(This passage is excerpted from material published in 1997) Whereas United States economic productivity grew at an annual rate of...
GMAT Reading Comprehension : (RC) Questions
(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.
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.
Which of the following, if true, would most weaken the budget-deficit explanation for the discrepancy mentioned in line 57?
1. Question Analysis:
The question asks which statement, if true, would most weaken the budget-deficit explanation for the productivity discrepancy between manufacturing and service sectors. We need to find information that undermines the logic of Theory #3.
Connecting to Our Passage Analysis:
From our passage analysis, we identified that Theory #3 (the budget deficit explanation) follows this chain of reasoning:
- High budget deficit → High interest rates → Less investment in technology → Lower service productivity
- This theory assumes that high interest rates specifically harm service sector productivity more than manufacturing productivity
- The passage rejects this theory by arguing there's plenty of technology available, but managers don't use it well
Prethinking:
To weaken the budget deficit explanation, we need to find evidence that either:
- Breaks the causal chain (high deficit → high rates → less investment → lower service productivity)
- Shows that high interest rates don't specifically target service productivity
- Demonstrates that interest rates affect both sectors equally, eliminating the "discrepancy" the theory tries to explain
The key insight is that Theory #3 tries to explain why services lag behind manufacturing in productivity. If high interest rates hurt both sectors equally, then interest rates can't explain the difference between them.
Why It's Wrong:
• This actually supports the budget deficit explanation rather than weakening it
• If budget deficits cause service companies to invest less in R&D, this strengthens the causal chain that Theory #3 proposes
• The question asks what would weaken the explanation, not strengthen it
Common Student Mistakes:
- Wait, doesn't this show that budget deficits hurt service companies?
→ Yes, but that supports Theory #3. We need to weaken it, not strengthen it. - I thought any connection between budget deficits and service productivity would be relevant?
→ The direction matters. This choice reinforces the budget deficit theory instead of undermining it.
Why It's Wrong:
• This supports rather than weakens the budget deficit explanation
• If new technologies play a significant role in service productivity, this reinforces the importance of technology investment
• This would make the budget deficit → high interest rates → less technology investment chain more concerning, not less
Common Student Mistakes:
- Doesn't this show that technology matters for productivity?
→ Yes, but that makes the budget deficit explanation stronger, not weaker. - I thought anything about technology would weaken the theory?
→ Only if it shows technology isn't important or isn't affected by interest rates. This choice shows technology IS important.
Why It's Wrong:
• This doesn't address the budget deficit explanation at all
• The passage already discussed quality measurement issues in Theory #1, which was rejected
• This choice doesn't connect to interest rates, investment, or budget deficits
Common Student Mistakes:
- Isn't this about the discrepancy between manufacturing and services?
→ Yes, but it doesn't address the specific budget deficit explanation we're trying to weaken. - Does this explain why both sectors might have similar productivity issues?
→ It addresses measurement, but not the budget deficit theory's focus on interest rates and investment.
Why It's Wrong:
• This actually strengthens the budget deficit explanation
• If services require larger technology investments, they would be more sensitive to high interest rates
• This would make the budget deficit → high interest rates → reduced service investment chain more plausible
Common Student Mistakes:
- Doesn't this show a difference between the sectors?
→ Yes, but it explains why budget deficits would hurt services more, supporting Theory #3. - I thought showing services need more investment would weaken the investment-based explanation?
→ Actually, it makes services more vulnerable to high interest rates, strengthening the budget deficit theory.
Why It's Right:
• This directly undermines the budget deficit explanation by showing high interest rates affect both sectors equally
• If interest rates slow manufacturing and service productivity equally, then interest rates cannot explain the discrepancy between them
• This breaks the logic of Theory #3, which assumes budget deficits specifically harm service sector productivity
Key Evidence: The budget deficit theory from the passage states "if it [the deficit] 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." If high interest rates hurt both sectors equally, this theory cannot explain why services specifically lag behind manufacturing.