control the "overissuance of bank notes".

Thus, D is the answer.
Hope this helps.
_________________

Spread some love..Like = +1 Kudos :)

Kudos [?]: 51 [0], given: 862

Intern
Intern
avatar
B
Joined: 08 Oct 2017
Posts: 1

Kudos [?]: 0 [0], given: 1

Re: The National Bank Act was passed in 1864 to provide a uniform currency [#permalink]

Show Tags

New post 29 Oct 2017, 23:15
Question 2
Which of the following can be logically deduced from the passage?

A Prior to 1864, some state banks issued more than one type of bank note.
B The National Bank Act decreased the number of counterfeit bank notes in circulation.
C Had Jay Cooke not purchased Union Civil War bonds, the Union would have been unable to sell them.
D Up until the National Bank Act, counterfeiting bank notes was a profitable enterprise.
E The majority of businessmen were pleased by the passage of the National Bank Act.


Why the answer cannot be B ??

Kudos [?]: 0 [0], given: 1

Re: The National Bank Act was passed in 1864 to provide a uniform currency   [#permalink] 29 Oct 2017, 23:15
Display posts from previous: Sort by

The National Bank Act was passed in 1864 to provide a uniform currency

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  


GMAT Club MBA Forum Home| About| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.