When "the U.S." appears as the name of the country, (and certainly as an acronym), it is normally treated as singular - the subject is the singular country, not the plural "states".

However, for the sake of the argument, suppose you thought "they" was ambiguous, as it could refer to either "governments" or "The United States" - viewed as a plural noun. Nonetheless, in practice - it is clear that the answer choices that use "it" are incorrect, as "it" does not match the plural verb "hold" that follows it. Therefore, it follows that one of the answer choices using "they" must be correct, even if it does contain an ambiguity. the correct answer in a GMAT SC question can never present a grammar error, but a 'stylistic' one such as ambiguity is allowed - if the other answer choices commit even worse grammar mistakes.

Thanks Geva Stern for your nice explanation. Sometimes the answer is not perfectly correct, but the best available choice, isn't it?

limestone wrote:Thanks Geva Stern for your nice explanation. Sometimes the answer is not perfectly correct, but the best available choice, isn't it?

I would probably use "least worst", but yes. the correct answer is sometimes not perfect. However, it should still not overtly go against grammar.