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you either understand the material well enough to make use of it, or you don't
consider this
we have student A, student B, and student C
A scores 100% on every assignment in algebra I. B scores a 75% average. C scores 50% average.
A and B both understand the content well enough to utilize it when necessary, but A probably will be a better fit for algebra II. C needs some help.
the issue is not in how we grade, but in how we treat grading. A should move on and may be able to get through algebra II with self-study by testing out of it, allowing A to advance on to precalculus. B isn't ready to move on but doesn't necessarily need to go through the entire class again. C needs tutoring, as the class was ineffective.
however, in american schooling, A and B both move on to algebra II, and C is either shoved ahead by completing some unrelated and unhelpful extra credit or is made to retake the class without any additional help, which slows both A and C down a lot, while B is barely managing to get through the classes and doesn't fully understand the material.
A is bored, C is disillusioned, B is overwhelmed.