The informal sector of the economy involves activities that, in both d

Question

The informal sector of the economy involves activities that, in both developed and underdeveloped countries, are outside the arena of the normal, regulated economy and thus escape official record keeping. These activities, which include such practices as off-the-books hiring and cash payments, occur mainly in service industries like construction, hotels, and restaurants. Many economists think that the informal sector is an insignificant supplement to the larger formal economy. They base this belief on three assumptions that have been derived from theories of industrial development. But empirical evidence suggests that these assumptions are not valid.

All three assumptions are, essentially, hypotheses about the character of the labor process at different levels of development. The first is that informal activities are transitory, being a consequence of the imperfect penetration of modern capitalism into less developed regions, and are thus destined to disappear with the advance of industrialization. The second is that the principal reason for the continuing existence of an informal sector is to keep a redundant segment of the labor force alive through jobs invented to fit in the interstices of the modern economy. The third is that the informal sector is primarily a feature of peripheral economies such as those of Latin America, Africa, and most of Asia.

Data collected from both developed and underdeveloped countries, however, reveal that the informal sector is neither disappearing with industrialization, limited in function to being an employment alternative of last resort, nor exclusively or particularly a Third World phenomenon. Informal sector employment rates in many countries have remained constant in the postwar era. Moreover, if the informal economy were exclusively a refuge from destitution, two facts would logically follow: First, average income levels among the informally employed would be significantly lower than among workers in formal activities; second, those who found employment in formal activities would never leave voluntarily in order to move into the informal economy. But neither of these predictions is supported by data.   1  
 D 
 Q1). The primary purpose of this passage is to

A) compare the economies of developed and underdeveloped countries.
B) suggest that economists should develop a new framework for studying the global economy.
C) criticize the notion that the informal economy is primarily a Third World phenomenon.
D) dispute a widely held view of the relationship between the formal and informal sectors of the world economy.
E) argue that workers in the informal economy are almost as well paid as those in the formal economy.

2  
 B 
 Q2). From the passage, which of the following can be inferred about employment opportunities in the informal economy?

A) Workers employed in the informal economy generally receive much lower wages than do workers in the formal economy.
B) Some workers have purposely chosen to work in the informal economy rather than in the formal economy.
C) The number of workers employed in the informal economy has remained stable over the last few centuries.
D) Employment opportunities in the informal economy will decline as agriculture is displaced by industry.
E) The informal economy has created no employment for workers who would otherwise be unemployable.

3  
 E 
 Q3). The author states which of the following about activities in the informal economy?

A) They are an insignificant aspect of the global economy.
B) They provide income for workers who are unemployable in the formal economy.
C) They are a consequence of capitalist penetration of less developed economies.
D) They thrive mainly in underdeveloped countries in Asia, Africa, and Latin America.
E) They consist of such unregulated practices as off-the-books hiring and cash payments.

siddhantmittal · Accepted Answer

Q1). The primary purpose of this passage is to

Pre-thinking: The passage first presents a concept and how economists defend that concept. The author then kind of destroys the economists' belief

A) compare the economies of developed and underdeveloped countries. Incorrect- the passage isnt about comparison between economies
B) suggest that economists should develop a new framework for studying the global economy. Incorrect- the passage doesn't suggest any new framework
C) criticize the notion that the informal economy is primarily a Third World phenomenon. Incorrect- narrow scope
D) dispute a widely held view of the relationship between the formal and informal sectors of the world economy.  Correct- matches our pre-thinking 
E) argue that workers in the informal economy are almost as well paid as those in the formal economy. incorrect- narrow scope

Q2). From the passage, which of the following can be inferred about employment opportunities in the informal economy?

A) Workers employed in the informal economy generally receive much lower wages than do workers in the formal economy. Incorrect- in the last passage, the author says that this isnt the case
B) Some workers have purposely chosen to work in the informal economy rather than in the formal economy.  Correct - the passage does tell us that some people choose informal over formal
C) The number of workers employed in the informal economy has remained stable over the last few centuries. Incorrect- we cannot comment on the number
D) Employment opportunities in the informal economy will decline as agriculture is displaced by industry. Incorrect- nothing mentioned about the agriculture industry
E) The informal economy has created no employment for workers who would otherwise be unemployable. incorrect- it has.

Q3). The author states which of the following about activities in the informal economy?

A) They are an insignificant aspect of the global economy. Incorrect- it isn't insignificant
B) They provide income for workers who are unemployable in the formal economy. Incorrect
C) They are a consequence of capitalist penetration of less developed economies.- Incorrect- this idea is refuted
D) They thrive mainly in underdeveloped countries in Asia, Africa, and Latin America. Incorrect- this thought is refuted in the passage
E) They consist of such unregulated practices as off-the-books hiring and cash payments.  Correct - given in the first paragraph

Gmatsaiyan · Answer

Analysis 
The author begins by describing the informal sector of the economy, which will be the topic of the passage.
Economists think the informal sector is not important, based on three assumptions.
The author of the passage disagrees with the economists’ assumptions, citing evidence to the contrary.The second paragraph outlines the three assumptions made by the economists mentioned above.
The author’s opinion doesn’t figure into this paragraph—it only identifies the three assumptions.Here the author discusses how the “data” refute the first of the economists’ assumptions (transitory). . . and the second (redundant). . . and the third (peripheral). The author further develops the rebuttal.

Passage Map 
¶1: Description of informal sector Economists think it’s unimportant, due to three assumptions
¶2: Economists’ assumptions about the informal sector:
(1) transitory
(2) created for those who cannot find jobs within the formal economy (redundant)
(3) a feature of developing economies (peripheral)
¶3: Economists’ assumptions are all incorrect
Reasons given to refute the first two
Topic: Informal sector of the economy
Scope: Economists’ belief and assumptions about the informal sector
Purpose: To show the economists are incorrect in their assumptions and thus in their belief that the informal sector is insignificant

Gmatsaiyan · Answer

Official Answers and Explanations 
 Q1). (D)
The primary purpose of this passage is to
○○ compare the economies of developed and underdeveloped countries.
○○ suggest that economists should develop a new framework for studying the global economy.
○○ criticize the notion that the informal economy is primarily a Third World phenomenon.
○○ dispute a widely held view of the relationship between the formal and informal sectors of the world economy.
○○ argue that workers in the informal economy are almost as well paid as those in the formal economy.
Step 2: Analyze the Question Stem
The phrase “primary purpose” signals that this is a Global question. We need the author’s reason for writing the passage.
Step 3: Research the Relevant Text
For this question, we’ll simply consult our notes on topic, scope, and purpose. We shouldn’t have to go back to the passage itself.
Step 4: Make a Prediction
We noted that the author’s purpose in writing the passage is to demonstrate that the economists are wrong in thinking the informal sector of the economy to be “insignificant” compared to the formal sector.
Step 5: Evaluate the Answer Choices
(D) matches our prediction. The “widely held view” is that of the economists. (A) is outside the scope of the passage, which focuses on the economists’ assumptions about the informal sector
of the economy. (B) is again outside the scope. The author makes no recommendation as to what the economists “should” do. (C) is a classic faulty use of detail. The idea that the informal sector is a Third World phenomenon is certainly mentioned and criticized in the passage (specifically, in paragraph 3), but this isn’t the purpose of the entire passage. (E) is another faulty use of detail. The pay rates of informal- and formal-sector workers are mentioned in the third paragraph, but again, this doesn’t constitute the purpose of the entire passage. Choice (D) is correct.

Q2). (B)
From the passage, which of the following can be inferred about employment opportunities in the informal economy?
○○ Workers employed in the informal economy generally receive much lower wages than do workers in the formal economy.
○○ Some workers have purposely chosen to work in the informal economy rather than in the formal economy.
○○ The number of workers employed in the informal economy has remained stable over the last few centuries.
○○ Employment opportunities in the informal economy will decline as agriculture is displaced by industry.
○○ The informal economy has created no employment for workers who would otherwise be unemployable.
Step 2: Analyze the Question Stem
The word “inferred” signals an Inference question. This question stem provides us with a context clue: “employment opportunities in the informal economy.”
Step 3: Research the Relevant Text
Unless a question specifically mentions a different point of view, it is asking for the author’s perspective.
We can safely confine our research to the first and third paragraphs and leave out the second, which describes the economists’ assumptions. In the first paragraph, we learn that informal
sector occupations are typically service jobs such as construction, hotel, or restaurant jobs. In the third paragraph, we learn that informal sector jobs are not jobs “of last resort,” because they don’t
necessarily pay a great deal less than formal sector jobs and because some workers actually move “voluntarily” from the formal to the informal sector.
Step 4: Make a Prediction
While it is difficult to make a precise prediction for this question, the correct answer will follow from our research. We’ll check the answer choices against it one at a time.
Step 5: Evaluate the Answer Choices
(A) states the opposite of the wage information we found in the third paragraph. (B) paraphrases the last couple of lines of the passage: Data support the idea that some workers do voluntarily move from formal sector employment to informal sector employment. This is the correct answer. (C) is too extreme. We learn in the third paragraph that “informal sector employment rates in many
countries have remained constant in the postwar era,” but we have no support for the idea that such employment has remained stable for “centuries.” (C) also confuses employment rates (which
are percentages) with the number employed. (D) restates one of the economists’ assumptions. It is the economists, not the author, who believe that the informal sector will disappear with increasing industrialization. (E) is extreme. While the author debunks the economists’ assumption that the informal sector is “limited in function to being an employment alternative of last resort,” she never
goes so far as to say that not a single job for an otherwise unemployable person has been created in the informal sector. Choice (B) is correct.

Q3). (E)
The author states which of the following about activities in the informal economy?
○○ They are an insignificant aspect of the global economy.
○○ They provide income for workers who are unemployable in the formal economy.
○○ They are a consequence of capitalist penetration of less developed economies.
○○ They thrive mainly in underdeveloped countries in Asia, Africa, and Latin America.
○○ They consist of such unregulated practices as off-the-books hiring and cash payments.
Step 2: Analyze the Question Stem
This Detail question asks us for something the author “states” explicitly. All we need to do is go back to the passage and look up the “activities in the informal economy.”
Step 3: Research the Relevant Text
The “activities” that take place in the informal economy are mentioned at the beginning of the first paragraph. We learn that they are typically “off-the-books” and that they include hiring and cash
payments in the construction, hotel, and restaurant industries.
Step 4: Make a Prediction
We’ll look for an answer choice that mentions any of the details we gleaned from our research.
Remember that for a Detail question, the correct answer has to come from the passage nearly verbatim.
Step 5: Evaluate the Answer Choices
(E) restates what we read in the first paragraph and is the correct answer. (A) is incorrect because it is the economists, not the author, who believe that informal sector activities are “insignificant.”
(B) is incorrect because, again, it states one of the economists’ assumptions, not the author’s opinion.
Similarly, (C) and (D) are incorrect because they present the economists’ beliefs, not the author’s.
Choice (E) is correct.

rawraj · Answer

Request explanation for Q2 please

Gmatsaiyan · Answer

here you go

Official Answers and Explanations 
 Q1). (D)
The primary purpose of this passage is to
○○ compare the economies of developed and underdeveloped countries.
○○ suggest that economists should develop a new framework for studying the global economy.
○○ criticize the notion that the informal economy is primarily a Third World phenomenon.
○○ dispute a widely held view of the relationship between the formal and informal sectors of the world economy.
○○ argue that workers in the informal economy are almost as well paid as those in the formal economy.
Step 2: Analyze the Question Stem
The phrase “primary purpose” signals that this is a Global question. We need the author’s reason for writing the passage.
Step 3: Research the Relevant Text
For this question, we’ll simply consult our notes on topic, scope, and purpose. We shouldn’t have to go back to the passage itself.
Step 4: Make a Prediction
We noted that the author’s purpose in writing the passage is to demonstrate that the economists are wrong in thinking the informal sector of the economy to be “insignificant” compared to the formal sector.
Step 5: Evaluate the Answer Choices
(D) matches our prediction. The “widely held view” is that of the economists. (A) is outside the scope of the passage, which focuses on the economists’ assumptions about the informal sector
of the economy. (B) is again outside the scope. The author makes no recommendation as to what the economists “should” do. (C) is a classic faulty use of detail. The idea that the informal sector is a Third World phenomenon is certainly mentioned and criticized in the passage (specifically, in paragraph 3), but this isn’t the purpose of the entire passage. (E) is another faulty use of detail. The pay rates of informal- and formal-sector workers are mentioned in the third paragraph, but again, this doesn’t constitute the purpose of the entire passage. Choice (D) is correct.

Q2). (B)
From the passage, which of the following can be inferred about employment opportunities in the informal economy?
○○ Workers employed in the informal economy generally receive much lower wages than do workers in the formal economy.
○○ Some workers have purposely chosen to work in the informal economy rather than in the formal economy.
○○ The number of workers employed in the informal economy has remained stable over the last few centuries.
○○ Employment opportunities in the informal economy will decline as agriculture is displaced by industry.
○○ The informal economy has created no employment for workers who would otherwise be unemployable.
Step 2: Analyze the Question Stem
The word “inferred” signals an Inference question. This question stem provides us with a context clue: “employment opportunities in the informal economy.”
Step 3: Research the Relevant Text
Unless a question specifically mentions a different point of view, it is asking for the author’s perspective.
We can safely confine our research to the first and third paragraphs and leave out the second, which describes the economists’ assumptions. In the first paragraph, we learn that informal
sector occupations are typically service jobs such as construction, hotel, or restaurant jobs. In the third paragraph, we learn that informal sector jobs are not jobs “of last resort,” because they don’t
necessarily pay a great deal less than formal sector jobs and because some workers actually move “voluntarily” from the formal to the informal sector.
Step 4: Make a Prediction
While it is difficult to make a precise prediction for this question, the correct answer will follow from our research. We’ll check the answer choices against it one at a time.
Step 5: Evaluate the Answer Choices
(A) states the opposite of the wage information we found in the third paragraph. (B) paraphrases the last couple of lines of the passage: Data support the idea that some workers do voluntarily move from formal sector employment to informal sector employment. This is the correct answer. (C) is too extreme. We learn in the third paragraph that “informal sector employment rates in many
countries have remained constant in the postwar era,” but we have no support for the idea that such employment has remained stable for “centuries.” (C) also confuses employment rates (which
are percentages) with the number employed. (D) restates one of the economists’ assumptions. It is the economists, not the author, who believe that the informal sector will disappear with increasing industrialization. (E) is extreme. While the author debunks the economists’ assumption that the informal sector is “limited in function to being an employment alternative of last resort,” she never
goes so far as to say that not a single job for an otherwise unemployable person has been created in the informal sector. Choice (B) is correct.

Q3). (E)
The author states which of the following about activities in the informal economy?
○○ They are an insignificant aspect of the global economy.
○○ They provide income for workers who are unemployable in the formal economy.
○○ They are a consequence of capitalist penetration of less developed economies.
○○ They thrive mainly in underdeveloped countries in Asia, Africa, and Latin America.
○○ They consist of such unregulated practices as off-the-books hiring and cash payments.
Step 2: Analyze the Question Stem
This Detail question asks us for something the author “states” explicitly. All we need to do is go back to the passage and look up the “activities in the informal economy.”
Step 3: Research the Relevant Text
The “activities” that take place in the informal economy are mentioned at the beginning of the first paragraph. We learn that they are typically “off-the-books” and that they include hiring and cash
payments in the construction, hotel, and restaurant industries.
Step 4: Make a Prediction
We’ll look for an answer choice that mentions any of the details we gleaned from our research.
Remember that for a Detail question, the correct answer has to come from the passage nearly verbatim.
Step 5: Evaluate the Answer Choices
(E) restates what we read in the first paragraph and is the correct answer. (A) is incorrect because it is the economists, not the author, who believe that informal sector activities are “insignificant.”
(B) is incorrect because, again, it states one of the economists’ assumptions, not the author’s opinion.
Similarly, (C) and (D) are incorrect because they present the economists’ beliefs, not the author’s.
Choice (E) is correct.

dave13 · Answer

is it only me who thinks that RC passages of gmat prep companies are much easier compared to those of official GMATprep ?

Gmatsaiyan · Answer

Haha is that true, cause I haven't tried material from various prep providers so can't say for sure

Sajjad1994 · Answer

Official Explanation

Q2). From the passage, which of the following can be inferred about employment opportunities in the informal economy?

Difficulty Level:   650

Explanation

Step 2: Analyze the Question Stem

The word  “inferred”  signals an Inference question. This question stem provides us with a context clue:  “employment opportunities in the informal economy.”

Step 3: Research the Relevant Text

Unless a question specifically mentions a different point of view, it is asking for the author’s perspective. We can safely confine our research to the first and third paragraphs and leave out the second, which describes the economists’ assumptions. In the first paragraph, we learn that informal sector occupations are typically service jobs such as construction, hotel, or restaurant jobs. In the third paragraph, we learn that informal sector jobs are not jobs  “of last resort,”  because they don’t necessarily pay a great deal less than formal sector jobs and because some workers actually move  “voluntarily”  from the formal to the informal sector.

Step 4: Make a Prediction

While it is difficult to make a precise prediction for this question, the correct answer will follow from our research. We’ll check the answer choices against it one at a time.

Step 5: Evaluate the Answer Choices

(A)  states the opposite of the wage information we found in the third paragraph.

(B)  paraphrases the last couple of lines of the passage: Data support the idea that some workers do voluntarily move from formal sector employment to informal sector employment. This is the correct answer.

(C)  is too extreme. We learn in the third paragraph that  “informal sector employment rates in many countries have remained constant in the postwar era,”  but we have no support for the idea that such employment has remained stable for  “centuries.” (C)  also confuses employment rates (which are percentages) with the number employed.

(D)  restates one of the economists’ assumptions. It is the economists, not the author, who believe that the informal sector will disappear with increasing industrialization.

(E)  is extreme. While the author debunks the economists’ assumption that the informal sector is  “limited in function to being an employment alternative of last resort,”  she never goes so far as to say that not a single job for an otherwise unemployable person has been created in the informal sector.

Choice (B) is correct.

The informal sector of the economy involves activities that, in both d

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GMAT Reading Comprehension (RC) Questions

The informal sector of the economy involves activities that, in both d

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