Changes in the volume of unemployment are governed by three

Question

(The following passage was written in 1977.)

Changes in the volume of unemployment are governed by three fundamental forces: the growth of the labor force, the increase in output per man-hour, and the growth of total demand for goods and services. Changes in the average hours of work enter in exactly parallel fashion but have been quantitatively less significant. As productivity rises, less labor is required per dollar of national product, or more goods and services can be produced with the same number of man-hours. If output does not grow, employment will certainly fall; if production increases more rapidly than productivity (less any decline in average hours worked), employment must rise. But the labor force grows, too. Unless gross national product (total final expenditure for goods and services corrected for price changes) rises more rapidly than the sum of productivity increase and labor force growth (again modified for any change in hours of work), the increase in employment will be inadequate to absorb the growth in the labor force. Inevitably the unemployment rate will increase. Only when total production expands faster than the rate of labor force growth plus the rate of productivity increase and minus the rate at which average annual hours fall does the unemployment rate fall. Increases in productivity were more important than growth of the labor force as sources of the wide gains in output experienced in the period from the end of World War II to the mid-sixties. These increases in potential production simply were not matched by increases in demand adequate to maintain steady full employment.

Except for the recession years of 1949, 1954, and 1958, the rate of economic growth exceeded the rate of productivity increase. However, in the late 1950s productivity and the labor force were increasing more rapidly than usual, while the growth of output was slower than usual. This accounted for the change in employment rates.

But if part of the national purpose is to reduce and contain unemployment, arithmetic is not enough. We must know which of the basic factors we can control and which we wish to control. Unemployment would have risen more slowly or fallen more rapidly if productivity had increased more slowly, or the labor force had increased more slowly, or the hours of work had fallen more steeply, or total output had grown more rapidly. These are not independent factors, however, and a change in any of them might have caused changes in the others.

A society can choose to reduce the growth of productivity, and it can probably find ways to frustrate its own creativity. However, while a reduction in the growth of productivity at the expense of potential output might result in higher employment in the short run, the long-run effect on the national interest would be disastrous.

We must also give consideration to the fact that hidden beneath national averages is continuous movement into, out of, between, and within labor markets. For example, 15 years ago, the average number of persons in the labor force was 73.4 million, with about 66.7 million employed and 3.9 million unemployed. Yet 14 million experienced some term of unemployment in that year. Some were new entrants to the labor force; others were laid off temporarily. The remainder were those who were permanently or indefinitely severed from their jobs. Thus, the average number unemployed during a year understates the actual volume of involuntary displacement that occurs.

High unemployment is not an inevitable result of the pace of technological change but the consequence of passive public policy. We can anticipate a moderate increase in the labor force accompanied by a slow and irregular decline in hours of work. It follows that the output of the economy—and the aggregate demand to buy it—must grow by more than 4 percent a year just to prevent the unemployment rate from rising, and by even more if the unemployment rate is to fall further. Yet our economy has seldom, if ever, grown at a rate greater than 3.5 percent for any extended length of time. We have no cause of complacency. Positive fiscal, monetary, and manpower policies will be needed in the future.   1 
 1. The primary purpose of the passage is to

A. Define the economic terms used in the discussion of employment
B. Criticize the decisions of past administrations during recession years
C. Call for the application of positive economic control policies in the years that lie ahead
D. Allay current fears about increasing unemployment
E. Document the rise of American productivity since World War II

2 
 2. According to the passage, if the labor force does not grow and there is no decline in the average number of hours worked, under which of the following conditions will the employment rate inevitably rise?

A. Total production expands faster than the total demand for goods and services.
B. The total demand for goods and services and productivity both rise.
C. Output per man-hour and gross national product both rise.
D. Productivity increases more rapidly than production.
E. Production increases more rapidly than output per man-hour.

3 
 3. It can be inferred from the passage than in the late 1950s, which of the following occurred?

I. The growth in output was less than 3.5 percent.
II. The average number of hours worked declined.
III. The increase in output per man-hour was greater than usual.

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

4 
 4. It can be inferred from the passage that during the recession years of 1949, 1954, and 1958, which of the following most likely occurred?

A. The labor force increased more rapidly than it did in any other year between 1945 and 1965.
B. More labor was required per dollar of national product than in any other year between 1945 and 1965.
C. The average number of hours worked rose.
D. Full employment was attained.
E. The rate of unemployment increased.

5 
 5. It can be inferred from the passage that if a policy to increase employment by reducing the growth of productivity at the expense of potential output were adopted, the author most likely would regard it as

A. Sound but inadequate
B. Overly aggressive
C. Frivolous
D. Insidious
E. Unobjectionable

6 
 6. It can be inferred from the passage that, according to the author, the actual number of people who experience some term of unemployment during any given year

A. Is the difference between the number of persons in the labor force and the number of persons employed that year
B. Does not reflect movement into, out of, between, and within labor markets
C. Exceeds the average number unemployed during that year
D. Overstate the volume of involuntary displacement that occurs during the year
E. Is impossible to calculate

7 
 7. The passage contains information that answers all of the following questions EXCEPT:

A. What is gross national product?
B. What effect does a change in productivity invariably have on gross national product?
C. Under what conditions might employment rise in the short run?
D. What effect does an increase in output and a decrease in number of hours worked have on productivity?
E. What was the average number of people unemployed in 1962?

8 
 8. Which of the following best describes the organization of the fifth paragraph of the passage?

A. An assertion is made, data are provided to support it, and the assertion is reiterated in different words.
B. Several figures are given and hypothesis is formulated to explain them.
C. An example is given to support the conclusion drawn in the preceding paragraph.
D. A statement is made, data are provided to illustrate and amplify the statement, and a conclusion is drawn.
E. A generalization is made and an example is given to refute it.

9 
 9. Which of the following proposals best responds to the author’s concerns?

A. The government should manipulate the size of the labor force to prevent future recessions.
B. The government should maintain some controls over the economy, but it should allow the employment rate to rise and fall with the gross national product, as a check on labor costs.
C. People should accept that unemployment is undesirable but unavoidable.
D. The government should manage the economy carefully.
E. The government should not interfere in the interplay among the three forces affecting unemployment.

10 
 10. Which of the following best summarizes the main idea of the passage?

A. We can and must take steps to ensure that the unemployment rate does not continue to rise as our population and our use of technology increase.
B. Increases in potential production must be matched by increases in demand in order to maintain steady full employment.
C. High unemployment is not an inevitable result of the pace of technological change but the consequence of passive public policy.
D. If part of the national purpose is to reduce and contain unemployment, arithmetic is not enough.
E. Full employment, regardless of fluctuations in the economy, is within the realm of possibility

mSKR · Accepted Answer

Summary:
Unemployment increase - - - > labor force increase + productivity increase + demand increase----(1)
More output more employment ----------------------------(2)
Productivity > growth of labor (steady employment) ----(3)

Other information is given as extra and hanging on above these core messages

Yet our economy has seldom, if ever, grown at a rate greater than 3.5 percent for any extended length of time. We have no cause of complacency. Positive fiscal, monetary, and manpower policies will be needed in the future.

A. Define the economic terms used in the discussion of employment
B. Criticize the decisions of past administrations during recession years
 C. Call for the application of positive economic control policies in the years that lie ahead
Whole purpose of passage get concluded in the end that for future we need to maintain high employment rate . For this Positive fiscal, monetary, and manpower policies need to be implemented. 
D. Allay current fears about increasing unemployment
E. Document the rise of American productivity since World War II

Employment rate increase?

A. Total production expands faster than the total demand for goods and services.
If total production expands than total demand then some products and services would be wasted; not enough sale, it means companies need to fire some people; it means unemployment would increase
B. The total demand for goods and services and productivity both rise.
If both rise then it is hard to say which one grow higher than other.

C. Output per man-hour and gross national product both rise.
Productivity and production both rise –but we don’t know which rise higher than other

D. Productivity increases more rapidly than production.
If productivity increase but not production, it may leads to increase in unemployment

E. Production increases more rapidly than output per man-hour.
Production increased over productivity. It means employment may rise. 
From our (3)

Specific question:

Except for the recession years of 1949, 1954, and 1958, the rate of economic growth exceeded the rate of productivity increase. However, in the late 1950s productivity and the labor force were increasing more rapidly than usual, while the growth of output was slower than usual. This accounted for the change in employment rates.

The rate of economic growth exceeded the rate of productivity increase.
Productivity increase + Labor force increase --- > total output increase ( but not increase as expected) , so should be change in employment RATE

I. The growth in output was less than 3.5 percent.
Yet our economy has seldom, if ever, grown at a rate greater than 3.5 percent for any extended length of time
II. The average number of hours worked declined.
 productivity (less any decline in average hours worked),
productivity and the labor force were increasing more rapidly than usual

it means decline in average hours worked 
III. The increase in output per man-hour was greater than usual.
Productivity increase – given in context

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

Note: I missed II in my first attempt:)

Except for the recession years of 1949, 1954, and 1958, the rate of economic growth exceeded the rate of productivity increase\

In recession years, the rate of economic growth ( output) DID NOT exceed the rate of productivity increase. Hence Unemployment increase .
In other years, the rate of economic growth exceeds the rate of productivity increase. Hence Unemployment decreases.

A. The labor force increased more rapidly than it did in any other year between 1945 and 1965.
Not mentioned in the context
Not relevant: we don’t know productivity increase or decrease.
B. More labor was required per dollar of national product than in any other year between 1945 and 1965.
Means low producitity in recession years as compared to other years.
But producututy and production varies unemployment .
Only talking about productivity will not give us any conclusion.
C. The average number of hours worked rose.
.
D. Full employment was attained.
Too extreme and no such information is mentioned.

E. The rate of unemployment increased.

Productivity > growth of labor (steady employment) ----(3)

a reduction in the growth of productivity at the expense of potential output might result in higher employment in the short run, the long-run effect on the national interest would be disastrous.

He doesn’t favour it

A. Sound but inadequate
Not facourable 
B. Overly aggressive
Not completely rejected
C. Frivolous
He is serious
 D. Insidious
Sounds good in beginning but disaster – matches exactly  
E. Unobjectionable
Not favorable

IanStewart · Answer

I don't know how old this question is, but it's very old. It's the longest RC passage I've ever seen by far, and it has 10 questions attached to it, which hasn't happened on the GMAT for at least twenty years. I think it makes more sense to look at recent material more similar to what you might see on the test.

The style of writing -- dense abstract prose that defines a lot of terms and connections in the first paragraph that you need to understand in order to make sense of the remaining paragraphs -- is very similar to what I saw in a (very hard) RC question on a real test. But the passage I saw was only two or three paragraphs long, so the main challenge was decoding the dense writing. The length wasn't an issue.

I rarely answer RC questions on this forum, especially not ones that would take this much time, so if anyone does have questions about this passage, I hope another Verbal expert will stop by to help.

MaryKaaviya · Answer

1. The primary purpose of the passage is to

A. Define the economic terms used in the discussion of employment --  too narrow 
B. Criticize the decisions of past administrations during recession years -- focuses only one part of the passage 
C. Call for the application of positive economic control policies in the years that lie ahead-- In the last para the author talks of how passive economic policies are the reason for unemployment 
D. Allay current fears about increasing unemployment-- out of scope 
E. Document the rise of American productivity since World War II-- irrelevant

Question 2

2. According to the passage, if the labor force does not grow and there is no decline in the average number of hours worked, under which of the following conditions will the employment rate inevitably rise?

A. Total production expands faster than the total demand for goods and services.-- Total demand should increase more 
B. The total demand for goods and services and productivity both rise.-- productivity should fall 
C. Output per man-hour and gross national product both rise.-- output per man hour should fall 
D. Productivity increases more rapidly than production.-- opposite 
E. Production increases more rapidly than output per man-hour.-- correct

Question 3
3. It can be inferred from the passage than in the late 1950s, which of the following occurred?

I. The growth in output was less than 3.5 percent. -- last para states that never was there an increase of more than 3.5 
II. The average number of hours worked declined.  this is given directly 
III. The increase in output per man-hour was greater than usual. output per man hour is the productivity. Given

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

Question 4
4. It can be inferred from the passage that during the recession years of 1949, 1954, and 1958, which of the following most likely occurred?

A. The labor force increased more rapidly than it did in any other year between 1945 and 1965.-- Labor force increase is too strong. We have no info on the number of people in labor force 
B. More labor was required per dollar of national product than in any other year between 1945 and 1965. -- not given 
C. The average number of hours worked rose. -- not given 
D. Full employment was attained. -- incorrect 
E. The rate of unemployment increased. -- recession means rise in unemployment

Question 5

5. It can be inferred from the passage that if a policy to increase employment by reducing the growth of productivity at the expense of potential output were adopted, the author most likely would regard it as

A. Sound but inadequate
B. Overly aggressive
C. Frivolous
D. Insidious
E. Unobjectionable

A. Sound but inadequate-- incorrect 
B. Overly aggressive-- incorrect 
C. Frivolous-- incorrect 
D. Insidious - correct as it can cause harm in ling run 
E. Unobjectionable-- incorrect

Question 6
6. It can be inferred from the passage that, according to the author, the actual number of people who experience some term of unemployment during any given year

A. Is the difference between the number of persons in the labor force and the number of persons employed that year - -- incorrect- opposite 
B. Does not reflect movement into, out of, between, and within labor markets --- incorrect- opposite 
C. Exceeds the average number unemployed during that year-- Given 
D. Overstate the volume of involuntary displacement that occurs during the year-- incorrect- opposite 
E. Is impossible to calculate-- incorrect

Question 7

7. The passage contains information that answers all of the following questions EXCEPT:

A. What is gross national product?-- para 1 
B. What effect does a change in productivity invariably have on gross national product?-- not Given 
C. Under what conditions might employment rise in the short run?-- para 2 
D. What effect does an increase in output and a decrease in number of hours worked have on productivity?-- para 3 
E. What was the average number of people unemployed in 1962?-- para 5

Question 8
8. Which of the following best describes the organization of the fifth paragraph of the passage?

A. An assertion is made, data are provided to support it, and the assertion is reiterated in different words.-- assertion is not reiterated 
B. Several figures are given and hypothesis is formulated to explain them.-- no figures and hypothesis are given 
C. An example is given to support the conclusion drawn in the preceding paragraph.-- no example is given 
D. A statement is made, data are provided to illustrate and amplify the statement, and a conclusion is drawn.-- Given 
E. A generalization is made and an example is given to refute it.-- no generalization is made

Question 9
9. Which of the following proposals best responds to the author’s concerns?

A. The government should manipulate the size of the labor force to prevent future recessions.-- opposite 
B. The government should maintain some controls over the economy, but it should allow the employment rate to rise and fall with the gross national product, as a check on labor costs.-- partial scope 
C. People should accept that unemployment is undesirable but unavoidable.-- opposite 
D. The government should manage the economy carefully.-- Given 
E. The government should not interfere in the interplay among the three forces affecting unemployment.-- opposite

mSKR · Answer

For example, 15 years ago, the average number of persons in the labor force was 73.4 million, with about 66.7 million employed and 3.9 million unemployed. Yet 14 million experienced some term of unemployment in that year

the actual number of people who experience some term of unemployment during any given year : 
maybe much higher as

A. Is the difference between the number of persons in the labor force and the number of persons employed that year
Some maybe voluntarily retired - wrong
B. Does not reflect movement into, out of, between, and within labor markets
The question is not asked about whether actual number of people doesn’t reflect
 C. Exceeds the average number unemployed during that year
Yes, the number would be much higher as some maybe in and out , 
D. Overstate the volume of involuntary displacement that occurs during the year
Doesn’t overstates. 
E. Is impossible to calculate
Too extreme; we don’t know maybe there are some other methods available

A. What is gross national product?
Given: gross national product (total final expenditure for goods and services corrected for price changes)
 B. What effect does a change in productivity invariably have on gross national product?

Unless gross national product (rises more rapidly than the sum of productivity increase and labor force growth, the increase in employment will be inadequate to absorb the growth in the labor force.
Productivity and outputs don’t depend on each other but as productivity increase, outputs should have higher growth rate than productivity for steady employment 
 
C. Under what conditions might employment rise in the short run?
Given: a reduction in the growth of productivity at the expense of potential output might result in higher employment in the short run
D. What effect does an increase in output and a decrease in number of hours worked have on Definition of productivity given: less labor is required per dollar of national product, or more goods and services can be produced with the same number of man-hours
E. What was the average number of people unemployed in 1962?
Given: 
(The following passage was written in 1977.) For example, 15 years ago, the average number of persons in the labor force was 73.4 million, with about 66.7 million employed and 3.9 million unemployed

We must also give consideration to the fact that h

Some extra infromaiton is explained that maybe need to precise results.

A. An assertion is made, data are provided to support it, and the assertion is reiterated in different words.
assertion : hidden beneath national averages is continuous movement int
assertion is not reiterated in different words but explained in detail.

B. Several figures are given and hypothesis is formulated to explain them.
Hypothesis is not formed to explain the figures. Figures are facts and it shows some proofs to the conclusion made.
C. An example is given to support the conclusion drawn in the preceding paragraph.
Extra information: new conclusion; not affected with conclusion in previous para
 D. A statement is made, data are provided to illustrate and amplify the statement, and a conclusion is drawn.
Statement is made to show extra information, data is to explain that extra information
amplification is done with more details and a conclusion is done for that extra information  
E. A generalization is made and an example is given to refute it.
Example and conclusion are in line with each other

Note: I choose A in my first attempt

must grow by more than 4 percent a year just to prevent the unemployment rate from rising, and by even more if the unemployment rate is to fall further. Yet our economy has seldom, if ever, grown at a rate greater than 3.5 percent for any extended length of time. We have no cause of complacency. Positive fiscal, monetary, and manpower policies will be needed in the future.
Author concern: 3.5 percent growth is also not enough as there are some factors needed in the future.

Best response: grow economy more than 4%( the example should support such an increase)

A. The government should manipulate the size of the labor force to prevent future recessions.
Manipulation: will not solve the problem

B. The government should maintain some controls over the economy, but it should allow the employment rate to rise and fall with the gross national product, as a check on labor costs.
Labor cost is not mentioned

C. People should accept that unemployment is undesirable but unavoidable.
Maybe. not given and not concern . 
 D. The government should manage the economy carefully.
Yes 3.5 is not enough, if government can manage carefully then it can try to increase over 4’

E. The government should not interfere in the interplay among the three forces affecting unemployment
If not interfere then how can improve efficicenty to take it over 4%

Manage economy well so that un emolyment decreases and follow some policies well.

High unemployment is not an inevitable result of the pace of technological change but the consequence of passive public policy.

A. We can and must take steps to ensure that the unemployment rate does not continue to rise as our population and our use of technology increase.
But it is controlled with the policy .

B. Increases in potential production must be matched by increases in demand in order to maintain steady full employment.
Output must be higher than production.

C. High unemployment is not an inevitable result of the pace of technological change but the consequence of passive public policy.
Could be but that’s not main point in passage

D. If part of the national purpose is to reduce and contain unemployment, arithmetic is not enough.
half true but "Positive fiscal, monetary, and manpower policies will be needed in the future" is key point

E. Full employment, regardless of fluctuations in the economy, is within the realm of possibility
Could be but not main point in passage

Note: I choose D in 1st attempt.

kntombat · Answer

IanStewart ,  MartyTargetTestPrep ,  AndrewN , This passage totally stumped me. How should one tackle passages like this ?
And if anyone could answer  saghosh1  's question also ? even I have the same doubt ??

Erick1802 · Answer

In the late 1950s case study (Paragraph 2), the author explicitly attributes the change in employment to productivity, the labor force, and output growth, but makes no mention of a decline in work hours for that specific period. While Paragraph 1 notes that hours usually move in a 'parallel fashion' to other forces, how can we strictly infer that Statement II occurred during this specific window without direct textual or numerical evidence? Is the 'parallel' trend alone enough to meet the GMAT's standard for a necessary inference, or does the author's omission of hours when 'accounting for' the 1950s shift suggest it should be excluded?

This doubt is regarding question 2.

This doubt is regarding question 2.

guddo · Answer

3. It can be inferred from the passage than in the late 1950s, which of the following occurred?

I. The growth in output was less than 3.5 percent.
II. The average number of hours worked declined.
III. The increase in output per man-hour was greater than usual.

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

The passage explains that unemployment depends on how fast total output grows relative to labor force growth and productivity growth, with changes in average hours worked moving in the same direction but usually mattering less. It then notes that in the late 1950s productivity and the labor force grew faster than usual while output grew more slowly than usual, which explains the employment change.

I. The growth in output was less than 3.5 percent.

The passage says late 1950s output growth was “slower than usual,” and later says the economy has seldom, if ever, sustained growth above 3.5 percent for any extended period. If “usual” sustained growth is not above 3.5, then “slower than usual” implies output growth was below 3.5. So I is supported.

II. The average number of hours worked declined.

Even though paragraph 2 does not name hours explicitly, paragraph 1 treats hours as a standard part of the unemployment arithmetic and frames it as “the rate at which average annual hours fall,” meaning the typical direction is downward. Since hours “enter in exactly parallel fashion,” it is reasonable to infer that in that same late 1950s window, hours followed the usual direction,  a decline , even if that factor was not large enough to mention when summarizing the main drivers. So II is supported.

III. The increase in output per man-hour was greater than usual.

This is stated directly: in the late 1950s “productivity ...   increasing more rapidly than usual,” and productivity here is output per man hour. So III is supported.

Answer: (E)

guddo · Answer

The omission isn’t enough to exclude II , because paragraph 1 doesn’t say hours “might” fall, it treats “the rate at which average annual hours fall” as a standard component of the arithmetic, and paragraph 2 says hours move in  parallel  but are “quantitatively less significant,” which explains why they might be left out of a short causal summary. So the passage allows the inference that hours were  declining  but not by an unusually important amount, and that is enough for Statement II under a necessary-inference standard.

Changes in the volume of unemployment are governed by three

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Changes in the volume of unemployment are governed by three

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