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OG Historians remain divided over the role of banks

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OG Historians remain divided over the role of banks

Post Thu Jul 27, 2017 7:51 pm
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
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
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
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
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
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
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
planters.

419)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

420) 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

421) 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.

422) 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

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.

Q419: C
Q420: B
Q421: B
Q422: A
Q423: D

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