PrepTest 85, Section 2, Question 21
Economist: Currently the interest rates that banks pay to borrow are higher than the interest rates that they can receive for loans to large, financially strong companies. Banks will not currently lend to companies that are not financially strong, and total lending by banks to small and medium-sized companies is less than it was five years ago. So total bank lending to companies is less than it was five years ago.
Economist: Currently the interest rates that banks pay to borrow are higher than the interest rates that they can receive for loans to large, financially strong companies. Banks will not currently lend to companies that are not financially strong, and total lending by banks to small and medium-sized companies is less than it was five years ago. So total bank lending to companies is less than it was five years ago.
Economist: Currently the interest rates that banks pay to borrow are higher than the interest rates that they can receive for loans to large, financially strong companies. Banks will not currently lend to companies that are not financially strong, and total lending by banks to small and medium-sized companies is less than it was five years ago. So total bank lending to companies is less than it was five years ago.
Economist: Currently the interest rates that banks pay to borrow are higher than the interest rates that they can receive for loans to large, financially strong companies. Banks will not currently lend to companies that are not financially strong, and total lending by banks to small and medium-sized companies is less than it was five years ago. So total bank lending to companies is less than it was five years ago.
The economist's conclusion follows logically if which one of the following is assumed?
Banks will not lend money at interest rates that are lower than the interest rates they pay to borrow.
Most small and medium-sized companies were financially stronger five years ago than they are now.
Five years ago, some banks would lend to companies that were not financially strong.
The interest rates that banks currently pay to borrow are higher than the rates they paid five years ago.
The interest rates that small and medium-sized companies pay to borrow are higher than those paid by large, financially strong companies.
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