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# Many people believe that because wages are lower in developi

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Many people believe that because wages are lower in developi [#permalink]

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14 Oct 2010, 16:04
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Many people believe that because wages are lower in developing countries than in developed countries, competition from developing countries in goods traded internationally will soon eliminate large numbers of jobs in developed countries. Currently, developed countries' advanced technology results in higher productivity, which accounts for their higher wages. Advanced technology is being transferred ever more speedily across borders, but even with the latest technology, productivity and wages in developing countries will remain lower than in developed countries for many years because developed countries have better infrastructure and better-educated workers. When productivity in a developing country does catch up, experience suggests that wages there will rise. Some individual firms in developing countries have raised their productivity but kept their wages (which are influenced by average productivity in the country's economy) low. However, in a developing country's economy as a whole, productivity improvements in goods traded internationally are likely to cause an increase in wages. Furthermore, if wages are not allowed to rise, the value of the country's currency will appreciate, which (from the developed countries' point of view) is the equivalent of increased wages in the developing country. And although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely.
The passage suggests that if the movement of capital in the world were restricted, which of the following would be likely?
A. Advanced technology could move more quickly from developed countries to developing countries.
B. Developed countries could compete more effectively for jobs with developing countries.
C. A country's average wages could increase without significantly increasing the sophistication of its technology or the value of its currency.
D. A country's productivity could increase without significantly increasing the value of its currency.
E. Workers could obtain higher wages by increasing their productivity.
[Reveal] Spoiler:
D

2. The primary purpose of the passage is to
A identify the origin of a common misconception
B discuss the implications of a generally accepted principle
C present information relevant in evaluating a commonly held belief
D defend a controversial assertion against a variety of counterarguments
E explain under what circumstances a well-known phenomenon occurs
[Reveal] Spoiler:
C

[Reveal] Spoiler: Question #1 OA
[Reveal] Spoiler: Question #2 OA

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Re: Wages in developing countries [#permalink]

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14 Oct 2010, 20:21
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Re: Wages in developing countries [#permalink]

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15 Oct 2010, 02:56
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Re: Wages in developing countries [#permalink]

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15 Oct 2010, 11:05
No.
OA is D. But I do not understand why.

I think that we understand better the reading passages than GMAC lol.
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Re: Wages in developing countries [#permalink]

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15 Oct 2010, 18:36
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metallicafan wrote:
I found this passage in an old post:

 Many people believe that because wages are lower in developing countries than in developed countries, competition from developing countries in goods traded internationally will soon eliminate large numbers of jobs in developed countries. Currently, developed countries' advanced technology results in higher productivity, which accounts for their higher wages. Advanced technology is being transferred ever more speedily across borders, but even with the latest technology, productivity and wages in developing countries will remain lower than in developed countries for many years because developed countries have better infrastructure and better-educated workers. When productivity in a developing country does catch up, experience suggests that wages there will rise. Some individual firms in developing countries have raised their productivity but kept their wages (which are influenced by average productivity in the country's economy) low. However, in a developing country's economy as a whole, productivity improvements in goods traded internationally are likely to cause an increase in wages. Furthermore, if wages are not allowed to rise, the value of the country's currency will appreciate, which (from the developed countries' point of view) is the equivalent of increased wages in the developing country. And although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely.

The passage suggests that if the movement of capital in the world were restricted, which of the following would be likely?
A. Advanced technology could move more quickly from developed countries to developing countries.
B. Developed countries could compete more effectively for jobs with developing countries.
C. A country's average wages could increase without significantly increasing the sophistication of its technology or the value of its currency.
D. A country's productivity could increase without significantly increasing the value of its currency.
E. Workers could obtain higher wages by increasing their productivity.

IMO it is
[Reveal] Spoiler:
E

BUT OA IS

D

Furthermore, if wages are not allowed to rise, the value of the country's currency will appreciate, which (from the developed countries' point of view) is the equivalent of increased wages in the developing country. And although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely

increased prod => higher wages or (lower wages and) appreciated currency (= dev'd country paying more for the goods)

currency undervalued => currency not appreciated == lower wages BUT AT HIGHER PRODUCTIVITY

D: A country's productivity could increase without significantly increasing the value of its currency
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Re: Wages in developing countries [#permalink]

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29 Oct 2010, 17:59
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D
although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely.

The last sentence of the passage says that ..Currencies value kept at low BUT it is difficult in where capital moves freely..i.e. author unwilling to accept that currency values can be devalued easily.
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Re: Wages in developing countries [#permalink]

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30 Mar 2011, 08:40
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And although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely.

This line suggests that the answer is D.
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Re: Wages in developing countries [#permalink]

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01 Apr 2011, 13:43
D , without a doubt
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Re: I found this passage in an old post: Many people believe [#permalink]

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07 Apr 2013, 01:08
IMHO,

The reason why I think D could be right, is because if the capital( which is nothing but investment ) is restricted within one's own country, it could be used to make the businesses within the country to be more productive .

Now when it come to option E, the very fact that workers would obtain high wages is dependant on whether the productivity increase(due to the reinvested capital) is put to good use in the form of exports etc.,, yielding considerable profits.

Please let me know if this reasoning is sound enough to help choose the right answer. Thank you.
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Re: Many people believe that because wages are lower in developi [#permalink]

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01 Jul 2014, 02:30
Hello from the GMAT Club VerbalBot!

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Re: Many people believe that because wages are lower in developi [#permalink]

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24 Feb 2015, 04:29
However, in a developing country's economy as a whole, productivity improvements in goods traded internationally are likely to cause an increase in wages. Furthermore, if wages are not allowed to rise, the value of the country's currency will appreciate, which (from the developed countries' point of view) is the equivalent of increased wages in the developing country. And although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely.

This part of the passage explains why the answer is D in first questions.
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Re: Many people believe that because wages are lower in developi [#permalink]

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16 Mar 2015, 07:19
My answer is D & C, but it takes me 3:15s to complete. I've started to work on RC.
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Re: Many people believe that because wages are lower in developi [#permalink]

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01 Mar 2016, 05:16
To answer the 1st question, following lines must be digested
"Productivity improvements in goods traded internationally are likely to cause an increase in wages. Furthermore, if wages are not allowed to rise, the value of the country's currency will appreciate, which (from the developed countries' point of view) is the equivalent of increased wages in the developing country. And although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely."

from the above lines, the following can be inferred
1) if P increases W increase
2) forcibly if you are not allowing W to increase, even after the P increased, it will cause CV( of producing country)to increase. which is a burden for the importer.
3) Now alternative to this is to keep CV low so that the importer is happy and Wages also can be increased
4) point 3. is not feasible because of the free flow of currency.
5) so, if the free flow is restricted, CV can be low, wages can be high and Production can be high. that is clearly mentioned in Option D
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Re: Many people believe that because wages are lower in developi [#permalink]

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18 Apr 2016, 07:08
Could somebody throw some light on the second Q please?
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Re: Many people believe that because wages are lower in developi [#permalink]

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28 Apr 2016, 11:11
metallicafan wrote:
Many people believe that because wages are lower in developing countries than in developed countries, competition from developing countries in goods traded internationally will soon eliminate large numbers of jobs in developed countries. Currently, developed countries' advanced technology results in higher productivity, which accounts for their higher wages. Advanced technology is being transferred ever more speedily across borders, but even with the latest technology, productivity and wages in developing countries will remain lower than in developed countries for many years because developed countries have better infrastructure and better-educated workers. When productivity in a developing country does catch up, experience suggests that wages there will rise. Some individual firms in developing countries have raised their productivity but kept their wages (which are influenced by average productivity in the country's economy) low. However, in a developing country's economy as a whole, productivity improvements in goods traded internationally are likely to cause an increase in wages. Furthermore, if wages are not allowed to rise, the value of the country's currency will appreciate, which (from the developed countries' point of view) is the equivalent of increased wages in the developing country. And although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely.
The passage suggests that if the movement of capital in the world were restricted, which of the following would be likely?
A. Advanced technology could move more quickly from developed countries to developing countries.
B. Developed countries could compete more effectively for jobs with developing countries.
C. A country's average wages could increase without significantly increasing the sophistication of its technology or the value of its currency.
D. A country's productivity could increase without significantly increasing the value of its currency.
E. Workers could obtain higher wages by increasing their productivity.
[Reveal] Spoiler:
D

2. The primary purpose of the passage is to
A identify the origin of a common misconception
B discuss the implications of a generally accepted principle
C present information relevant in evaluating a commonly held belief
D defend a controversial assertion against a variety of counterarguments
E explain under what circumstances a well-known phenomenon occurs
[Reveal] Spoiler:
C

Hi E-gmat,

Q1. I have the below doubts:

Below is my understanding from the relevant section of the passage that:
1. Productivity increases in dev countries > Wages inc
2. If wages are not increased then the currency rate appreciates which is equivalent to increased wages
3. Because in a free flowing economy currency can't be undervalued
Conclusion: currency rate could increase leading to increase in wages.

I do not understand how productivity is increasing with the increase in wage. Do we have reverse relationship here as per point 1. Please explain.

Q2. The first para talks about the factors that causes differences between the developing and developed countries.
The second para shares a chain reaction of how productivity and wage are interdependent on each other and how they define the wages along with some independent factors about currency appreciation and its effect on wages
Main point: The argument talks about factors causing the difference in wages between developed and developing countries.
Can you please help me how the argument reaches the abstract main point. I am unable to figure out.
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Re: Many people believe that because wages are lower in developi [#permalink]

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29 Apr 2016, 06:32
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nishatfarhat87 wrote:
Many people believe that because wages are lower in developing countries than in developed countries, competition from developing countries in goods traded internationally will soon eliminate large numbers of jobs in developed countries. Currently, developed countries' advanced technology results in higher productivity, which accounts for their higher wages. Advanced technology is being transferred ever more speedily across borders, but even with the latest technology, productivity and wages in developing countries will remain lower than in developed countries for many years because developed countries have better infrastructure and better-educated workers. When productivity in a developing country does catch up, experience suggests that wages there will rise. Some individual firms in developing countries have raised their productivity but kept their wages (which are influenced by average productivity in the country's economy) low. However, in a developing country's economy as a whole, productivity improvements in goods traded internationally are likely to cause an increase in wages. Furthermore, if wages are not allowed to rise, the value of the country's currency will appreciate, which (from the developed countries' point of view) is the equivalent of increased wages in the developing country. And although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely.
The passage suggests that if the movement of capital in the world were restricted, which of the following would be likely?
A. Advanced technology could move more quickly from developed countries to developing countries.
B. Developed countries could compete more effectively for jobs with developing countries.
C. A country's average wages could increase without significantly increasing the sophistication of its technology or the value of its currency.
D. A country's productivity could increase without significantly increasing the value of its currency.
E. Workers could obtain higher wages by increasing their productivity.
[Reveal] Spoiler:
D

2. The primary purpose of the passage is to
A identify the origin of a common misconception
B discuss the implications of a generally accepted principle
C present information relevant in evaluating a commonly held belief
D defend a controversial assertion against a variety of counterarguments
E explain under what circumstances a well-known phenomenon occurs
[Reveal] Spoiler:
C

Hi E-gmat,

Q1. I have the below doubts:

Below is my understanding from the relevant section of the passage that:
1. Productivity increases in dev countries > Wages inc
2. If wages are not increased then the currency rate appreciates which is equivalent to increased wages
3. Because in a free flowing economy currency can't be undervalued
Conclusion: currency rate could increase leading to increase in wages.

I do not understand how productivity is increasing with the increase in wage. Do we have reverse relationship here as per point 1. Please explain.

Q2. The first para talks about the factors that causes differences between the developing and developed countries.
The second para shares a chain reaction of how productivity and wage are interdependent on each other and how they define the wages along with some independent factors about currency appreciation and its effect on wages
Main point: The argument talks about factors causing the difference in wages between developed and developing countries.
Can you please help me how the argument reaches the abstract main point. I am unable to figure out.

Hi Nishat,

Thanks for posting your doubt here.

Reply for Q1. Take a look the the following excerpt from the passage: When productivity in a developing country does catch up, experience suggests that wages there will rise. Some individual firms in developing countries have raised their productivity but kept their wages (which are influenced by average productivity in the country's economy) low. However, in a developing country's economy as a whole, productivity improvements in goods traded internationally are likely to cause an increase in wages. Furthermore, if wages are not allowed to rise, the value of the country's currency will appreciate, which (from the developed countries' point of view) is the equivalent of increased wages in the developing country. And although in the past a few countries have deliberately kept their currencies undervalued, that is now much harder to do in a world where capital moves more freely.

The passage states that in developing countries, when productivity increases, then wages increase too. But many developing countries have deliberately kept the wages low. When this is done, then the value of the currency of that nation increases. But if the capital is allowed to move freely, then productivity could increase, but that would not lead to the increase in the value of the currency pf that nation. Hence, Choice D is the correct answer.

Reply for Q2. The opening sentence of the passage says: Many people believe that because wages are lower in developing countries than in developed countries, competition from developing countries in goods traded internationally will soon eliminate large numbers of jobs in developed countries.

This is the point that the author elaborates upon. He goes on to say that technological advancements are catching up in developing nations that will lead to increase in productivity as well as wages. Hence, the developing countries will also have the same job opportunities as the developed nations. This is the reason why Choice C is the correct answer.

Hope this helps.
Thanks.
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Re: Many people believe that because wages are lower in developi   [#permalink] 29 Apr 2016, 06:32
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