Despite Views that Globalization has Reached its Peak GMAT Reading Comprehension

Reading Passage Questions

Despite views that globalization has reached its peak, a period beginning in the nineteenth century and extending into the early twentieth century, in fact, is the interval during which international barriers to trade fell most steeply, as can be seen in the case of price convergence in commodities. The prices of cloves, pepper, and coffee failed to converge between Amsterdam and East Asia or between England and India from as far back as 1580 but began in 1820 to draw closer. Similarly, the difference in wheat prices in the United States and England fell from one hundred percent in the early nineteenth century to negligible levels late in the century and to no difference at all in the early twentieth century. A similar story unfolded during this period for bacon, cotton, and rice.

Peter Lindert and Jeffrey Williamson have summarized the price gaps in commodity markets between continents as evolving in three phases. From 1820 to 1914, these gaps fell by 81 percent; they attribute 72 percent of this decline to cheaper transport and 28 percent to trade policies. Second, during the wartime period of 1914 to 1950, the gaps doubled, due to a reversal in trade policies. Finally, from 1950 to 2000, they fell again by 76 percent, ending up 92 percent lower than in 1820, with about four-fifths of the total change attributable to cheaper transport and one-fifth to more favorable trade policies.

The question is often articulated in terms of the ratio of total trade volume to the gross domestic product, since commodity price information is not universally available. The values of this ratio in many advanced economies were higher in the mid-1990s than in the early 1900s, but not by much. In Japan, notably, the percentage of GDP for which trade accounted in 1995 was 17 percent, far under its 1910 level of 30 percent, as measured in current prices. Sure enough, the ratios have risen somewhat in other economies over that same time period--by 13 percentage points in United Kingdom, 8 points in France, and from 11 percent to 24 percent in the United States; this latter spike may explain why the attention to globalization has been especially acute in America. These increases, nevertheless, are modest given the fact that the world economy grew roughly twice as quickly in the twentieth century as in the nineteenth.

The ratios grow much more dramatically if they are computed in constant prices rather than in current prices, because the prices of goods relative to services fell due to sustained increases in productivity in the sectors producing these goods. Trade has grown most in those sectors in which prices have most fallen, so the proportions of GDP in constant prices have risen more than those in current prices.

“Despite views that globalization has reached its peak GMAT Reading Comprehension”is a sample text for the exam GMAT.

This GMAT Reading Comprehension consists of 4 comprehension questions. The GMAT Reading Comprehension questions are designed for the purpose of testing candidates’ abilities in understanding, analyzing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.

Solutions and Explanations

1. The author cites which of the following as a consideration influencing the selection of data that has been presented in the passage?

1. Ease of calculation
2. Wide acceptance
3. Lack of bias
4. Availability
5. Universality

2. In the passage, the author anticipates which of the following as a possible objection to his argument?

1. The growth of the world economy could be seen as a reason to consider modern price convergence more significant than prior convergence.
2. The methodology to determine the impact of transport and trade policies on commodities prices has not been presented.
3. The ratios of trade volume to gross domestic product might point to a different conclusion if calculated in constant prices.
4. The increases in ratio of trade volume to gross domestic product presented by the argument were not typical for all nations of the world.
5. The argument fails to address whether the globalization of labor is higher today than at the turn of the twentieth century.

3. According to the passage, which of the following was true of commodities prices from 1950 to 2000?

1. They were brought closer together by favorable trade policies.
2. They were pushed down by cheaper transport.
3. They generated acute attention to globalization in the United States.
4. The gaps in these prices first increased, then decreased.
5. They rose by as much as 13 percent.

4. The author explicitly cites each of the following as evidence EXCEPT

1. the ratio of total trade volume to gross domestic product
2. price gaps in commodity markets prior to 1820
3. price gaps in commodity markets after 1820
4. the percentage of commodities imported
5. the rate of growth of the world economy

5. With which of the following statements would the author the passage be most likely to agree?

1. The current level of globalization across advanced economies is low.
2. Throughout the three phases discussed, cheaper transport had a larger effect on the gap in commodities prices than did trade policies.
3. When the difference between commodities prices across markets shrinks suddenly, it can be concluded that international barriers to trade have been lessened or removed.
4. The United States opened its markets more between the mid-1990s and early 1900s than did the United Kingdom.
5. The wars of 1914 to 1950 had no lasting effect on globalization across advanced economies.

6. The primary purpose of the passage is to

1. outline alternatives to an accepted theory
2. present information that resolves a debate
3. contribute to a theory by introducing new data
4. challenge a widely accepted view
5. further refute an already a discarded theory

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