LSAT 151 – Section 2 – Question 21

LSAT 151 - Section 2 - Question 21

September 2018

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Question
QuickView		 Type Tags Answer
Choices		 Curve Question
Difficulty		 Psg/Game/S
Difficulty		 Explanation
PT151 S2 Q21
+LR
Sufficient assumption +SA
Conditional Reasoning +CondR
Link Assumption +LinkA
A
34%
165
B
22%
159
C
21%
160
D
11%
157
E
12%
159
158
168
177
 +Hardest 147.144 +SubsectionMedium

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.

Summary
The author concludes that total bank lending to companies is less today than it was five years ago. This is based on the following:
For large, financially strong companies, the current interest rates that banks pay to borrow are higher than the interest rates they can receive for loans to these companies.
Banks won’t lend to companies that are not financially strong.
Total lending by banks to small and medium companies is less today than it was five years ago.
Banks

Missing Connection
The conclusion is that total lending is down from five years ago. We have a premise establishing that lending from small and medium companies is down from five years ago. But what about the large companies? Isn’t it possible that lending to large, financially strong companies actually increased in a way that offsets the decrease from small and medium companies?
So to make the argument valid, we want to learn that lending to large, financially strong companies has NOT increased enough to outweigh the decrease in lending to small/medium companies. The correct answer might interact with the first premise concerning interest rates for borrowing vs. lending concerning large companies. The role of that premise is not entirely clear right now.

A
Banks will not lend money at interest rates that are lower than the interest rates they pay to borrow.
The first premise tells us that the interest rates banks pay to borrow are higher than those they can get for loans to large, financially strong companies. (A), therefore, establishes that banks don’t currently lend to large, financially strong companies. If lending to small and medium has decreased, and banks currently don’t lend to large, then total lending must have decreased.
B
Most small and medium-sized companies were financially stronger five years ago than they are now.
(B) leaves open the possibility that lending to large companies has increased.
C
Five years ago, some banks would lend to companies that were not financially strong.
(C) leaves open the possibility that lending to large companies has increased.
D
The interest rates that banks currently pay to borrow are higher than the rates they paid five years ago.
(D) leaves open the possibility that lending to large companies has increased.
E
The interest rates that small and medium-sized companies pay to borrow are higher than those paid by large, financially strong companies.
(E) compares the interest rates various companies pay to borrow. But this leaves open the possibility that lending to large companies has increased.

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LSAT PrepTest 151 Explanations

Section 1 - Reading Comprehension

Section 2 - Logical Reasoning

Section 3 - Logical Reasoning

Section 4 - Logical Reasoning

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