Economic Growth Involves Both Benefits And Costs GMAT Reading Comprehension

Reading Passage Question

Economic growth involves both benefits and costs. The desirability of increasing production has frequently been challenged in recent years, and some have even maintained that economic growth is merely a quantitative enlargement that has no human meaning or value. However, economic growth is an increase in the capacity to produce goods and services that people want. Since the product of economic growth can be measured by its value to someone, it is important to ask whose standard of valuation counts.

In the United States, the value of a product is what purchasers pay for it. This is determined by the purchasers’ preferences combined with conditions of supply, which in turn reflect various other factors, such as natural and technological circumstances at any given time and the preferences of those who supply capital and labor. The value by which we measure a product synthesizes all these factors. Gross National Product (GNP) is the market value of the nation’s total output of goods and services.

Gross National Product is not a perfect measure of all the activities involved in economic output. It does not account for deteriorations or improvements in the environment, even when they are incidental results of the production process. On the other hand, it does not count as “product” many benefits provided as side effects of the economic process; it does not include productive but unpaid work (such as that done by a homemaker); and it does not reckon with such other factors as the burdensomeness of work, the length of the work week, and so forth.

Nonetheless, the GNP concept makes an important contribution to our understanding of how the economy is working. While it is not a complete measure of economic productivity and even less so of “welfare,” the level and rate of increase of the GNP are clearly and positively associated with what most people throughout the world see as an improvement in the quality of life. In the long run, the same factors result in a growing GNP and in other social benefits: size and competence of population, state of knowledge, amount of capital, and the effectiveness with which these are combined and utilized.

“Economic growth involves both benefits and costs”- is a passage for the GMAT that addresses reading comprehension. Candidates must have a firm understanding of GMAT reading comprehension in English. This GMAT reading comprehension section consists of four comprehension questions. The purpose of the GMAT Reading Comprehension questions is to assess a candidate's capacity to understand, evaluate, and apply knowledge or ideas. By responding to the GMAT Reading Comprehension Practice Questions section, candidates can actively practice.

Solutions and Explanation

1. The main purpose of the passage is to

1. define the limitations of using GNP to measure the nation’s wellbeing.
2. contrast the American and the European GNPs.
3. argue for the value of increased economic output.
4. explain the disadvantages of measuring the quality of life using a scale of material affluence.
5. define Gross National Product.

2. The rhetorical purpose of the third paragraph of the passage is to

1. anticipate objections to what the GNP fails to take into account.
2. cite examples of “products” the GNP ought to include.
3. develop the definition of paragraph two with specific details.

1. I only
2. II only
3. III only
4. I and II only
5. I, II, and III

3. We can infer from the passage that of the following, the factor that does NOT influence the growth of the GNP is

1. the condition of the population.
2. a dependence on spiritual values.
3. the capital available in the country.
4. knowledge related to production of goods and services.
5. the efficiency of the production process.

4. A critic of the limitations of the measurements of the GNP might cite its failure to consider all of the following EXCEPT

1. the steady increase in American workers’ leisure time.
2. cooperative baby-sitting projects among parents with young children.
3. the widespread existence of chemicals in American rivers.
4. the value of the time a salaried stock broker spends on research.
5. the valuation of family household management.

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