The United States Government has a Long-Standing Policy of Using Federal Funds GMAT Reading Comprehension

Reading Passage Question

The United States government has a long-standing policy of using federal funds to keep small business viable. The Small Business Act of 1953 authorized the Small Business Administration (SBA) to enter into contracts with government agencies having procurement powers and to arrange for fulfillment of these contracts by awarding subcontracts to small businesses. In the mid 1960's, during the war on poverty years, Congress hoped to encourage minority entrepreneurs by directing such funding to minority businesses. At first this funding was directed toward minority entrepreneurs with very low incomes. A 1967 amendment to the Economic Opportunity Act directed the SBA to pay special attention to minority-owned businesses located in urban or rural areas characterized by high proportions of unemployed or low-income individuals. Since then, the answer given to the fundamental question of who the recipients should be—the most economically disadvantaged or those with the best prospects for business success—has changed, and the social goals of the programs have shifted, resulting in policy changes.

The first shift occurred during the early 1970's. While the goal of assisting the economically disadvantaged entrepreneur remained, a new goal emerged: to remedy the effects of past discrimination. In fact, in 1970 the SBA explicitly stated that their main goal was to increase the number of minority-owned businesses. At the time, minorities constituted seventeen percent of the nation's population, but only four percent of the nation's self-employed. This ownership gap was held to be the result of past discrimination. Increasing the number of minority-owned firms was seen as a way to remedy this problem. In that context, providing funding to minority entrepreneurs in middle- and high-income brackets seemed justified.

In the late 1970's, the goals of minority-business funding programs shifted again. At the minority business Development Agency, for example, the goal of increasing numbers of minority-owned firms was supplanted by the goal of creating and assisting more minority-owned substantive firms with future growth potential. Assisting manufacturers or wholesalers became far more important than assisting small service businesses. Minority-business funding programs were now justified as instruments for economic development, particularly for creating jobs in minority communities of high unemployment.

The United States Government has a Long-Standing Policy of Using Federal Funds GMAT Reading Comprehension contains a passage with questions and answers. Candidates need a strong knowledge of English GMAT reading comprehension. 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.

Solution and Explanation

1. It can be inferred that the "ownership gap" (see underlined text) would be narrowed if which of the following were to occur?

(A) Minority entrepreneurs received a percentage of government contracts equal to that received by nonminority entrepreneurs.
(B) Middle- and high-income minority entrepreneurs gave more assistance to their low-income counterparts in the business community.
(C) Minority entrepreneurs hired a percentage of minority employees equal to the percentage of minority residents in their own communities.
(D) The percentage of self-employed minority persons rose to more than ten percent of all self-employed persons.
(E) Seventeen percent of all persons employed in small businesses were self-employed.

2. Which of the following best describes the function of the second paragraph in the passage as a whole?

(A) It narrows the scope of the topic introduced in the first paragraph.
(B) It presents an example of the type of change discussed in the first paragraph.
(C) It cites the most striking instance of historical change in a particular government policy.
(D) It explains the rationale for the creation of the government agency whose operations are discussed in the first paragraph.
(E) It presents the results of policies adopted by the federal government.

3. According to the passage, in 1970 funding to minority entrepreneurs focused primarily on which of the following?

(A) Alleviating chronic unemployment in urban areas
(B) Narrowing the ownership gap
(C) Assisting minority-owned businesses with growth potential
(D) Awarding subcontracts to businesses that encouraged community development
(E) Targeting the most economically disadvantaged minority-owned businesses

4. The passage mentions which of the following as a basic consideration in administering minority-business funding programs?

(A) Coming up with the funding for the programs
(B) Encouraging government agencies to assist middle- and high-income minority entrepreneurs
(C) Recognizing the profit potential of small service businesses in urban communities
(D) Determining who should be the recipients of the funding
(E) Determining which entrepreneurs are likely to succeed

5. The primary purpose of the passage is to

1. discuss historical changes in a government policy
2. describe the role of Congress in regulating the work of the SBA
3. contrast types of funding sources used by minority businesses
4. correct a misconception about minority entrepreneurship
5. advocate an alternative approach to funding minority entrepreneurs