Recently, a new school of economics called steady state economics has

Question

Recently, a new school of economics called steady
state economics has seriously challenged neoclassical
economics, the reigning school in Western economic
decision making. According to the neoclassical model,
 (5)  an economy is a closed system involving only the
circular flow of exchange value between producers and
consumers. Therefore, no noneconomic constraints
impinge upon the economy and growth has no limits.
Indeed, some neoclassical economists argue that
 (10)  growth itself is crucial, because, they claim, the
solutions to problems often associated with growth
(income inequities, for example) can be found only in
the capital that further growth creates.

Steady-state economists believe the neoclassical
 (15)  model to be unrealistic and hold that the economy is
dependent on nature. Resources, they argue, enter the
economy as raw material and exit as consumed
products or waste; the greater the resources, the greater
the size of the economy. According to these
 (20)  economists, nature’s limited capacity to regenerate raw
material and absorb waste suggests that there is an
optimal size for the economy, and that growth beyond
this ideal point would increase the cost to the
environment at a faster rate than the benefit to
 (25)  producers and consumers, generating cycles that
impoverish rather than enrich. Steady-state economists
thus believe that the concept of an ever growing
economy is dangerous, and that the only alternative is
to maintain a state in which the economy remains in
 (30)  equilibrium with nature. Neoclassical economists, on
the other hand, consider nature to be just one element
of the economy rather than an outside constraint,
believing that natural resources, if depleted, can be
replaced with other elements—i.e., human-made
 (35)  resources—that will allow the economy to continue
with its process of unlimited growth.

Some steady-state economists, pointing to the
widening disparity between indices of actual growth
(which simply count the total monetary value of goods
 (40)  and services) and the index of environmentally
sustainable growth (which is based on personal
consumption, factoring in depletion of raw materials
and production costs), believe that Western economies
have already exceeded their optimal size. In response
 (45)  to the warnings from neoclassical economists that
checking economic growth only leads to economic
stagnation, they argue that there are alternatives to
growth that still accomplish what is required of any
economy: the satisfaction of human wants. One of
 (50)  the alternatives is conservation. Conservation—for
example, increasing the efficiency of resource use
through means such as recycling—differs from growth
in that it is qualitative, not quantitative, requiring
improvement in resource management rather than an
 (55)  increase in the amount of resources. One measure of
the success of a steady-state economy would be the
degree to which it could implement alternatives to
growth, such as conservation, without sacrificing the
ability to satisfy the wants of producers and consumers.  
 1 
 1. Which one of the following most completely and accurately expresses the main point of the passage?

(A) Neoclassical economists, who, unlike steady state economists, hold that economic growth is not subject to outside constraints, believe that nature is just one element of the economy and that if natural resources in Western economies are depleted they can be replaced with human-made resources.
(B) Some neoclassical economists, who, unlike steady-state economists, hold that growth is crucial to the health of economies, believe that the solutions to certain problems in Western economies can thus be found in the additional capital generated by unlimited growth.
(C) Some steady-state economists, who, unlike neoclassical economists, hold that unlimited growth is neither possible nor desirable, believe that Western economies should limit economic growth by adopting conservation strategies, even if such strategies lead temporarily to economic stagnation.
(D) Some steady-state economists, who, unlike neoclassical economists, hold that the optimal sizes of economies are limited by the availability of natural resources, believe that Western economies should limit economic growth and that, with alternatives like conservation, satisfaction of human wants need not be sacrificed.
(E) Steady-state and neoclassical economists, who both hold that economies involve the circular flow of exchange value between producers and consumers, nevertheless differ over the most effective way of guaranteeing that a steady increase in this exchange value continues unimpeded in Western economies.

2 
 2. Based on the passage, neoclassical economists would likely hold that steady-state economists are wrong to believe each of the following EXCEPT:

(A) The environment’s ability to yield raw material is limited.
(B) Natural resources are an external constraint on economies.
(C) The concept of unlimited economic growth is dangerous.
(D) Western economies have exceeded their optimal size.
(E) Economies have certain optimal sizes.

3 
 3. According to the passage, steady-state economists believe that unlimited economic growth is dangerous because it

(A) may deplete natural resources faster than other natural resources are discovered to replace them
(B) may convert natural resources into products faster than more efficient resource use can compensate for
(C) may proliferate goods and services faster than it generates new markets for them
(D) may create income inequities faster than it creates the capital needed to redress them
(E) may increase the cost to the environment faster than it increases benefits to producers and consumers

4 
 4. A steady-state economist would be LEAST likely to endorse which one of the following as a means of helping a steady-state economy reduce growth without compromising its ability to satisfy human wants?

(A) a manufacturer’s commitment to recycle its product packaging
(B) a manufacturer’s decision to use a less expensive fuel in its production process
(C) a manufacturer’s implementation of a quality control process to reduce the output of defective products
(D) a manufacturer’s conversion from one type of production process to another with greater fuel efficiency
(E) a manufacturer’s reduction of output in order to eliminate an overproduction problem

5 
 5. Based on the passage, a steady-state economist is most likely to claim that a successful economy is one that satisfies which one of the following principles?

(A) A successful economy uses human-made resources in addition to natural resources.
(B) A successful economy satisfies human wants faster than it creates new ones.
(C) A successful economy maintains an equilibrium with nature while still satisfying human wants.
(D) A successful economy implements every possible means to prevent growth.
(E) A successful economy satisfies the wants of producers and consumers by using resources to spur growth.

6 
 6. In the view of steady-state economists, which one of the following is a noneconomic constraint as referred to in line 7?

(A) the total amount of human wants
(B) the index of environmentally sustainable growth
(C) the capacity of nature to absorb waste
(D) the problems associated with economic growth
(E) the possibility of economic stagnation

7 
 7. Which one of the following most accurately describes what the last paragraph does in the passage?

(A) It contradicts the ways in which the two economic schools interpret certain data and gives a criterion for judging between them based on the basic goals of an economy.
(B) It gives an example that illustrates the weakness of the new economic school and recommends an economic policy based on the basic goals of the prevailing economic school.
(C) It introduces an objection to the new economic school and argues that the policies of the new economic school would be less successful than growth-oriented economic policies at achieving the basic goal an economy must meet.
(D) It notes an objection to implementing the policies of the new economic school and identifies an additional policy that can help avoid that objection and still meet the goal an economy must meet.
(E) It contrasts the policy of the prevailing economic school with the recommendation mentioned earlier of the new economic school and shows that they are based on differing views on the basic goal an economy must meet.

8 
 8. The passage suggests which one of the following about neoclassical economists?

(A) They assume that natural resources are infinitely available.
(B) They assume that human-made resources are infinitely available.
(C) They assume that availability of resources places an upper limit on growth.
(D) They assume that efficient management of resources is necessary to growth.
(E) They assume that human-made resources are preferable to natural resources.

GMATNinja · Accepted Answer

Question 1 
The question asks which answer choice "most completely and accurately expresses the  main point  of the passage." So, it's not enough to just restate something that's  mentioned  in the passage -- the correct answer must capture the author's main idea. (D) does that, while (A) and (B) do not.

Question 2 
 
Notice that the question asks us what neoclassical economists " would likely " hold -- so, we're not necessarily looking for something that's explicitly stated in the passage. Instead, we're just looking at which options can reasonably be inferred from what we know about these economists.

The entire passage contrasts the view of neoclassical economists and steady state economists. One of these contrasts is that steady state economists believe that "Western economies have already exceeded their optimal size," whereas neoclassical economists believe that economic growth is "crucial" and that "checking economic growth only leads to economic stagnation."

From this we can infer that neoclassical economists don't think there IS an optimal size for an economy -- they want the economy to grow indefinitely. Thus, they would not agree with steady state economists that "Western economies have exceeded their optimal size."

(D) is out for question 2.

Question 6 
 
In line 7, we learn that neoclassical economists think that the economy is a closed circle, so are no "noneconomic constraints" to stop the economy from growing forever.

By contrast, steady-state economists believe that there ARE noneconomic restraints that prevent continual growth. Specifically, "nature’s limited capacity to regenerate raw material and absorb waste" limit the perpetual economic growth proposed by neoclassical economists.

Which answer choice captures this constraint?
 
"Satisfying human wants" is mentioned at the end of the passage as the goal of a thriving economy. Neoclassical economists think that the best way to achieve this goal is through growth, while steady-state economists think that there are alternate ways to achieve the same thing.

This has nothing to do with noneconomic constraints, so (A) is out for question 6.

Again, we're looking for a factor that constrains economic growth. Can some  index  constrain growth? Nope, that doesn't make any sense.

(B) is out.

Compare that to (C):
 
This is one of the constraints mentioned by steady-state economists!

(C) is the correct answer to question 6.

I hope that helps!

skhemani · Answer

Could anyone explain Q6 - how can we arrive at answer C ?

govindarathi4 · Answer

It is mentioned that we don’t have the luxury of unlimited natural resources, no can we assume that whatever we produce as a waste, can be absorbed by the nature.
Thus, we have to make sure that we don’t grow beyond the nature can absorb our wastes. Hence, a noneconomic constraint.

Posted from my mobile device

thouhid · Answer

Question-1
The phrase that really jumps out to me in C is "even if such strategies lead temporarily to economic stagnation." Stagnation is what the neoclassical economists think will happen if we check economic growth. In response, the steady-state economists argue that "alternatives to growth can still accomplish what is required of any economy: the satisfaction of human wants." That response doesn't accept that stagnation, temporary or not, may occur. Instead, it redirects to the idea of the real goal of the economy - the satisfaction of human wants.

Another, more subtle reason to be skeptical of C is the phrase "by adopting conservation strategies." Conservation is an example of one alternative to growth. But there could be others. That makes C a bit too narrow.

If you compare C to D, you'll notice that D redirects to the satisfaction of human wants, whereas C stays on stagnation. You'll also notice that D presents conservation as one alternative to growth (alternatives like conservation") without narrowing the scope too much.

Comparing the correct answer to a similar-but wrong answer is a great exercise for review.

Comparing two similar answers, spotting the differences, and then looking at the passage with those differences in mind is a great way to choose between two good-looking answer choices on test day.

thouhid · Answer

Q-2
The wording on this one is tricky. We want something that the neoclassical economists and the steady-state economists AGREE on. Blahsheep nailed it with the line reference: lines 30-36 tell us that the neoclassicists do acknowledge that the environment can be depleted. Steady-state economists definitely believe this, which is why they are so into conservation. As for the others:

(A) is correct because limited environmental resources is something steady-state economists believe in (Line 20) and neoclassical economists wouldn't disagree with. According to Lines 30-36, neoclassical economists believe that natural resources, "if depleted, can be replaced by other elements." So they can acknowledge that these resources can be limited ("if depleted"), but they ultimately believe it's not a big obstacle (since other elements, like human-made resources) can replace natural resources.
(B) is something the neoclassicists would not agree with. See line 7, they do not believe there are any economic constraints.

(C) Again, they would not agree. See line 45 and line 36: they believe in unlimited growth.

(D) see same lines.

(E) see same lines.

thouhid · Answer

Question-3
The answer was "almost verbatim"
That's something we expect more out of questions that say
"according to the passage / the passage cites / the passage states"

It's useful to remember that these question stems usually lead to easier to verify answers.

The question stem wordings that make us think, "This answer will be a hard-to-decipher rewording of something we know from the passage" are
inferred, implies, suggests, most likely to agree

Both times "I didn't look back to the passage"
This might be the most important thing you could change to affect your RC accuracy!

I spend most of my time teaching RC trying to get students to do more thinking / researching / prephrasing before they look at answer choices.

For most of these question stems, there are keywords in there that allow you to find the "Proof Window": the sentence or sentences from the passage that this question is testing.

I would see the keywords on Q3 of "steady-state economists ... unlimited economic growth ... dangerous ... because"

In lines 26-28, I see a match for these keywords:
"Steady-state economists thus believe that ... an ever growing economy is dangerous".

I *know* that I'm looking at the right spot, because of the tight correspondence between question stem keywords and passage wording.

We were asked to look for WHY they find it dangerous. Since this sentence say "they THUS believe that it's dangerous", I know that the preceding sentence must be where the reason WHY is located.

Looking at line 21-26, it looks like they're saying "if we kept growing beyond the optimal size, it would increase the cost to the environment faster that it would benefit us, and we would generate cycles that impoverish rather than enrich".

ANSWERS
(A) there was nothing in that Proof Window about "replacing" one resource with another
(B) nothing in that Window about "converting into products faster other stuff can compensate for"
(C) nothing in that Window about "generating new markets"
(D) nothing in that Window about "income inequities and capital needed to fix them"
(E) Yup.

If you're thinking to yourself, "Who has time to look back on every question?!"
1. That's fair ... many/most people don't have time to finish all of RC
2. This method doesn't necessarily take more time; it just allocates time differently. By always finding the Proof Window in the passage and re-reading it before I look at answers, I spend way less time on the answer choices. I'm not tossing and turning, agonizing over which answer feels better than another. I have pretty quick, black-and-white reactions to the answers, because I know the test can only be testing me on the Proof Sentence they pointed me to.

Hope this helps.

thouhid · Answer

Q-5
The index of environmentally sustainable growth is a warning sign that our actual growth is environmentally sustainable. Although this warning sign is suggesting to us that we've exceeded our limits, the index itself is just a measurement tool, a warning sign, not a limit.

The keyword in the question stem is "noneconomic constraint".

Whichever answer choice we pick needs to come from a line reference that includes "noneconomic constraint" or some equivalent paraphrase.

From line 7-8, we see "no noneconomic constraints" and "no limits on growth" going hand in hand.

And then in line 19-26, we see "nature's limited capacity to regenerate raw material and absorb waste suggests ... that growth beyond this ideal point would ... impoverish rather than enrich".

Line 7-8 vs. line 19-26 is the essence of the debate between Neoclassical (no limits) and Steady State (oh, there are limits, my friend).

So we can support (C) because the capacity of nature to absorb waste is a LIMIT on growth, and SS believes that finite environmental resources are EXTERNAL to an economic system, not internal.

== incorrect answers ==

(A) this is an economic constraint ... in lines 48-49 we see that both Neo and SS agree that this is a required goal an economy must meet.

(B) this is economic (it factors in production costs) and is NOT a constraint ... it's just a measurement tool that SS sees as a warning that we've exceeded our budget.

(D) Do problems associated with economic growth LIMIT economic growth? i.e., are they a constraint? There's not a good line reference in the passage for saying so, but it seems reasonable to think that the problems that arise with growth might limit growth. However, those problems would be an economic constraint, because they are a direct consequence of economic growth.

(E) You could shoot this down in a similar manner to how we eliminated (D). However, the easier way to get rid of this answer is to remember that this phrase came out of the mouths of Neo's ... this question is from the viewpoint of SS. So this reeks of "wrong point of view".

thouhid · Answer

Q-7
Remind myself of the Passage Map

2. See if the first sentence (the transition sentence) of the paragraph we're being asked about gives a decent summary of what that paragraph is trying to do.

====

1. What was each paragraph good for?

P1 - introduced the two sides to the scale and described what Neoclassical is all about

P2 - described what Steady State is all about

P3 - present a little back and forth debate between the two about exceeding our equilibrium and slowing down / putting a cap on growth.

2. Is the transition sentence helpful?
In this case, not really. It's really long and we only really get its function as we read the rest of the paragraph.

So, approaching the answers, I want something to the effect of
"Last paragraph has a claim by SS that we've exceeded the limit and should stop growing, a rebuttal by Neo, and then a counter-rebuttal by SS."

(A) "contradicts" is way too strong and unsupported

(B) "illustrates the weakness" is way too opinionated and unsupported (the author never really chooses a favorite, but implicitly the author seems to favor SS, the new school)

(C) again, this makes the author seem like he favors Neo, but there's no support for that in the passage.

The easiest way to tell (D) and (E) apart is their common denominator: "the basic goal an economy must meet".

Is there something like that in the last paragraph?
Yes, lines 48-49 "the satisfaction of human wants"

(D) is saying that Neo thinks SS will ruin that goal, but SS identifies an additional way to achieve the goal.

(E) is saying that Neo and SS have differing views on the basic goal an economy must meet. That seems to be contradicted by lines 44-49.

Both SS and Neo agree that "what is required of any economy" is the satisfaction of human wants.

Neo argues that if we limit/halt growth, we'll no longer be able to satisfy human wants. SS replies that if we turn our focus to conservation, we can get more out of what we have "without sacrificing the ability to satisfy the wants of producers and consumers" (last sentence).

Hope this helps.

thouhid · Answer

Q-8
Neoclassical - unlimited growth, use human resources when natural are depleted, problems are best cured by growth
steady-state - limited resources, limited growth, optimal growth is sustainable

Answer choice (B) is supported in lines 30-35.

Incorrect answers
(A) is contradicted in lines 30-35.
(C) is unsupported. It's the steady-state economists who hold this belief.
(D) is unsupported. Steady-state economists point to this, but is not addressed by neoclassical economists.
(E) is unsupported. Which resource is more preferable is not indicated.

nikitamaheshwari · Answer

In Q1...Option choice A and B are factually correct but does it not encapsulate the entire main point of the passage like it missed the last para part?
In Q2 Option choice D,, does Neo classical oppose the view that Western economies have exceeded the optimal size? I dont think they have explicitly stated the same. Please help with the same.
In Q 6..Please explain Option A and B

GMATNinja   VeritasKarishma

Gaurav2896 · Answer

HI  VeritasKarishma ,
Can you help me with question 7 , see new I do not see in third paragraph where it notes an objection to implementing the policies of the new economic school. I can that it identifies an additional policy , but I don't see objection to new school policies i.e. steady state economics. They just point that Western economies have already reached optimal value (No objection here).

KarishmaB · Answer

"(D) It notes an objection to implementing the policies of the new economic school and identifies an additional policy that can help avoid that objection and still meet the goal an economy must meet."

an objection to implementing the policies of the new economic school is:

...In response
(45) to the warnings from neoclassical economists that
 checking economic growth only leads to economic
stagnation ...

identifies an additional policy that can help avoid that objection and still meet the goal an economy must meet:

...they argue that there are alternatives to
growth that still accomplish what is required of any
economy: the satisfaction of human wants. One of
(50) the alternatives is  conservation ...

(D) is correct.

VerbalBot · Answer

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