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The US Constitution established both gold and silver as the basis of U

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The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post Updated on: 15 Jan 2018, 02:22
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The US Constitution established both gold and silver as the basis of US currency: that is to say, it established a bimetallic standard for currency. This remained in place for about a century, until the Coinage Act of 1873, which embraced a "gold only" standard, a monometallic standard, effectively dropping silver as the basis of currency. Over the next several decades, advocates of bimetallism and advocates of the "gold only" standard fiercely debated.

The "gold only" advocates, such as William McKinley, argued that shifts in the relative value of the two precious metals could lead to wild fluctuations in the values of currency in a bimetallic system. Early in the United States history, Alexander Hamilton had tried to fix the gold-silver exchange rate by fiat, but of course, such restraints only inhibit the natural development of a free market.

Unemployment was high in the depression caused by the Panic of 1893, and many argued that these economic challenges had been triggered by abandoning bimetallism. One of the more prominent advocates of bimetallism was William Jennings Bryant: indeed, bimetallism was the very center of his presidential campaigns in 1896 and 1900, both of which he lost to McKinley. Bryant articulated the popular view that a "gold only" standard limited the money supply, and thus favored those who were already quite wealthy, against the interests of working people of all professions. He famously expressed this argument in his "Cross of Gold" speech at the 1896 Democratic National Convention, in which he argued that continuing the "gold only" standard would "crucify" the honest laboring classes on a "cross of gold."

Despite the eloquence of Bryant's arguments, history strongly favored the "gold-only" standard. The argument that increasing the money supply would lead to greater prosperity strikes us now as naïve: of course, we now understand that increasing the monetary supply can lead to runaway inflation, which hurts everyone. Furthermore, gold did not remain as limited as the advocates of bimetallism imagined. In the 1890s, scientists discovered a cyanide process that allowed workers to extract pure gold from much lower grade ore, thus significantly increasing domestic gold production. Additionally, the discovery of two immense gold deposits in South Africa substantially increased world gold supply. Thus, the "gold only" standard allowed for ample currency, and even robust prosperity in the 1920s, so bimetallism died a quiet death.

1. One reason advocates of bimetallism did not favor a “gold only” standard was that they believed that

A the supply of gold was limited
B it would increase the money supply
C shifts in the prices of gold and silver were unpredictable
D it could lead to rampant inflation
E silver provided a check against deflation


2. It can be inferred from the passage that the author believes that government attempts to control exchange rates

A compromise the workings of a free economy
B will inevitably lead to fiscal collapse
C are usually favorable in the short-term
D run counter to the tenets of the United States
E lead to a greater chance for inflation


3. According to the passage, bimetallism was not enduring because it

A made unwarranted conclusions concerning the connection between value and metals
B was not adopted by those responsible for the shaping of economic policy
C resulted in persistent inflation that plagued all levels of the economy
D did not allow for the possibility of a third monometallic standard
E was based on false assumptions regarding both the money supply and the supply of gold


4. The author of the passage believes William Jennings Bryant’s argument that a gold standard favors the rich to be

A somewhat relevant, because it accounts for a common trend seen throughout the history of bimetallism
B lacking validity, because it believes increasing the money supply will benefit a segment of the population
C without merit, because it is not based on actual historical accounts
D not entirely accurate, because it overemphasizes the role of silver in regulating the money supply
E partially correct, because it described some of the class differences between the rich and the poor


Originally posted by chesstitans on 12 Jan 2018, 12:45.
Last edited by broall on 15 Jan 2018, 02:22, edited 1 time in total.
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Re: The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post 19 Jan 2018, 09:47
Please provide explanation for the Question.3 in this RC.

Thank you.
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Re: The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post 16 Mar 2018, 20:54
mahapatro wrote:
Please provide explanation for the Question.3 in this RC.

Thank you.


3. According to the passage, bimetallism was not enduring because it

A made unwarranted conclusions concerning the connection between value and metals
B was not adopted by those responsible for the shaping of economic policy
C resulted in persistent inflation that plagued all levels of the economy
D did not allow for the possibility of a third monometallic standard
E was based on false assumptions regarding both the money supply and the supply of gold - Correct -- it is supported by the below -

The argument that increasing the money supply would lead to greater prosperity strikes us now as naïve: of course, we now understand that increasing the monetary supply can lead to runaway inflation, which hurts everyone.
Furthermore, gold did not remain as limited as the advocates of bimetallism imagined.
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The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post 27 Mar 2018, 11:11
Skywalker18 Could you please provide explaination to Q4 please?
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The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post 30 Mar 2018, 13:50
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prateek176 wrote:
Skywalker18 Could you please provide explaination to Q4 please?



Question 4 :

Evidence :

"..and thus favored those who were already quite wealthy, against the interests of working people of all professions"
but,
"greater prosperity strikes us now as naïve: of course, we now understand that increasing the monetary supply can lead to runaway inflation, which hurts everyone"

Coming to the question.

4. The author of the passage believes William Jennings Bryant’s argument that a gold standard favors the rich to be

A somewhat relevant, because it accounts for a common trend seen throughout the history of bimetallism
B lacking validity, because it believes increasing the money supply will benefit a segment of the population
C without merit, because it is not based on actual historical accounts
D not entirely accurate, because it overemphasizes the role of silver in regulating the money supply
E partially correct, because it described some of the class differences between the rich and the poor

Clearly, the author does not accept bimetallism and provides opinion in the last para in support of the single metal theory and based on the evidence above B. C, is incorrect because the author cites historical evidence for to support his own opinion.

IMO B.
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Re: The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post 13 May 2018, 04:11
1
P1 - first bimetallic standard then law passed and silver gone.
P2 - Gold only advocates vies.
P3 - bimetallic supporters put depression on gold only.
P4 - limited source problem solved. and so does the main problem.

As main purpose questions are not asked, let me answer them any ways.
3A. Questions that you need to answer after first go.
- What is the issue in hand? --- stopping bimetallism and situation developed around it.
- What is each paragraph's map and on the same lines what is the paragraph's summary? Mind that paragraph's map is more important/helpful. --- given above.
- How many number of theories are there ? What prevalent theories on the matter does the author discuss, and to what extent does he agree with them? --- No theories. but two sides. in favor and in opposition of bimetallism.
- Why does the author usually believe his theory is best? in P4, author seems to be inclining towards gold only.
- What is the main idea? Combine all para's summary. this need not to match one that in answer. still try to do this. --- history for the start of gold only and a debate around the problems rises due to this. and solution of the problem.
- tone - Abstract

1. One reason advocates of bimetallism did not favor a “gold only” standard was that they believed that
Pre-thinking - P4 gave the answer.

A the supply of gold was limited - correct.
--------------------------------------

2. It can be inferred from the passage that the author believes that government attempts to control exchange rates
Lines to read - such restraints only inhibit the natural development of a free market.
A compromise the workings of a free economy - Correct.
---------------------------------------

3. According to the passage, bimetallism was not enduring because it
Pre-thinking - P2 is the best place to look for answer. mainly this part "The "gold only" advocates, such as William McKinley, argued that shifts in the relative value of the two precious metals could lead to wild fluctuations in the values of currency in a bimetallic system.".
A made unwarranted conclusions concerning the connection between value and metals --- No such conclusion made.
B was not adopted by those responsible for the shaping of economic policy -- false.
C resulted in persistent inflation that plagued all levels of the economy -- true
D did not allow for the possibility of a third monometallic standard -- no such mention.
E was based on false assumptions regarding both the money supply and the supply of gold --- no
--------------------------------------

4. The author of the passage believes William Jennings Bryant’s argument that a gold standard favors the rich to be
pre-thinking - this will restrict the supply of gold and rich will become more rich while others will not. may be value for the limited gold will increase.

A somewhat relevant, because it accounts for a common trend seen throughout the history of bimetallism --- yes relevant. but not cause of history.
B lacking validity, because it believes increasing the money supply will benefit a segment of the population --- Hmm... there is no proof of it. just an opinion. keeep it.
C without merit, because it is not based on actual historical accounts --- sounds same like b. but if it is not on historic account then it is without merit. makes no sense.
D not entirely accurate, because it overemphasizes the role of silver in regulating the money supply --- could be true as choice is not too extreme but what is the role of silver in making rich to be richer.
E partially correct, because it described some of the class differences between the rich and the poor --- well rich are already rich. what all this situation have to do with this.
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Re: The US Constitution established both gold and silver as the basis of U  [#permalink]

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Re: The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post 15 Aug 2018, 09:14
pikolo2510 wrote:
nice passage! All correct

Let me know if anyone needs any explanation/help



Hi pikolo2510, I need help with Q4.
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Re: The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post 15 Aug 2018, 11:26
:cool: 8 min all correct

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The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post 04 Sep 2018, 17:22
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Official Explanation for Q4



According to the passage, Bryan believes that a gold standard would hurt the poor because it would cut them off from the money supply. Increasing the money supply on the other hand, he argued, would allowed the poor access to wealth (“…limited the money supply…against the interests of working people…”). Bryan, however, overlooked inflation, and thus his argument was not valid: more money would not help the poor. This leads us to answer (B).

(A) is wrong because the argument is not relevant.

(C) is wrong. While the passage agrees that Bryan’s argument is without merit, it does not mention inaccurate historical accounts.

(D) ignore Bryan’s overlooking of inflation and adds information not supported by the passage (Bryan never overemphasizes the role of silver).

(E) is wrong because it says partially correct.
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Re: The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post 04 Sep 2018, 17:28
1

Official Explanation Q3



According to the passage, the proponent of bimetallism, William Jennings Bryant among them, believed that the gold standard would hurt the poor because it would limit the money supply. This reasoning turned out to be incorrect. Another argument favored by bimetallists was that the gold supply was limited. This belief was proven invalid once a gold conversion process found (the cyanide process) and huge gold mines in South Africa were found. Therefore (E) is the best answer.

(A) sounds superficially tempting but remember the connection was between metals and supply, and metals and economic implications.

(B) sounds somewhat alluring but is nowhere supported in the passage.

(C) is wrong. Inflation is mentioned in response to an increased money supply, not in response to bimetallism.

(D) is wrong since there is no mention of a third monometallic standard.
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Re: The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post 04 Sep 2018, 18:05

Official Explanation Q2



The line, “such restraints only inhibit the natural development of a free market”, allows us to infer that the author of the passage believes that government intervention (“Hamilton…fiat”) holds back the free market. This matches up best with (A).

(B) is too strong.

(C) sounds plausible but is not supported by text on exchange rates.

(D) is not supported by the text.

(E) is tempting because the passage talks about a greater chance of inflation but that is in regards to increasing the money supply, not to exchange rates.
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Re: The US Constitution established both gold and silver as the basis of U  [#permalink]

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New post 04 Sep 2018, 18:07

Official Explanation Q1



(A) is supported by “gold did not remain as limited as the advocates of bimetallism imagined.”

(B) is wrong because bimetallists believed that the “gold standard” would NOT increase the money supply.

(C) is tricky because it neatly summarizes what the “gold standard” advocates thought, not what bimetallist advocates did.

(D) does not work because the bimetallists never even mentioned inflation. The author of the passage mentions inflation in the context of Bryan’s shortsightedness.

(E) is wrong because deflation is not mentioned in the passage.
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Re: The US Constitution established both gold and silver as the basis of U &nbs [#permalink] 04 Sep 2018, 18:07
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