{"id":57685,"date":"2025-08-27T18:21:36","date_gmt":"2025-08-27T12:51:36","guid":{"rendered":"https:\/\/e-gmat.com\/blogs\/?p=57685"},"modified":"2025-09-05T00:04:49","modified_gmt":"2025-09-04T18:34:49","slug":"whereas-united-states-economic-productivity-grew-at-an-annual-rate-of","status":"publish","type":"post","link":"https:\/\/e-gmat.com\/blogs\/whereas-united-states-economic-productivity-grew-at-an-annual-rate-of\/","title":{"rendered":"(This passage is excerpted from material published in 1997) Whereas United States…."},"content":{"rendered":"A <\/span> 6<\/span> min read <\/span><\/span>\n

(This passage is excerpted from material published in 1997) Whereas United States economic productivity grew at an annual rate of 3 percent from 1945 to 1965, it has grown at an annual rate of only about 1 percent since the early 1970’s. What might be preventing higher productivity growth? Clearly, the manufacturing sector of the economy cannot be blamed. Since 1980, productivity improvements in manufacturing have moved the United States from a position of acute decline in manufacturing to one of world prominence. Manufacturing, however, constitutes a relatively small proportion of the economy. In 1992, goods-producing businesses employed only 19.1 percent of American workers, whereas service-producing businesses employed 70 percent. Although the service sector has grown since the late 1970’s, its productivity growth has declined. Several explanations have been offered for this declined and for the discrepancy in productivity growth between the manufacturing and service sectors. One is that traditional measures fail to reflect service-sector productivity growth because it has been concentrated in improved quality of services. Yet traditional measures of manufacturing productivity have shown significant increases despite the under measurement of quality, whereas service productivity has continued to stagnate. Others argue that since the 1970’s, manufacturing workers, faced with strong foreign competition, have learned to work more efficiently in order to keep their jobs in the United States, but service workers, who are typically under less global competitive pressure, have not. However, the pressure on manufacturing workers in the United States to work more efficiently has generally been overstated, often for political reasons. In fact, while some manufacturing jobs have been lost due to foreign competition, many more have been lost simply because of slow growth in demand for manufactured goods.<\/p>\n\n\n\n

Yet another explanation blames the federal budget deficit: if it were lower, interest rates would be lower too, thereby increasing investment in the development of new technologies, which would spur productivity growth in the service sector. There is, however, no dearth of technological resources, rather, managers in the service sector fail to take advantage of widely available skills and machines. High productivity growth levels attained by leading edge service companies indicate that service sector managers who wisely implement available technology and choose skillful workers can significantly improve their companies’ productivity. The culprits for service-sector productivity stagnation are the forces such as corporate takeovers and unnecessary governmental regulation that distract managers from the task of making optimal use of available resources.<\/p>\n\n\n\n

Question 1<\/h3>\n\n\n\n

Which of the following, if true, would most weaken the budget-deficit explanation for the discrepancy mentioned in line 57?<\/p>\n\n\n\n

A. Research shows that the federal budget deficit has traditionally caused service companies to invest less money in research and development of new technologies<\/p>\n\n\n\n

B. New technologies have been shown to play a significant role in companies that have been able to increase their service productivity<\/p>\n\n\n\n

C. In both the service sector and manufacturing, productivity improvements are concentrated in gains in quality<\/p>\n\n\n\n

D. The service sector typically requires larger investments in new technology in order to maintain productivity growth than those of manufacturing<\/p>\n\n\n\n

E. High interest rates tend to slow the growth of manufacturing productivity as much as they slow the growth of service-sector productivity in the United States<\/p>\n\n\n\n

Question 2<\/h3>\n\n\n\n

The passage states which of the following about the effect of foreign competition on the American manufacturing sector since the 1970’s?<\/p>\n\n\n\n

A. It has often been exaggerated.<\/p>\n\n\n\n

B. It has not been a direct cause of job loss.<\/p>\n\n\n\n

C. It has in large part been responsible for the subsequent slowing of productivity growth.<\/p>\n\n\n\n

D. It has slowed growth in the demand for manufactured goods in the United States.<\/p>\n\n\n\n

E. It has been responsible for the majority of American jobs lost in manufacturing.<\/p>\n\n\n\n

Question 3<\/h3>\n\n\n\n

It can be inferred from the passage that which of the following was true of the United States manufacturing sector in the years immediately prior to 1980?<\/p>\n\n\n\n

A. It was performing relatively poorly.<\/p>\n\n\n\n

B. It was in a position of world prominence.<\/p>\n\n\n\n

C. It was increasing its productivity at an annual rate of 3 percent.<\/p>\n\n\n\n

D. It was increasing its productivity at an annual rate of 1 percent.<\/p>\n\n\n\n

E. Its level of productivity was higher than afterward.<\/p>\n\n\n\n

Question 4<\/h3>\n\n\n\n

The author of the passage would be most likely to agree with which of the following statements about productivity improvements in United States service companies?<\/p>\n\n\n\n

A. Such improvements would be largely attributable to efficiencies resulting from corporate takeovers.<\/p>\n\n\n\n

B. Such improvements would depend more on wise implementation of technology than on managers’ choice of skilled workers.<\/p>\n\n\n\n

C. Such improvements would be more easily accomplished if there were fewer governmental regulations of the service sector.<\/p>\n\n\n\n

D. Such improvements would require companies to invest heavily in the development of new technologies.<\/p>\n\n\n\n

E. Such improvements would be attributable primarily to companies’ facing global competitive pressure.<\/p>\n\n\n\n

Solution<\/h2>\n\n\n\n

Question Analysis:<\/h3>\n\n\n\n

The question asks what the author would most likely agree with regarding productivity improvements in US service companies. This requires us to identify the author’s perspective on how service sector productivity could be enhanced, based on their analysis and conclusion in the passage.<\/p>\n\n\n\n

Connecting to Our Passage Analysis:<\/h3>\n\n\n\n

From our passage analysis, we know that:<\/p>\n\n\n\n

  1. The author systematically rejected three popular explanations for service sector productivity problems (measurement issues, competitive pressure, and budget deficits)<\/li>
  2. The author concluded that the real problem is poor management in the service sector<\/li>
  3. The author identified that “leading edge service companies” achieve “high productivity growth levels” when “managers who wisely implement available technology and choose skillful workers can significantly improve their companies’ productivity”<\/li>
  4. The author’s final conclusion pinpointed “corporate takeovers and unnecessary governmental regulation” as “the culprits” that “distract managers from the task of making optimal use of available resources”<\/li><\/ol>\n\n\n\n

    Prethinking:<\/h3>\n\n\n\n

    Based on the passage structure and the author’s systematic elimination of alternative theories, the correct answer should align with the author’s final conclusion about management focus being the key issue. The author believes that:<\/p>\n\n\n\n

    • Technology and skilled workers are readily available<\/li>
    • Good management can achieve high productivity (as proven by leading companies)<\/li>
    • The main obstacles are distractions like corporate takeovers and government regulations<\/li><\/ul>\n\n\n\n

      Therefore, the author would likely agree that reducing these distractions\u2014particularly government regulations\u2014would facilitate productivity improvements in service companies.<\/p>\n\n\n\n

      Answer Choices Explained<\/h3>\n\n\n\n

      A. Such improvements would be largely attributable to efficiencies resulting from corporate takeovers.<\/p>\n\n\n\n

      Why It’s Wrong:<\/strong><\/p>\n\n\n\n

      • The author explicitly identifies “corporate takeovers” as one of the culprits that distract managers from optimal resource use<\/li>
      • Corporate takeovers are presented as part of the problem, not the solution<\/li>
      • This directly contradicts the author’s conclusion<\/li><\/ul>\n\n\n\n

        Common Student Mistakes:<\/strong><\/p>\n\n\n\n

        1. Did the author mention corporate takeovers as beneficial because they create efficiencies?<\/em>
          \u2192 No, the author specifically calls them “culprits” that distract managers from productivity tasks<\/li>
        2. Could corporate takeovers be seen as a form of competitive pressure that improves performance?<\/em>
          \u2192 The author already rejected competitive pressure theories and treats takeovers as harmful distractions<\/li><\/ol>\n\n\n\n

          B. Such improvements would depend more on wise implementation of technology than on managers’ choice of skilled workers.<\/p>\n\n\n\n

          Why It’s Wrong:<\/strong><\/p>\n\n\n\n

          • The author presents technology implementation and worker choice as equally important for productivity<\/li>
          • The passage states managers need to both “wisely implement available technology and choose skillful workers”<\/li>
          • No evidence suggests the author prioritizes one over the other<\/li><\/ul>\n\n\n\n

            Common Student Mistakes:<\/strong><\/p>\n\n\n\n

            1. Doesn’t the author emphasize technology more since they reject the “no technology” theory?<\/em>
              \u2192 The author shows technology is available, but effective use requires both good technology implementation AND skilled workers<\/li>
            2. Is technology implementation mentioned first, making it more important?<\/em>
              \u2192 Order of mention doesn’t indicate priority; both elements are presented as necessary<\/li><\/ol>\n\n\n\n

              C. Such improvements would be more easily accomplished if there were fewer governmental regulations of the service sector.<\/p>\n\n\n\n

              Why It’s Right:<\/strong><\/p>\n\n\n\n

              • Directly aligns with the author’s final conclusion that “unnecessary governmental regulation” distracts managers<\/li>
              • Follows logically from the author’s argument that removing distractions would allow better management focus<\/li>
              • Consistent with the author’s evidence that good management (when not distracted) leads to high productivity<\/li><\/ul>\n\n\n\n

                Key Evidence:<\/strong> “The culprits for service-sector productivity stagnation are the forces such as corporate takeovers and unnecessary governmental regulation that distract managers from the task of making optimal use of available resources.”<\/p>\n\n\n\n

                D. Such improvements would require companies to invest heavily in the development of new technologies.<\/p>\n\n\n\n

                Why It’s Wrong:<\/strong><\/p>\n\n\n\n

                • The author explicitly rejects the idea that lack of technology is the problem<\/li>
                • The passage states “there is no dearth of technological resources”<\/li>
                • The author argues technology is already “widely available” but not well-utilized<\/li><\/ul>\n\n\n\n

                  Common Student Mistakes:<\/strong><\/p>\n\n\n\n

                  1. Doesn’t the author discuss technology investment as important for productivity?<\/em>
                    \u2192 The author mentions this as Theory #3 (budget deficit theory) but then rejects it, showing technology is already available<\/li>
                  2. If technology helps productivity, wouldn’t more investment be better?<\/em>
                    \u2192 The author’s point is that existing technology isn’t being used well; more investment won’t solve poor management<\/li><\/ol>\n\n\n\n

                    E. Such improvements would be attributable primarily to companies’ facing global competitive pressure.<\/p>\n\n\n\n

                    Why It’s Wrong:<\/strong><\/p>\n\n\n\n

                    • The author specifically rejects competitive pressure as an explanation for productivity differences<\/li>
                    • The passage argues that competitive pressure on manufacturing workers “has generally been overstated”<\/li>
                    • Global competitive pressure is dismissed as Theory #2 that doesn’t hold up<\/li><\/ul>\n\n\n\n

                      Common Student Mistakes:<\/strong><\/p>\n\n\n\n

                      1. Didn’t the author say competition helped manufacturing productivity?<\/em>
                        \u2192 No, the author rejected this theory and said job losses were mainly due to reduced demand, not competition<\/li>
                      2. Wouldn’t more competition naturally improve service sector performance?<\/em>
                        \u2192 The author argues management focus and resource utilization matter more than competitive pressure<\/li><\/ol>\n","protected":false},"excerpt":{"rendered":"

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