SBI PO Prelims 2017: New Pattern Comprehension Test – Set 3

Read the following
passage carefully and answer the questions that follow.

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 was 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. 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 lay ahead
(D) allay current fears about increasing unemployment
(E) document the rise of American productivity since World War II

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 raise.
(D)Productivity increases more rapidly than production.
(E) Production increases more rapidly than output per man-hour.

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

(A) The
growth in output was less than 3.5 percent.
(B) The average number of hours worked declined.
(C) The increase in output per man-hour was greater than usual.
(D) I only
(E) II only

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. 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. 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. 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. 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. 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. 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.

Answers:
1. C
2. E
3. E
4. E
5. D
6. C
7. B
8. D
9. D
10. A