Historians remain divided over the role of banks in facilitating eco

Question

Line 
 
 Historians remain divided over the role of banks in facilitating economic growth in the United States in the late eighteenth and early nineteenth centuries. Some scholars contend
 
 (5) 
 
that banks played a minor role in the nation’s growing economy. Financial institutions, they argue, appeared only after the economy had begun to develop, and once organized, followed conservative lending practices, providing aid to
 
 (10)  
 
established commercial enterprises but shunning those, such as manufacturing and transportation projects, that were more uncertain and capital-intensive (i.e., requiring greater expenditures in the form of capital than in
 
 (15) 
 
labor).

A growing number of historians argue, in contrast, that banks were crucial in transforming the early national economy. When state legislatures began granting more bank charters
 
 (20) 
 
in the 1790s and early 1800s, the supply of credit rose accordingly. Unlike the earliest banks, which had primarily provided short-term loans to well-connected merchants, the banks of the early nineteenth century issued credit widely. As Paul
 
 (25) 
 
Gilje asserts, the expansion and democratization of credit in the early nineteenth century became the driving force of the American economy, as banks began furnishing large amounts of capital to transportation and industrial enterprises. The
 
 (30) 
 
exception, such historians argue, was in the South; here, the overwhelmingly agrarian nature of the economy generated outright opposition to banks, which were seen as monopolistic institutions controlled by an elite group of
 
 (35) 
 
planters.
 
   1 
(Book Question: 419)
 1. The primary purpose of the passage is to

A. compare the economic role played by southern banks with the economic role played by banks in the rest of the United States during the late eighteenth and early nineteenth centuries
B. reevaluate a conventional interpretation of the role played by banks in the American economy during the late eighteenth and early nineteenth centuries
C. present different interpretations of the role played by banks in the American economy during the late eighteenth and early nineteenth centuries
D. analyze how the increasing number of banks in the late eighteenth and early nineteenth centuries affected the American economy
E. examine how scholarly opinion regarding the role played by banks in the American economy during the late eighteenth and early nineteenth centuries has changed over

2 
(Book Question: 420)
 2. The passage suggests that the scholars mentioned in line 4 would argue that the reason banks tended not to fund manufacturing and transportation projects in the late eighteenth and early nineteenth centuries was that

A. these projects, being well established and well capitalized, did not need substantial long-term financing from banks
B. these projects entailed a level of risk that was too great for banks’ conservative lending practices
C. banks preferred to invest in other, more speculative projects that offered the potential for higher returns
D. bank managers believed that these projects would be unlikely to contribute significantly to economic growth in the new country
E. bank managers believed funding these projects would result in credit being extended to too many borrowers

3 
(Book Question: 421)
 3. The passage suggests that Paul Gilje would be most likely to agree with which of the following claims about the lending practices of the “earliest banks” (see line 21)?

A. These lending practices were unlikely to generate substantial profits for banks.
B. These lending practices only benefited a narrow sector of the economy.
C. The restrictive nature of these lending practices generated significant opposition outside of the South.
D. The restrictive nature of these lending practices forced state legislatures to begin granting more bank charters by the early nineteenth century.
E. These lending practices were likely to be criticized by economic elites as being overly restrictive.

4 
(Book Question: 422)
 4. The passage suggests that the opposition to banks in the South in the early nineteenth century stemmed in part from the perception that banks

A. did not benefit more than a small minority of the people
B. did not support the interests of elite planters
C. were too closely tied to transportation and industrial interests
D. were unwilling to issue the long-term loans required by agrarian interests
E. were too willing to lend credit widely

5 
(Book Question: 423)
 5. Which of the following statements best describes the function of the last sentence of the passage?

A. It provides evidence tending to undermine the viewpoint of the scholars mentioned in line 5.
B. It resolves a conflict over the role of banks summarized in the first paragraph.
C. It clarifies some of the reasons state legislatures began granting more bank charters.
D. It qualifies a claim made earlier in the passage about the impact of banks on the American economy in the early nineteenth century.
E. It supports a claim made earlier in the passage about how the expansion of credit affected the economy.

OG 2019 ID's
RC00419-01
RC00419-02
RC00419-04
RC00419-05
RC00419-06

GMATNinja · Accepted Answer

As explained in the last sentence of the first paragraph, financial institutions (such as banks) followed conservative lending practices and shunned projects that were uncertain (i.e. risky) and capital-intensive, such as manufacturing and transportation projects. This implies that banks following conservative lending practices would prefer less risky projects.

So we know that banks tended not to fund manufacturing and transportation projects in the late eighteenth and early nineteenth centuries. Why?... because those banks, which followed conservative lending practices, preferred less risky projects. This reason is summarized in choice (B): 
 
As for the last question,
 
The purpose of the second paragraph is to explain the historians' belief (or "claim") that banks were crucial in transforming the early national economy. Does this claim have any stated limitations? Yes--as explained in the last sentence of the passage, those same historians argued that, in the South, there was an exception to this general trend. So the last sentence modifies and limits (" qualifies ") the historians' claim that banks were crucial in transforming the early national economy, and the answer is (D).

I hope this helps!

vityakim@gmail.com · Answer

(Book Question: 423)
Which of the following statements best describes the function of the last sentence of the passage?
A. It provides evidence tending to undermine the viewpoint of the scholars mentioned in line 5.
B. It resolves a conflict over the role of banks summarized in the first paragraph.
C. It clarifies some of the reasons state legislatures began granting more bank charters.
D. It qualifies a claim made earlier in the passage about the impact of banks on the American economy in the early nineteenth century.
E. It supports a claim made earlier in the passage about how the expansion of credit affected the economy.

Jut my 2 cents.

On D, "qualifies" means to add limitations or conditions.
This is true for all usage of the word "qualify" on gmat, I think.

Hope this helps.

aviejay · Answer

what is meant "qualifies a claim" as mentioned in option D? Does it mean "strengthen"?

ShashankDave · Answer

Hi  abhimahna   IanStewart 
This is for Q423. I had a confusion between D and E. I finally chose E. Here's what made me do so. Earlier in the passage, the first group of historians blamed the banks for offering credit only to elite and well established businesses. I thnk the kast sentence supports this claim by pointing out that in the South, the banks were seen as elite controlled institutions. Please explain. Also, am I missing a "key strategy about attempting such questions"? Please advise.

GMATNinja · Answer

The first group of historians argued that financial institutions provided aid to established commercial enterprises. This does not say that the banks themselves are "established" or "elite". Rather, it just says that the banks provided aid to established commercial enterprises. The last sentence, on the other hand, says that the banks were  controlled  by an elite group of planters. The last part talks about who was running the banks, not who was receiving aid from the banks.

Furthermore, the first claim you mentioned doesn't really talk about "how the expansion of credit affected the economy." It simply tells us who, according to the first group of historians, received aid from the banks.

As for choice (D), the purpose of the second paragraph is to explain the historians' belief (or "claim") that banks were crucial in transforming the early national economy. Does this claim have any stated limitations? Yup -- as explained in the last sentence of the passage, those same historians argued that, in the South, there was an exception to this general trend. So the last sentence modifies and limits ("qualifies") the historians' claim that banks were crucial in transforming the early national economy, and the answer is (D).

I hope this helps!

shra1raju · Answer

Hello guys, Below is my performance in this RC passage: I took 2mins to read and comprehend the passage and I took 55secs - 1st Q - Right 90secs - 2nd Q - Right 130secs -3rd Q - Wrong 90secs- 4th Q- Wrong 55secs - 5th Q- Right Overall accuracy = 60% At this moment of my prep, I'm targeting to get my accuracy to be little over 50% and timing to be around avg 2mins per Q. I know, this is not ideal, but I'm doing worst than this.So, You get my point. Right?

The below is the strategies I followed for the Qs that I attempted right and analyzed solutions for the wrongly attempted ones. Q1: The primary purpose of the passage is to A. compare the economic role played by southern banks with the economic role played by banks in the rest of the United States during the late eighteenth and early nineteenth centuries B. reevaluate a conventional interpretation of the role played by banks in the American economy during the late eighteenth and early nineteenth centuries C. present different interpretations of the role played by banks in the American economy during the late eighteenth and early nineteenth centuries D. analyze how the increasing number of banks in the late eighteenth and early nineteenth centuries affected the American economy E. examine how scholarly opinion regarding the role played by banks in the American economy during the late eighteenth and early nineteenth centuries has changed over Question Type: Primary purpose Question Strategy: IMO: 1st paragraph talks out against the thought that banks supported US economy and 2nd tells that it has helped US economy. So, Author tried his best to debrief those beliefs. Hunting down the Options: A- 1st word itself puts me down- Author is not comparing anyone or anything - Straight away hang this choice B- "reevaluate a conventional interpretation"- firstly, NO reevaluation is happening. Secondly, there are two interpretations briefed. - Eliminated C- present different interpretations- Hold on D - "analyze" - I don't think so, anyone has ever analyzed in the passage- Eliminated E- "Examine"- NO NO - moreover, it says that "role played by banks in the American economy during the late eighteenth and early nineteenth centuries has changed over "- We are dying to know the role of the bank on US economy. Now, who the heck knows the role of the banks changed OVER TIME- Kill it!! Q2: The passage suggests that the scholars mentioned in line 4 would argue that the reason banks tended not to fund manufacturing and transportation projects in the late eighteenth and early nineteenth centuries was that A. these projects, being well established and well capitalized, did not need substantial long-term financing from banks B. these projects entailed a level of risk that was too great for banks’ conservative lending practices C. banks preferred to invest in other, more speculative projects that offered the potential for higher returns D. bank managers believed that these projects would be unlikely to contribute significantly to economic growth in the new country E. bank managers believed funding these projects would result in credit being extended to too many borrowers Question Type: Frankly speaking, I couldn't categorize this Q, half of it looks like an inference and another half looks like a specific Q Context: Q gave me a clue to go to line#4. I grabbed the whole context and found that Banks did not lend loans to Manufacturing and transportation projects because these fields are SO UNCERTAIN and CAPITAL-INTENSIVE. In this pragmatic world, the uncertainty increases the risk. Hunting down the options: A- Nope. We really don't know from the passage whether these fields need any help or not. The discussion is why didn't these banks lend money- Eliminated B- Yup. This option takes about risk factor in lending money to these fields - Holdon C- This is not mentioned in the passage at all that banks choose one field over the other- eliminated D- See who care's about what bank manager's think- out of scope- Eliminated E - Too many borrows may be or may not be an issue. We are concerned about the uncertainty of fields. So too many borrows might be or might not be a deal - Eliminated Q3: The passage suggests that Paul Gilje would be most likely to agree with which of the following claims about the lending practices of the “earliest banks” (see line 21)? A. These lending practices were unlikely to generate substantial profits for banks. B. These lending practices only benefited a narrow sector of the economy. C. The restrictive nature of these lending practices generated significant opposition outside of the South. D. The restrictive nature of these lending practices forced state legislatures to begin granting more bank charters by the early nineteenth century. E. These lending practices were likely to be criticized by economic elites as being overly restrictive. Question type: Inference Question type Context: Line#21. reading from the context mentioned, I could see this Early banks= ShortTermsLoans to only selective people but 19th-century banks = Loans to almost everyone. Hunting begins: Q talks about only early banks, to see for an option which talks about short-term loans to only a few selective people A- Profits is really out of context - Eliminated C/D/E- This is the cheap trick played by the GMAT Test makers- These 3 choices are made for those dumb test makers like me, who think they are smart and go and read two extra lines of the passage proactively to more about the context. See, we are asked about line#21, but if we read these extra lines because the Q mentions this name Paul Gilje. And moreover, even you read these extra lines, you should be aware that these line reference to the 19th-century banks, but we are discussing 'Earlier banks' right now. In a single shot- Shoot all these three dead choices. B - is the only left and correct answer Q4: The passage suggests that the opposition to banks in the South in the early nineteenth century stemmed in part from the perception that banks A. did not benefit more than a small minority of the people B. did not support the interests of elite planters C. were too closely tied to transportation and industrial interests D. were unwilling to issue the long-term loans required by agrarian interests E. were too willing to lend credit widely Q type: Inference Question Context: The word south is mentioned only in the last sentence of the passage, go there and get the context. Frankly speaking, My dumb brain didn't comprehend those words properly. In the analysis, because of the complex wordings, it is little difficult to comprehend that though loans are widely given by the 19th-century bank, it is opposed by the south people that these loans are not beneficial to everyone, as these banks system is controlled by few people. Strategy: If few people think this, it means that they did not benefit from the 19th-century banks. Hunting: A- this is what happened B- It is contradicted, people believe that banks supported planters - Eliminated C- This is a laid trap for people who remember these keywords in the passage i,e. 'Transportation, Industrial interest' - Eliminated D- This is a kind of trap again to attract test takers by mentioning the words like 'long-term loans, agrarian interests', but take time and search a sentence that supports this, you will find none- Eliminated E - Yup, this is right that 19th-century banks approved loans widely, but south people didn't feel that way - Eliminated Q4: Which of the following statements best describes the function of the last sentence of the passage? A. It provides evidence tending to undermine the viewpoint of the scholars mentioned in line 5. B. It resolves a conflict over the role of banks summarized in the first paragraph. C. It clarifies some of the reasons state legislatures began granting more bank charters. D. It qualifies a claim made earlier in the passage about the impact of banks on the American economy in the early nineteenth century. E. It supports a claim made earlier in the passage about how the expansion of credit affected the economy. Question type: Paragraph or sentence purpose Question Context: 1st passage, says that banks DID NOT help US economy, the first half of 2nd passage oppose 1st passage people and says that Banks DID help US ECONOMY. The last sentence again opposes first half of 2nd passage and claims that Banks DID NOT HELP. So in short, it is clearly seen that 1st paragraph people and second half of 2nd paragraph people compliment each other. Hunting: So the options, which matches our comprehension are D , E. But with a slight but major differene in E, it says the claim is made on 'Expansion of credit affected economy', but we are talking about banks affected economy situation. So, D is the winner

GMATNinja · Answer

aviejay , to  qualify  a claim is not necessarily to  strengthen  a claim.

As explained in  this post  above, to qualify is to limit or modify the meaning. For example, I might say, "I love pizza." But then I might  qualify  that statement by saying, "I only love pizza from New York."

The last sentence of the passage modifies and limits ("qualifies") the historians' claim that banks were crucial in transforming the early national economy.

I hope that helps!

adkikani · Answer

GMATNinja   GMATNinjaTwo

The passage says:
Unlike the earliest banks (i.e. banks before early nineteenth century),
which had primarily provided short-term loans to
well-connected merchants,  the banks of the early
nineteenth century issued credit widely (ie to more customers).

How an option A be correct?

What is issue with B/D?

GMATNinja · Answer

Even though "the banks of the early nineteenth century issued credit widely," this question refers to the  perception  of banks in the South.

In the South, banks "were    seen    as monopolistic institutions controlled by an elite group of planters." So southerners  thought  that the banks were controlled by a small minority of people ("an elite group planters"). If this perception were accurate, then the banks would likely only benefit that small minority. Thus, in the South, there existed the  perception  that banks only benefited a small minority of people.

Choice (B) directly contradictions the  perception  in the South. Also, there is nothing in the passage to support choice (D). (A) is the best answer.

I hope that helps!

rish2708 · Answer

Hello  abhimahna  ,  GMATNinja  and experts,

I have a small query regarding last question of the passage:
we know that qualify could either mean support or a criticism ( limiting)

Luckily option D is true for both interpretations:
It qualifies the claim by a school of Historians mentioned in 1st para that only a few sections of people benefited from banks.

It also qualifies the claim made by other historians such as PG mentioned in another paragraph.

Which interpretation is correct?

Regards,
Rishav

GMATNinja · Answer

Interesting question! Here, "qualify" means to "add reservations to" or to "make less absolute."

Take another look at answer choice (D):
 
The "claim" referenced in this answer choice is that " the expansion and democratization of credit in the early nineteenth century became the driving force of the American economy."

Now take a look at the last sentence of the passage:
 
By introducing this fact as "the exception," the author is telling us that he/she is making the claim less absolute. So, by examining an exception, the author is "qualifying" the claim.

I hope that helps!

adstudy · Answer

As it is mentioned here Line 21, lets have look at that sentence around Line 21. Unlike the earliest banks , which had primarily provided short-term loans to well-connected merchants , the banks of the early nineteenth century issued credit widely. So from the above highlighted part we come to know a little about the earliest banks - That provided short - term loans that too to well-connected merchants. Notice, we can not infer from here what other loans were received by well-connected merchants nor can we infer about "not so well-connected merchants." Now keeping this in mind, we go to the answer options - We are not talking about profits generated in the above excerpt. Hence this option is Incorrect I agree in this option the term 'narrow section' is mentioned that we cannot directly infer from the above excerpt but this option is on the same line as that of our understanding above. Hence we will keep this option as a backup to compare with other probable options, if any. 'Outside of the south' encompasses a large area. Even out of the US, I could say. Hence this option, because of its abstractness, can be eliminated. 'Forced state legislatures' ??? Leave the excerpt, nowhere in the passage such strong wording can be inferred. Hence Incorrect 'economic elites' ??? Who are these people. From the passage, we only know about one type of elites, 'elite group of planters'. And that is not even part of the excerpt. Hence we can eliminate this option. Hence the BEST ANSWER out of the lot is clearly B Hoping this to be helpful. For Question 4 also, you can go on the same lines of finding the answer using the above approach. I would encourage you to do so, that is try to reach the answer in the above way. Let me know, if things are still unclear on Q4. Would be glad to help

mSKR · Answer

I understood how D is an answer. But D is an exception and it is exception because what qualifies in exception is very small part of things happening in generic. 
I like pizza. Exception: i don't like pizza from new york.

Here the key message : in general i like pizza. I should not focus on pizza from new york.

SImilarly , i understood why D is answer because of exception.

But why not B can be answer. It talks more in general about role ( except south) by "most" historians against "some" scholars mentioned in first passage.

Some people say X. Many people say Y with exception in one city.
Should not what many people say Y important than some people say X that may match to in just one area.

please suggest.

What can I do or change in thinking that i chose D in future in such questions?

GMATNinja   AndrewN  sir  VeritasKarishma

AndrewN · Answer

Hello,  imSKR . Choice (B) does not make sense because pointing out an exception does not in and of itself resolve a conflict. There must be some sort of consensus reached between opposing parties to resolve a conflict. Whenever I approach any Verbal question, I look for keywords to potentially argue against. The answer choice that presents few, if any, words for me to  successfully  challenge is the option I end up choosing. The following is my breakdown of  keywords  in each answer choice to measure against the question and the information presented in the passage:

In my first pass of the answer choices, I look to get rid of what I know is incorrect; in a follow-up pass, I debate the relative  weaknesses  of what remains. It is an effective strategy, one that can help reduce the time spent on each question as well as the mental energy exhausted to arrive at the most reasonable answer.

I hope that helps. Thank you for thinking to ask me. (Since you already understood (D), I did not feel the need to address it.)

- Andrew

VIBHOJAIN · Answer

I want to understand the difference among the choices of Q1.
I request experts to help me with it please.

GMATNinja · Answer

Question 1 
 
To answer general questions like this one, it’s good to first break down the structure of the passage as a whole:

Paragraph 1 :

The author describes the  lack of consensus  (“Historians remain divided”) regarding a certain topic (“the role of banks in facilitating economic growth in the United States in the late eighteenth and early nineteenth centuries”).  
 The author then presents the argument of scholars who believe that “banks played a  minor  role in the nation’s growing economy.”

Paragraph 2 :

The author presents the argument of  different  scholars who contend that banks played a  large  role--that “banks were crucial in transforming the early national economy.”  
 The key phrase here is “in contrast”--we have two  opposing  arguments. 
 By presenting these two  opposing  arguments, the author supports the statement that "historians remain divided."

Now let’s now go through each choice, keeping in mind that we are looking for the  primary purpose  of the passage.

The southern banks are mentioned as an exception to the general opinion (held by some scholars) that banks played a  large  role--so it's a detail about one of the two opposing views presented in the passage. But this detail is presented within a much broader context that revolves around the  division  among historians.

While the passage does mention the role played by southern banks, the  primary  purpose of the passage is about the  division  between historians, not about comparing southern banks to other banks in the US.

Let's eliminate (A).

First, we know that the passage discusses two interpretations of the role played by banks, not just one. Second, the author does not  evaluate  (or  reevaluate ) either of those interpretations. Instead, the author simply provides a  summary  of each.

We can get rid of (B).

Here the key words are   present  ,   different  , and   interpretations  . In he first sentence of the passage, the author claims that "historians remain divided." Elaborating on this statement, the author shows us (or   presents  ) two fundamentally   different   scholarly positions (  interpretations  ): 1) that banks played a minor role and 2) that banks played large role.

The overarching goal is to show the reader that there are  different  interpretations when it comes to the role played by banks.

(C) seems pretty accurate, so let's keep it for now.

The passage does mention the increasing number of banks in the late 18th and early 19th centuries (lines 19-22). And the passage does state that this increase affected the American economy. But does the passage analyze  how  this increase affected the American economy? Not really.

The author simply presents two opposing views. The increasing number of banks in the late 18th and early 19th centuries is relevant to one of those views, but this detail does not represent the overall purpose of the passage.

(C) was a much better choice, so let's get rid of (D).

You might be tempted by this answer because the author discusses scholarly opinions and introduces the second opinion as being supported by a “ growing  number of historians.” Sure, this suggests some change over time, but the author doesn't  examine  or focus on that change.

Instead, the author focuses on the different opinions held by historians. We can eliminate (E).

By process of elimination, (C) is our answer.

I hope that helps!

CEdward · Answer

GMATNinja ,

To be clear is the suggestion here that E is wrong solely because of its use of "support"? The rest of E is correct to me. In fact, it's taken verbatim:
"...expansion and democratization of credit in the early nineteenth century became the driving force of the American economy" (according to Paul Gilje)

Would you also be able to comment whether on the exam, the "Lines" (e.g. Line 5) are numbered? I see references to specific lines in the answer choices so are we supposed to figure that out on our own?

GMATNinja · Answer

Question 5 
 
As you suggested, the problem with (E) is that the final sentence does not SUPPORT the idea that the expansion of credit became the driving force of the American economy. Rather, it LIMITS, or qualifies, that claim by saying that the expansion of credit did not have as large of an impact in the South. For that reason, we can eliminate (E).

One thing to be careful about on question 5 is “word-matching.” Just because an answer choice contains terminology or language borrowed from the passage does not mean that the answer choice is correct. This is actually something to be mindful of on all CR/RC questions. As silly as it may sound, be sure to understand the meaning of an answer choice and not just match words with the passage.

The lines on the GMAT will not be numbered, but if you are asked a question about a particular sentence, word, or phrase found in the passage, the test will often indicate where that is found in the passage, typically by highlighting it.  Pretty !

I hope that helps!

GMATRockstar · Answer

https://www.youtube.com/watch?v=JvctHET3b4s

Historians remain divided over the role of banks in facilitating eco

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