As Americans suffered through the first two years of the Great Depress

Question

As Americans suffered through the first two years of the Great Depression, they attempted to analyze the cause of their troubles and to suggest cures. The fact was, however, that potent remedies appeared to require a radically different approach to public finance and a revolutionary concept of the role of federal government in the time of economic crisis. Herbert Hoover had been elected to office on a platform promising safe, conservative economic programs. It was almost asking too much of him to come up with the imaginative, even radical, leadership that seemed needed to deal with the crisis.

It’s erroneous to think that Hoover did nothing to combat the depression, as some Democrats later tried to make people believe. It’s also fallacious to blame Hoover himself for the depression - in the same way that it is fallacious to dump the responsibility for World Wars I and II into the laps of Wilson and Roosevelt. In any event, Hoover, within the limits of economic orthodoxy and perhaps somewhat beyond, did attempt to restore equilibrium during the depression. Perhaps his sharpest break with tradition was the establishment of the Reconstruction Finance Corporation in January, 1932.

The idea behind the RFC was that the Corporation, capitalized to the tune of a half-billion dollars by the federal government, would make loans to railroads, banks, insurance companies, and other financial institutions in distress. There seems to be little question that for a short time the RFC, by feeding money in at the top, staved off many bankruptcies and prevented more serious losses than otherwise would have occurred. However, by the fall of 1932, this was no longer the case as banks again were tightening credit, deflation ground on - and it was seen that the assistance had been only a passing stimulant. Whatever its value to the economy, many people weren’t happy with the RFC, saying that it helped only the large and powerful. This criticism wasn’t entirely valid after mid-1932, for at that time Hoover pushed through legislation authorizing the RFC to lend $1.8 billion to states, cities, and other government agencies for self liquidating public projects and for direct relief. Even though little evidence existed, the idea persisted in many minds that the RFC was impersonal, and that it cared more about bankers and railroad owners than common folk. Even today, historians continue to debate the role of the RFC in easing the Great Depression and helping everyday people.   1 
 1. The author would most likely agree with all of the following except:

(A) A more radical leader than Hoover was needed to properly combat the Great Depression
(B) Leaders should not be automatically blamed for problems during their tenure
(C) The RFC unfairly favored large and powerful institutions.
(D) At least for a short time, the RFC had some positive effect on the economy.
(E) The impact of Hoover’s policies on the Great Depression remain controversial.

2 
 2. Which of the following can you logically infer from the passage?

(A) In 1932, the RFC gave more money to states, cities and governmental agencies that it did to financial institutions and railroads. 
(B) Credit tightening by financial institutions is a contributing factor to bankruptcy. 
(C) The RFC was conceived within the limits of economic orthodoxy. 
(D) After mid-1932 railroads received no more assistance from the RFC 
(E) The Great Depression would have been much more severe without the implementation of the RFC.

3 
 3. Which of the following is the primary purpose of the passage above?

(A) To criticize an important program implemented during the Great Depression 
(B) To argue that Herbert Hoover could have done more during the Great Depression 
(C) To highlight an unexpected program of Herbert Hoover during the Great Depression 
(D) To summarize the implications of a policy that Herbert Hoover instituted during the Great Depression 
(E) To analyze Herbert Hover’s legacy during the Great Depression

4 
 4. The author most probably believes which of the following about Herbert Hoover’s policies during the Great Depression:

(A) They were a complete failure
(B) They were helpful in leading the U.S. out of the depression
(C) They were better than is generally believed
(D) They did not directly benefit the “common folk”
(E) They were poorly received by all Democrats

ManishKM1 · Answer

Official Explanations:

1. The author would most likely agree with all of the following except:

(A) A more radical leader than Hoover was needed to properly combat the Great Depression
(B) Leaders should not be automatically blamed for problems during their tenure
(C) The RFC unfairly favored large and powerful institutions.
(D) At least for a short time, the RFC had some positive effect on the economy.
(E) The impact of Hoover’s policies on the Great Depression remain controversial.

The author agrees with all 4 statements except for answer choice (C).

(A) is found clearly in the first paragraph so we know this author believed that a more radical approach was needed.

In the second paragraph it is clear that he also agrees with (B), because he doesn’t believe Wilson, Hoover, and Roosevelt should be blamed for the circumstances they found themselves in.

In the last paragraph it is clear that author agrees with (D) and thinks it did have a positive effect briefly.

And for (E), the end of this last paragraph shows that the author believes it is still controversial. There is no evidence in the passage that the author believed the RFC favored large and powerful institutions (although other people may have believed that).

Answer is (C)

2. Which of the following can you logically infer from the passage?

(A) In 1932, the RFC gave more money to states, cities and governmental agencies that it did to financial institutions and railroads. 
(B) Credit tightening by financial institutions is a contributing factor to bankruptcy. 
(C) The RFC was conceived within the limits of economic orthodoxy. 
(D) After mid-1932 railroads received no more assistance from the RFC 
(E) The Great Depression would have been much more severe without the implementation of the RFC. 
 
(A) is a classic “sucker choice”.

While you do learn that the initial capitalization was a half billion dollars and that the initial expenditures were on railroads and financial institutions, you do not know how much more was spent.

Later you learn that $1.8 billion went to states, cities and governmental agencies but there is no way to know which of the two total expenditures was larger. For (B) , there is clear evidence for this in lines 3-7 of the third paragraph.

First you learn that the RFC was helpful in reducing bankruptcies.

Then you learned that this reduction stopped because banks started tightening lending and deflation continued.

From that you can logically infer that tightening lending contributes to bankruptcies.

(C) and (D) are relatively easy to eliminate because there is no clear basis in the passage.

(E) is trickier but is wrong because the inference goes way too far.

We know that the RFC helped to keep conditions from worsening over a short period of time but we don’t know its broad effect on the whole Great Depression.

Answer is (B).

3. Which of the following is the primary purpose of the passage above?

(A) To criticize an important program implemented during the Great Depression 
(B) To argue that Herbert Hoover could have done more during the Great Depression 
(C) To highlight an unexpected program of Herbert Hoover during the Great Depression 
(D) To summarize the implications of a policy that Herbert Hoover instituted during the Great Depression 
(E) To analyze Herbert Hover’s legacy during the Great Depression

Explanation: This is an implicit question that you should answer from your initial reading.

For (A) the goal of the passage was not to criticize the RFC but rather give information about Hoover and the RFC.

Likewise for (B), even though the author suggests that more could have done, the goal of the passage is not to ARGUE anything but rather present some information with a subtly embedded tone.

In (C) the primary goal of this passage IS to highlight the RFC within the context of Hoover’s presidency during the Great Depression.

The term “unexpected” is appropriate because everything in the first paragraph and beginning of the second suggests that Hoover would not embark on any kind of non-traditional program such as the RFC.

For (D), the implications of the RFC are not summarized and that is not the primary goal of the passage.

In (E), the statement is far too broad. This passage is only about one program of Hoover’s during the Great Depression and how it related to expectations for Hoover.

Answer is (C).

4. The author most probably believes which of the following about Herbert Hoover’s policies during the Great Depression:

(A) They were a complete failure
(B) They were helpful in leading the U.S. out of the depression
(C) They were better than is generally believed
(D) They did not directly benefit the “common folk”
(E) They were poorly received by all Democrats

You should try to answer from your initial reading if possible, but confirm any answer choice you are unsure of.

There is clear evidence in the passage that the author felt Hoover did some things well so (A) is wrong.

In (B), while there is some evidence that parts of Hoover’s programs helped, the language is way too strong and there is no evidence to support it.

For (C) there is plenty of evidence in the passage that the author believes that Hoover did a better job than he was given credit for. Consider these excerpts: “It’s erroneous to think that Hoover did nothing to combat the depression, as some Democrats later tried to make people believe.” OR “In any event, Hoover, within the limits of economic orthodoxy and perhaps somewhat beyond, did attempt to restore equilibrium during the depression.” (C) is correct.

(D) is contradicted at the end of the passage – there is evidence that it did directly benefit the “common folk”.

For (E), while some democrats did not like Hoover’s policies, it is unknown if all of them believed the policies were poorly conceived.

Answer is (C).

JS1290 · Answer

Hi  VeritasKarishma ,  GMATNinja ,

I was wondering could one of you please explain why option C is correct for Q3 and D is incorrect? In the first paragraph, we are given that, "Herbert Hoover had been elected to office on a platform promising safe, conservative economic programs. It was almost asking too much of him to come up with the imaginative, even radical, leadership that seemed needed to deal with the crisis". We know that Hoover couldn't have up imaginative or radical programs because it would have been too much for him. My main confusion is how can we deduce that RFC was an "unexpected" program? I am unable to see where in the passage, the author implies that RFC was an unexpected program.

KarishmaB · Answer

Last line of second paragraph says: "Perhaps his sharpest break with tradition was the establishment of the Reconstruction Finance Corporation in January, 1932."
Since what were expected from him were "safe, conservative economic programs," RFC was unexpected.

"The implications of RFC" is not the main point of the passage hence (D) is not correct. Two paragraphs are all about why RFC was out of the ordinary for Hoover. The last paragraph highlights RFC, its contribution and people's attitude.

Businessconquerer · Answer

VeritasKarishma 
What is in with Question 2, 
it is quite difficult to anticipate B when we see E in the answer choices, what is the trick word in it??? cOULD YOU HELP

KarishmaB · Answer

(E) is not correct. 
Look at the last time:
"Even today, historians continue to debate the role of the RFC in easing the Great Depression and helping everyday people."

The passage does not imply that the Great Depression would have been much more severe without the implementation of the RFC. The passage says that the role of RFC is not clear. In the entire passage, the writer is non-committal - "for a short time the RFC", "the assistance had been only a passing stimulant", "Whatever its value to the economy" etc

Look at these two sentences: There seems to be little question that for a short time the RFC, by feeding money in at the top, staved off many bankruptcies and prevented more serious losses than otherwise would have occurred. However, by the fall of 1932, this was no longer the case as banks again were tightening credit, deflation ground on - and it was seen that the assistance had been only a passing stimulant.

RFC staved off bankruptcies by feeding money to banks. But this was no longer the case by 1932 as banks again started tightening credit. This implies that they were tightening credit before money was fed to them to stave off bankruptcy. 
So though it is hard to say that credit tightening is a contributing factor, we do know that it is linked.

The other options are not correct so (B) seems to be the best.

VerbalBot · Answer

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As Americans suffered through the first two years of the Great Depress

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As Americans suffered through the first two years of the Great Depress

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