Reading Passage Question
The Gross Domestic Product (GDP), which measures the dollar value of finished goods and services produced by an economy during a given period, serves as the chief indicator of the economic well-being of the United States. The GDP assumes that the economic significance of goods and services lies solely in their price, and that these goods and services add to the national well-being, not because of any intrinsic value they may possess, but simply because they were produced and bought. Additionally, only those goods and services involved in monetary transactions are included in the GDP. Thus, the GDP ignores the economic utility of such things as a clean environment and cohesive families and communities. It is therefore not merely coincidental, since national policies in capitalist and non-capitalist countries alike are dependent on indicators such as the GDP, that both the environment and the social structure have been eroded in recent decades. Not only does the GDP mask this erosion, it can actually portray it as an economic gain: an oil spill off a coastal region “adds” to the GDP because it generates commercial activity. In short, the nation’s central measure of economic well-being works like a calculating machine that adds but cannot subtract.
Solution and Explanation
- The primary purpose of the passage is to:
(A) identify ways in which the GDP could be modified so that it would serve as a more accurate indicator of the economic well-being of the United States
(B) suggest that the GDP, in spite of certain shortcomings, is still the most reliable indicator of the economic well-being of the United States
(C) examine crucial shortcomings of the GDP as an indicator of the economic well-being of the United States
(D) argue that the growth of the United States economy in recent decades has diminished the effectiveness of the GDP as an indicator of the nation’s economic well-being
(E) discuss how the GDP came to be used as the primary indicator of the economic well-being of the United States
Answer: C
Explanation: The passage mostly concerns the GDP limit. According to the passage, the erosion of the environment and the social structure in recent decades is not only a coincidence. Because national policies in both capitalist and non-capitalist countries alike are based on metrics like the GDP. The GDP not only hides this deterioration, but it may also present it as a financial gain. An oil leak off a coastal region "adds" to the GDP because it spurs economic activity. In other words, the country's primary indicator of economic health functions like an add-only adding machine.
- Which of the following best describes the function of the second sentence of the passage in the context of the passage as a whole?
(A) It describes an assumption about the GDP that is defended in the course of the passage.
(B) It contributes to a discussion of the origins of the GDP.
(C) It clarifies a common misconception about the use of the GDP.
(D) It identifies a major flaw in the GDP.
(E) It suggests a revision to the method of calculating the GDP.
Answer: D
Explanation: The second sentence states, “The GDP assumes that the economic significance of goods and services lies solely in their price. And that these goods and services add to the national well-being. Not because of any intrinsic value they may possess, but simply because they were produced and bought.” The second sentence states that the GDP excludes all other forms of value. And is only concerned with the prices of goods and services produced in the United States. The passage continues by implying that the GDP may really hide issues with the country's broader economy by neglecting value other than price.
- It can be inferred that the author of the passage would agree with which of the following about the “economic significance” of those goods and services that are included in the GDP?
(A) It is a comprehensive indicator of a nation’s economic well-being.
(B) It is not accurately captured by the price of those goods and services.
(C) It is usually less than the intrinsic value of those goods and services.
(D) It is more difficult to calculate than the economic significance of those goods and services that are not included in the GDP.
(E) It is calculated differently in capitalist countries than in non-capitalist countries.
Answer: B
Explanation: The author makes the implication that the GDP is not a reliable statistic since it ignores the economic usefulness of some items. The author emphasises that the "intrinsic value" of commodities and services is not captured by the GDP. It disregards the economic value of a clean environment as a result. The author uses the fact that the GDP would count an oil leak as an economic gain as an illustration of this issue. As stated, “Thus, the GDP ignores the economic utility of such things as a clean environment and cohesive families and communities.”
- The comparison of the GDP to a calculating machine serves to do which of the following?
(A) Refute an assertion that the calculations involved in the GDP are relatively complex in nature
(B) Indicate that the GDP is better suited to record certain types of monetary transactions than others
(C) Suggest that it is likely that the GDP will be supplanted by other, more sophisticated economic indicators
(D) Illustrate the point that the GDP has no way of measuring the destructive impact of such things as oil spills on the nation’s economic well-being
(E) Exemplify an assertion that the GDP tends to exaggerate the amount of commercial activity generated by such things as oil spills
Answer: D
Explanation: Policies in both capitalist and non-capitalist nations are based on metrics like GDP. Despite the fact that both the environment and the social structure have deteriorated over the last few decades. The GDP not only hides this deterioration, but it may also present it as a financial gain. An oil leak off a coastal region "adds" to the GDP because it spurs economic activity.
The passage helps explain why an oil spill is misrepresented by the GDP by comparing it to a calculator that is unable to subtract.
The harm cannot be deducted from the total value, which is likely to be far higher than the value produced by economic activity. So, option D is the correct one.
- The passage implies that national policies that rely heavily on economic indicators such as the GDP tend to-
(A) become increasingly capitalistic in nature
(B) disregard the economic importance of environmental and social factors that do not involve monetary transactions
(C) overestimate the amount of commercial activity generated by environmental disasters
(D) overestimate the economic significance of cohesive families and communities
(E) assume that the economic significance of goods and services does not lie solely in the price of those goods and services
Answer: B
Explanation: By indicating that the GDP ignores environmental and social factors, the passage implies that policies dependent on the GDP will also ignore these issues. The GDP makes the assumption that a good or service's economic importance is solely determined by its price. And that it only adds to the country's prosperity. Because it was produced and purchased, not because it has any inherent value. Additionally, the GDP only includes goods and services that are part of financial transactions. Therefore, the GDP disregards the economic value of things like a healthy environment and strong families and communities. Therefore, the erosion of the environment and the social structure in recent decades is not only a coincidence. Given that national policies in both capitalist and non-capitalist nations alike are depending on measures like the GDP.
- It can be inferred that the author of the passage would agree with which of the following assessments of the GDP as an indicator of the economic well-being of the United States?
(A) It masks social and environmental erosion more fully than the chief economic indicators of other nations.
(B) It is based on inaccurate estimations of the prices of many goods and services.
(C) It overestimates the amount of commercial activity that is generated in the United States.
(D) It is conducive to error because it conflates distinct types of economic activity.
(E) It does not take into account the economic utility of certain environmental and social conditions
Answer: E
Explanation: According to the author, the GDP disregards the economic value of things like a healthy environment and social cohesion. Since national policies in both capitalist and non-capitalist countries are based on metrics like the GDP. As noted it is thus not just accidental that both the environment and the social structure have been degraded in recent decades.
“The Gross Domestic Product (GDP), which measures the dollar value of”- is a GMAT reading comprehension passage with answers. Candidates need a strong knowledge of English GMAT reading comprehension.
This GMAT Reading Comprehension consists of 6 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.
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