The London Board of Trade limited the quantity of pound sterling bankn

Question

The London Board of Trade limited the quantity of pound sterling banknotes permitted in circulation in the American colonies, citing fear of devaluation induced by overprinting. The Board also denied the necessity of paper money, considering the ever-increasing colonial exports purchased by foreign nations that rendered payments in gold and silver. However, in 1749, Governor Glen of South Carolina contended that access to more paper currency was essential because there was actually a deficit of gold and silver. This shortfall led to difficulties in exchanging goods for these precious metals, forcing many merchants to earn their success only through continued reliance on the barter system. Such a system limited the colonists' ability to obtain certain goods for which they had no apparently comparable trade, severely hampering widespread economic growth in the colonies.

Which of the following statements, if true, would most strengthen Governor Glen's argument in favor of paper currency?

A. It was difficult for the colonists to maintain high levels of foreign exports during the winter months.
B. Although colonists were not always able to find trade partners in their local communities, there were strong domestic trade links among the various colonies.
C. Since the value of a pound sterling banknote was linked directly to that of silver, the two methods of payment were equally acceptable to a merchant.
D. Foreign countries often wanted to barter with colonial exporters, but the value of some foreign goods was difficult to determine.
E. Because some colonies had already developed their own form of legal tender and no longer used the British pound sterling, the Board of Trade should not have been worried about devaluation.

Suzy2023 · Answer

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mishraesha · Answer

can someone provide a detailed explanation please

Carcass · Answer

OE

Governor Glen's argument relies on the fact that colonists were often forced to barter, but bartering was an unreliable method of doing business. Choice (D) supports that point of view not only by pointing out that the Board was wrong about the colonists' ability to obtain gold and silver from foreign trading partners, but also by giving another example of how barter is a poor system. Choice (A) is incorrect because although trade is low at one point during the year, it may be high enough during the rest of the year for the colonists to save up plenty of gold and silver to last them through the slow months. Choice (B) weakens the argument by widening the range of partners with whom the colonists can barter, thus lessening the need for paper currency. Choice (C) does not address any of the main points of the governor's argument and neither does (E).

Carcass · Answer

Let me know if you need further assistance

Akshayyjain · Answer

Someone may please correct me on below inferences :-

D : If value of goods can not be determined, it can not be traded even using paper currency notes. D should not be correct answer choice.

A :  Exports not possible in winters, hence instead of barter exchange of goods currency can be used to continue trade.

Sujithz001 · Answer

Good Question.

Let's breakdown the story first,

LBT is worried that excess currency printing might lead to devaluation. And so, they're preferring to do their export trades in barter systems(in exchange for gold, silver etc..) rather than for their paper currency.

Uh-oh, now there's another problem, due to the deficit in these precious metals, the trade merchants are now facing difficulties doing business with barter system. (For an analogy: If trader A can export 100 containers of the product if currency money is allowed, now he's able to do only 40-50 containers with barter). And hence finally, the Governor decides to start printing the currency, as it's hampering their economic growth.

Our aim: To find a choice that best supports the Governor's decision to print more currency.

A. It was difficult for the colonists to maintain high levels of foreign exports during the winter months.

"Winter Months" - we're nowhere talking about that. Irrelevant option.

B. Although colonists were not always able to find trade partners in their local communities, there were strong domestic trade links among the various colonies.

Okay great, continue doing domestic trade, here we're looking to solve a problem in export trades. So bye-bye, Irrelevant option.

C. Since the value of a pound sterling banknote was linked directly to that of silver, the two methods of payment were equally acceptable to a merchant.

This is rather weakening the Governor's decision to print more currency. Weaken.

D. Foreign countries often wanted to barter with colonial exporters, but the value of some foreign goods was difficult to determine.

Umm... Finally, this seems to be in-line with our search. Yes, the value of some goods were tough to decide & hence doing business via currency makes more sense. I'm liking this. Let's see the next one as well, before concluding.

E. Because some colonies had already developed their own form of legal tender and no longer used the British pound sterling, the Board of Trade should not have been worried about devaluation.

Irrelevant. Because if the above would have happened already, then Governor would never have thought to print more moreny.

Dereno · Answer

The Problem :
In the American colonies, there wasn’t enough gold and silver (precious metals) for people to use as money to buy and sell things. So, colonists had to rely on a system called barter, where they traded goods directly instead of using money. This was a problem because it was hard to trade for things you didn’t have or make.

London’s Concerns :
The British government, specifically the London Board of Trade, was worried about the colonies printing too much paper money (like banknotes). They feared this would make the paper money worthless (a situation called devaluation), causing inflation. They also thought the colonies didn’t really need paper money because they were selling goods to other countries, which paid with gold and silver.

Governor Glen’s Argument :
However, in 1749, Governor Glen of South Carolina disagreed. He said that there wasn’t enough gold and silver in the colonies to keep the economy running smoothly. Because of the shortage of precious metals, colonists couldn’t easily trade for the things they needed.

The Effect on the Economy :
Since there wasn’t enough money to go around, many people were stuck using barter, which limited what they could trade. For example, if you were a farmer who grew corn but needed a new tool, you could only get the tool if the blacksmith wanted corn. This made it hard to get what you needed and slowed down economic growth.

Glen’s Solution :
Governor Glen argued that the colonies needed more paper money to help solve this problem. If they had more paper money, people could buy and sell things more easily, and the economy could grow.

Key Points: 
Too little gold/silver =  Hard to trade .
Barter system =  Limited economic growth .
Paper money needed =  To help the economy run better .

In short, Governor Glen wanted more paper money to fix the shortage of precious metals and improve trade in the colonies. The British authorities were worried that too much paper money would make the currency lose value, but Glen believed it was essential for economic progress.

Now let’s look at the options

Which of the following statements, if true, would most strengthen Governor Glen's argument in favor of paper currency?

A.  It was difficult for the colonists to maintain high levels of foreign exports during the winter months. 
Nothing is mentioned about seasons specific - IRRELEVANT

B.  Although colonists were not always able to find trade partners in their local communities, there were strong domestic trade links among the various colonies. 
The option mentions strong domestic trade - so no need to print paper currency. Either way it’s irrelevant.

C.  Since the value of a pound sterling banknote was linked directly to that of silver, the two methods of payment were equally acceptable to a merchant. 
It mentions that payment can be done either way - paper or silver. It weakens the question.

D. Foreign countries often wanted to barter with colonial exporters, but the value of some foreign goods was difficult to determine.

Governor Glen argued that without enough gold and silver, paper money would solve the problem of insufficient currency to facilitate trade. When foreign countries prefer to barter but struggle with valuing goods, having more paper money could help the colonies transition away from inefficient bartering. The use of paper money would standardize transactions and make it much easier to value goods properly, thus making trade smoother and more efficient for both colonial exporters and foreign buyers.  Correct ✅

E. Because some colonies had already developed their own form of legal tender and no longer used the British pound sterling, the Board of Trade should not have been worried about devaluation.
Doesn’t strengthen.

JuniqueLid · Answer

Bad question.

Recapping Governor Glen’s argument: there is a shortage of gold and silver in the colonies > forcing colonists to rely on barter, which creates friction in trade; barter is inefficient because you can't always find someone who wants what you have and has what you want > therefore, more paper currency is essential to facilitate smoother trade and economic growth.

To strength, something that (a) reinforces the shortage of gold/silver or (b) underscores the inefficiency and limits of barter, ideally in a way that shows paper money could solve or mitigate the issue.

A) strenghthens the argument by saying if exports dip seasonally, then inflows of gold/silver fall, worsening the shortage. Other seasons may have a different story but at least in winter months, having paper money helps with the issue.

D) seems at first glance to support Glen by pointing to difficulties with barter, which Glen criticizes. However, valuation isn’t really the issue. His concern is not finding a match, not pricing ambiguity. At the end of the day, if foreign partners struggle to value the goods, then introducing paper money in the colonies doesn’t solve that. Therefore, D doesn't really strengthen the argument.

Curreny, in the form of metal or paper or any other form like digital, as an intermediary, is fundamentally a measure of value. If you cannot value, as most people believe is the case here, you cannot value using any form of currency. Having paper money isn't going to help.

The London Board of Trade limited the quantity of pound sterling bankn

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The London Board of Trade limited the quantity of pound sterling bankn

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

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