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OA a few posts below. Many people believe that because

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OA a few posts below. Many people believe that because [#permalink] New post 06 Aug 2005, 02:30
OA a few posts below.

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.

1. 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.

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

Please, provide explanations.

Source – GMATPrep by Pearson VUE

Last edited by Pauline on 07 Aug 2005, 01:10, edited 1 time in total.
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 [#permalink] New post 06 Aug 2005, 09:58
1. D

If the flow is restricted, productivity could increase and the country's currency can be kept artificially low.

2. C
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 [#permalink] New post 07 Aug 2005, 01:10
prep_gmat
You're right, but your explanation is not enough :( Can you refute other choices in №1?

OA is indeed
1.D
2.C
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 [#permalink] New post 25 Mar 2006, 12:29
Though this post is old, can someone please give an explanation to this RC.
I dont understand at all why it is 1 D!
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 [#permalink] New post 25 Mar 2006, 16:45
Expln. for D....

If the flow of capital is restricted, then the developing country can undervalue its currency to keep the prod. rate high while not raising wages.
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 [#permalink] New post 26 Mar 2006, 00:04
Quote:
Expln. for D....

If the flow of capital is restricted, then the developing country can undervalue its currency to keep the prod. rate high while not raising wages.

D A country's productivity could increase without significantly increasing the value of its currency.

I don't know if you meant productivity or production rate.
If it is the 2nd, I agree, however it doesnt mean that the productivity will increase as D states.
If you meant productivity, I disagree. It is not because you keep wages low, that the productivity will increase. On the opposite.

One assertion of D is that the productivity could increase. From which part in
the text can we infer that?
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 [#permalink] New post 27 Mar 2006, 22:26
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.

karlfurt wrote:
Quote:
Expln. for D....

If the flow of capital is restricted, then the developing country can undervalue its currency to keep the prod. rate high while not raising wages.

D A country's productivity could increase without significantly increasing the value of its currency.

I don't know if you meant productivity or production rate.
If it is the 2nd, I agree, however it doesnt mean that the productivity will increase as D states.
If you meant productivity, I disagree. It is not because you keep wages low, that the productivity will increase. On the opposite.

One assertion of D is that the productivity could increase. From which part in
the text can we infer that?
  [#permalink] 27 Mar 2006, 22:26
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