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Question

Which of the following financial situations is most analogous to the financial situation in which Japan's Tokugawa shoguns found themselves in the eighteenth century?
  1. A small business borrows heavily to invest in new equipment, but is able to pay off its debt early when it is awarded a lucrative government contract

  2. Fire destroys a small business, but insurance covers the cost of rebuilding.

  3. A small business is turned down for a loan at a local bank because the owners have no credit history.

  4. A small business has to struggle to meet operating expenses when its profits decrease


Solution

The correct option is D

A small business has to struggle to meet operating expenses when its profits decrease


The second paragraph clearly states that “farmers could be made to pay in taxes was not unlimited, and since the income of Japan’s central government consisted in part of taxes collected by the Shogun from his huge domain, the government too was constrained. Therefore, the Tokugawa Shoguns began to look to other sources for revenue.” Option (d) very well explains this situation by connecting it to a small business which has to struggle to meet operating expenses when its profits decrease. Therefore, answer option (d) is the correct answer choice.

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