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Difficulty: MediumMost Strongly Supported Questions

In the early 20th century, many independent regional banks merged to form larger national institutions. These mergers were intended to stabilize the banking system against localized economic shocks by pooling financial reserves across diverse geographic areas. However, this increased interconnectivity allowed financial panics that originated in a single region to spread rapidly nationwide. Furthermore, the smaller community banks that resisted consolidation often maintained closer relationships with local businesses and proved more willing to extend credit during economic downturns than the newly formed national banks, which relied on rigid, centralized lending criteria.

Which of the following is most strongly supported by the information above?

  1. During economic downturns in the early 20th century, the newly formed national banks were generally less willing to extend credit than the smaller community banks that had resisted consolidation.Answer
  2. B
    The consolidation of regional banks into national institutions failed to provide any stabilization against localized economic shocks.
  3. C
    If national banks had abandoned their centralized lending criteria, they could have prevented financial panics from spreading rapidly nationwide.
  4. D
    The rapid nationwide spread of financial panics in the early 20th century was primarily caused by national banks refusing to extend credit.
  5. E
    Any bank that maintained close relationships with local businesses refused to merge into a larger national institution.

Answer

During economic downturns in the early 20th century, the newly formed national banks were generally less willing to extend credit than the smaller community banks that had resisted consolidation.
The correct answer is a direct logical consequence of the final sentence in the stimulus. The text states that the smaller community banks 'proved more willing to extend credit during economic downturns than the newly formed national banks.' Therefore, it must be true that the national banks were less willing to extend credit than those community banks.

Step-by-Step Solution

1
Analyze the fact set provided in the stimulus.
Identified multiple premises: mergers intended to stabilize shocks caused panics to spread via interconnectivity; smaller non-merged banks maintained closer local ties; smaller banks were more willing to lend during downturns than national banks.
Understanding exactly what facts are explicitly stated is necessary to determine what can be logically proven.
2
Evaluate the question stem type.
Identified as a 'Most Strongly Supported' question.
This requires finding an answer choice that is a safe, highly probable deduction or direct paraphrase of the provided facts, without relying on outside information.
3
Test each option against the facts.
Eliminated options that exaggerate, introduce outside hypotheses, or improperly combine facts. Found that one option directly paraphrases the final sentence.
Rigorous elimination ensures the selected choice does not violate logical rules.

Key Concept

Drawing safe inferences strictly from provided premises without overreaching or assuming causation.
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