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# GMATPrep: Reading Comp Short ONe.

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Director
Joined: 01 May 2007
Posts: 786

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20 Aug 2008, 13:38
Anyone want to take this on and explain....

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

Question: 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.

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Manager
Joined: 12 May 2006
Posts: 163

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20 Aug 2008, 14:13
IMO D. Here is my explanation.

In the last time the author says: It is difficulty to for developing countries to control their currencies because of capital moves freely in today's world

=> if the capital does not moves freely it will be easy to control currency
=> though the currency value will appreciate in developing countries without increasing wages.
=> productivity improvements in developing countries.
=> D
Director
Joined: 01 May 2007
Posts: 786

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20 Aug 2008, 14:19
OA is D, but why not C?
Manager
Joined: 22 Jun 2008
Posts: 101
Schools: Darden School of Business (Class of 2012)

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20 Aug 2008, 16:29
sophistication of technology is out of scope, typically RC trap (one part of the sentence is right the other wrong)
jimmyjamesdonkey wrote:
OA is D, but why not C?
Intern
Joined: 20 Jul 2008
Posts: 20

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20 Aug 2008, 19:06
.... if the movement of capital in the world were restricted....
c. A country's average wages could increase without significantly increasing the sophistication of its technology or the value of its currency

Countrys average wage won't go up for the same reason [restriction].

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Re: GMATPrep: Reading Comp Short ONe. &nbs [#permalink] 20 Aug 2008, 19:06
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# GMATPrep: Reading Comp Short ONe.

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