With the explosion of the technology industry in the late 1990s

Question

With the explosion of the technology industry in the late 1990s, the US ushered in the so-called ―new economy.‖ Based largely on speculation and a ―cash in‖ mentality, the new economy bustled along until the bottom fell out and it came crashing back to earth. But what set the stage for this collapse to happen was put into motion years earlier. 
 
The growth of productivity is defined as the rate of growth in product less the rate of growth in the labour used in production. Productivity can be affected by factors such as: amount of capital invested in production, methods used in production, educational or demographic composition of the labour force, business climate, global competition, and cost of environmental and safety regulations. Capital investment was booming in the U.S. in the post-1995 period. Furthermore, that part of capital invested in information technology, including computers, software, and communications equipment, rose to more than fifty times what it had been in 1975. Because of its high gross rate of return in improving methods of production, capital investment in information technology should have a particularly large impact on overall productivity. 
 
For the past five years the big news for the U.S. economy has been a noticeable productivity growth spurt, which many have attributed to new information and communication technologies. The rate of growth in U.S. productivity had not been so high since the period extending from the end of World War II through the 1960s. In the early 1970s, productivity growth dropped suddenly. Apart from normal cyclical movements low productivity growth continued until the mid-1990s. Then, performance of the U.S. economy accelerated to a truly extraordinary level. From 1995 to 1999 real gross domestic product grew at an average rate of about 4 percent per year, and the rate of growth in labour productivity returned to the pre-1970 rate of increase. 
 
The revolution in technology is, at least in some sense, a worldwide phenomenon. Therefore, one would expect the recent trend in the rate of growth in productivity in the U.S. to be shared by other developed countries. However, marked differences exist. Although the U.S. had the lowest rate of overall productivity growth in the 1981-95 period, in the post-1995 period the U.S. rate of productivity rose to third among the countries, behind only Ireland and Australia. In several other developed countries, including France, Italy, Japan, the United Kingdom, the Netherlands, and Spain, overall productivity growth slowed quite sharply. 
 
 The questions then arise: Why are these trends in productivity growth so different; and does this difference illuminate anything about the role of the new technologies? Regression analysis of the rate of growth in productivity in each of these countries in the late 1990s, both as a function of the country‘s share of spending devoted to information technology and as a function of its number of internet servers, reveals a positive correlation that passes the test for statistical significance. Therefore, with due deference to the problems of international comparison, the data appears to reinforce the view that utilization of the new technologies has been important in raising productivity in the U.S. in recent years.   1  
 1. According to the passage, a resurgence in productivity occurred in:

I. the U.S. in the late 1990s. 
II. Ireland in the late 1990s. 
III. developed countries other than the U.S. in the 1981-95 period. 
 
A. I only 
B. II only 
C. III only 
D. I, II, and III 
E. I and II only

2 
 2. If the passage were to continue, the next topic the author would discuss would most probably be:

A. what factors caused the drop in the growth of U.S. productivity in the early 1970s. 
B. what factors prevented the productivity growth spurt in the U.S. from continuing. 
C. the relative importance of other factors in fostering productivity growth in the U.S. 
D. why different developed countries invested different shares of total spending on capital investment in new technologies. 
E. what will happen to productivity growth in the US in the next five years

3 
 3. In paragraph 2, the author is primarily concerned with:

A. defining productivity and identifying the types of factors that can affect its growth. 
B. noting a correlation between a peak in capital investment and a peak in the growth of productivity. 
C. emphasizing the impact of the amount of capital invested on the degree of improvement in methods used for production. 
D. introducing a explanation that will then be tested by further investigation. 
E. criticise an explanation that was later proved correct

SiffyB · Accepted Answer

(06:27) 
 1. According to the passage, a resurgence in productivity occurred in:

I. the U.S. in the late 1990s.
II. Ireland in the late 1990s.
III. developed countries other than the U.S. in the 1981-95 period .

A. I only  
B. II only
C. III only
D. I, II, and III
E. I and II only

In paragraph 3, consider this sentence: 
"Apart from normal cyclical movements low productivity growth continued until the mid-1990s. Then, performance of the U.S. economy accelerated to a truly extraordinary level."
This shows that there was a resurgence in the late 1990s. Thus, we should keep all options with I. in it and eliminate others. We can eliminate (B) and (C).

Now, the only place where Ireland is discussed in the third paragraph is in paragraph 4 and that, too, does not deal with dates. So, we don't know for sure whether resurgence happened in Ireland in the 1990s. Thus, we can safely eliminate (D) and (E).
Correct choice: (A)

(01:23) 
 2. If the passage were to continue, the next topic the author would discuss would most probably be:
 
A. what factors caused the drop in the growth of U.S. productivity in the early 1970s.
  B. what factors prevented the productivity growth spurt in the U.S. from continuing. 
 C. the relative importance of other factors in fostering productivity growth in the U.S.
D. why different developed countries invested different shares of total spending on capital investment in new technologies.
E. what will happen to productivity growth in the US in the next five years

The opening passage deals about the US economy "came crashing back to earth". This has not been discussed anywhere in the passage. Thus, the logical next step will be to elaborate about how such a booming economy collapsed. This is what option (B) talks about and is our correct answer.
 
 (00:54) 
 3. In paragraph 2, the author is primarily concerned with:
 
A. defining productivity and identifying the types of factors that can affect its growth.
B. noting a correlation between a peak in capital investment and a peak in the growth of productivity.
C. emphasizing the impact of the amount of capital invested on the degree of improvement in methods used for production.
  D. introducing a explanation that will then be tested by further investigation. 
 E. criticise an explanation that was later proved correct

(A) Too narrow a scope. This option overlooks the latter half of the paragraph.
(B) This option overlooks the former half of the paragraph. Narrow scope.
(C) This is out of scope of the second paragraph.
(D) This is the correct answer. The last line of the paragraph introduces the relationship between capital investment and productivity. The last paragraph qualifies this relationship by employing regression analysis and witnessing positive correlations between the two.
(E) No criticism is offered in the paragraph. It is purely factual.

Gmatsaiyan · Answer

Topic and Scope  - The role of information technology in a recent spike in American productivity
 Mapping the Passage 
¶1 gives background about the dotcom boom and asks what the precursors to the condition were.
¶2 describes a productivity spike and the possible explanation some have given for the spike: information technology.
¶3 defines productivity growth and suggests that heavy investment in information technology should have led to an increase in productivity.
¶4 discusses productivity and technology investment in other countries, and concludes that the data supports the argument that information technology was important to American productivity gains

Gmatsaiyan · Answer

Answers and Explanations OE 
 1)  A detail question; evaluate it carefully. What is a resurgence? It‘s a rise to previous levels; if it were just a rise, it would be a surge, but not a re-surgence. Only the United States has enough data in the passage to infer a resurgence from: the author says at the end of ¶2 that ―the rate of growth in labor productivity returned to the pre-1970 rate of increase.‖ While other nations are mentioned, their previous levels aren‘t mentioned. Therefore, RN I must fit, while the other ones don‘t. (A) fits.
(A): The correct answer
(B): Opposite. As described above.
(C): Opposite. As above.
(D): Opposite. As above.
(E): Opposite. As above.

2)  Review the topic and scope of the passage: the author is concerned with information technology‘s role in boosting American productivity in the recent past. Look for an answer choice that sticks as closely as possible to topic and scope. (B) does this: It‘s reasonable to guess that the author would continue the paragraph by talking about the next stage of these trends in the same topic and scope: information technology and its effect on productivity.
(A): Out of Scope. The author discusses the 1970s in ¶3, but only as background to discuss the current productivity spurt. It‘s more reasonable to think that the author will continue by talking about the future trajectory of the productivity gains.
(B): The correct answer(C): Out of Scope. The author doesn‘t mention any other possible causes for the increase in productivity and believes that information technology is the primary cause, and so it‘s unlikely that there would be a drastic shift that discussed other causes.
(D): Out of Scope. The author only discusses other countries to shed light on American productivity gains. Going into greater depth regarding other countries would veer out of scope.
(E): Out of Scope. Prediction for the next five years does not follow from the information in the passage

3)  An evaluation question: Predict by reviewing your map of ¶2. The author‘s main intent is to define productivity growth, and to suggest that the investment in information technology should have led to a growth in productivity. (D) most closely describes the author‘s purpose of providing a possible explanation, and suggests that the explanation is given with the intent of following it up with further evidence, which the author does in fact provide in ¶4.
(A): Faulty Use of Detail. Though (A) might be tempting because the author does define productivity and identify the factors that can affect its growth, this choice neglects the second half of the paragraph, which provides an explanation for a growth in productivity.
(B): Distortion. The author describes a correlation between investment and productivity, but doesn‘t describe peaks in either.
(C): Distortion. As above, while the author proposes a broad correlation between investment and productivity, there‘s no specific discussion of how much investment is required for a certain amount of productivity.
(D): The correct answer
(E): Opposite as explained above

Sajjad1994 · Answer

Official Explanation

1. According to the passage, a resurgence in productivity occurred in:

Explanation

A detailed question; evaluate it carefully. What is a resurgence? It‘s a rise to previous levels; if it were just a rise, it would be a surge, but not a resurgence. Only the United States has enough data in the passage to infer a resurgence from the author says at the end of  Paragraph 2  that ―the rate of growth in labor productivity returned to the pre-1970 rate of increase. While other nations are mentioned, their previous levels aren‘t mentioned. Therefore, RN I must fit, while the other ones don‘t. (A) fits.

(A):  The correct answer

(B):  Opposite. As described above.

(C):  Opposite. As above.

(D):  Opposite. As above.

(E):  Opposite. As above.

Answer: A

Gaurav015 · Answer

I still can't understand how this passage is at the 650 level. The question seems way harder than a usual 650 RC question. The options are very similar to one another and confusing.

Bunuel · Answer

The difficulty level of a question on the site is determined  automatically  after sufficient attempts, based on various parameters from users' attempts, such as the percentage of correct answers and the time taken to answer. Therefore, this is a 605-655 level question based on our statistics. For RC passages, the difficulty level is the average of the difficulties of all questions, so for this question, it's the average of the difficulties of all 3 questions.

With the explosion of the technology industry in the late 1990s

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Reading Comprehension (RC) Questions

With the explosion of the technology industry in the late 1990s

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards