PT151 S2 Q21 ExplanationEconomist: Currently the interest rates

Answer choices, explained

1. A

   Correct38% picked this

   Banks will not lend money at interest rates that are lower than the interest rates

   Why this is right

   In the case of large, financially strong companies, banks would be lending to them at an interest rate that is lower than the interest rates that the bank pays to borrow its money in the first place. According to the answer, banks will not lend in such cases. So this firmly establishes that banks are currently not lending to large, financially strong companies. We already knew that no lending is happening to large, not-financially strong companies. And we knew that less lending is happening to small / medium sized companies. So we've proven that there's less lending overall.

   Skill tested: Sufficient Assumption · how this choice captures the argument's function is the move to repeat next time.

   38%
2. B

   Unrelated to Goal22% picked this

   Most small and medium-sized companies were financially stronger five years ago than

   We already know that total lending is down for small and medium-sized companies. We don't need to worry about the details of how it looks with financially strong ones vs. not-financially strong ones, because the argument already provided the information we need, about the overall lending to small and medium-sized companies.

   22%
3. C

   Unrelated to Goal Weak17% picked this

   Five years ago, some banks would lend to companies that were

   We need to know about the financially strong large companies. This is about not-financially strong companies. This maybe strengthens a bit, by making it seem like there may have been more lending five years ago to non-financially strong companies, but we can't seal the deal until we know about those financially strong large companies. (It's almost unheard of for an answer as weak as "some" to be correct on Sufficient Assumption. You usually need black-and-white, no exceptions type language to 100% guarantee a conclusion.)

   17%
4. D

   Unrelated to Goal13% picked this

   The interest rates that banks currently pay to borrow are higher than the rates they

   This is giving us some backstory on a premise. But we need to hear how much lending is / isn't currently being given to large, financially strong companies.

   13%
5. E

   Unrelated to Goal10% picked this

   The interest rates that small and medium-sized companies pay to borrow are higher than those paid by

   This probably seems appealing because it feels like it could be inferred. But we're not being asked what can be derived from this paragraph. We're looking for the missing piece that could guarantee the conclusion: how much lending banks are currently giving to large, financially strong companies.

   10%