Describe the character development in chapter 4 of The Great Gatsby.  Which characters change in chapter 4?

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Certainly, Gatsby's character is developed by the list of awful people who attend his parties, his own fantastic, and obviously fictional, history of himself, and his association with Meyer Wolfsheim.  The fact that Gatsby is in any way connected with men who murdered their wives, notorious gamblers, and womanizers, lets us know that he is not just some honest bloke trying to make his way in the world.  Association with criminals is suspicious.  

Further, Nick describes Gatsby at first as someone he thought was "a person of some undefined consequence" because Gatsby never really said much about himself; however, he is always tapping a foot or wiggling his fingers, movements that signal anxiety or discomfort.  Then, Gatsby tells such an elaborate and ridiculous history of himself that Nick says, "My incredulity was submerged in fascination [...]; it was like skimming hastily through a dozen magazines."  Gatsby, then, is probably a liar, at least about some things.  And when he and Nick meet with Wolfsheim, Gatsby's casual mention that he was the man to fix the 1919 World's Series conveys just how little criminal or salacious activity affect him.  

Moreover, Gatsby's character, as well as Daisy's is developed by the story Jordan tells Nick about their past.  Gatsby's history, as related by Jordan, humanizes him in a way that he hasn't been so far.  He's been a myth, even mythic, but he's never been a real man.  Learning that he'd been so in love with Daisy, that he looked at her "'in a way that every young girls wants to be looked at some time,'" has this effect, and it explains why Gatsby bought the house across from Daisy's on the bay (as Jordan mentions) as well as why he throws the kinds of parties that he does (to get her attention).  Jordan's story also develops Daisy's character a bit, and it explains why she seems so incredibly unhappy in her life with the man she appears to have chosen.  He was not her first choice, but she settled; she had to get drunk to do it, but she lived up to the role to which her family and her status obligated her.

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