Capitalism and Inequality - TOEFL iBT® Reading Practice Test

In the TOEFL Reading section, you'll encounter various passages, including topics like 'Capitalism and Inequality'. Engaging with these types of texts can significantly enhance your comprehension skills, which are crucial for performing well on the test.

By practicing with passages on capitalism and its impact on inequality, you'll learn to identify key concepts and supporting arguments, which are essential for answering questions accurately. This targeted practice will not only help you become familiar with the test format but also improve your overall reading proficiency for the TOEFL.

Reading Instructions:

• You have 15 minutes to read the following passage and answer all 9 questions related to it.
• Most questions are worth 1 point, but the last question is worth more. The directions indicate how many points you will receive for that specific question.
• The specific section/paragraphs have been provided again with the question for ease of understanding and quick solution.
• Some questions include a word or phrase that is highlighted in the question as well as in the paragraph for quick reference.

Directions: Once you have read the passage, answer the following questions.

Paragraph 1

The relationship between capitalism and inequality has been a common topic of debate among economists, social scientists, and political thinkers. Capitalism, defined by private ownership of production and the seeking of profit, has been credited with encouraging innovation, economic growth, and better living standards. However, it has also been linked to significant gaps in wealth and income distribution. The basic idea of capitalism is that individuals are free to compete in the marketplace, which should ideally lead to a fair society. Yet, the reality often strays from this ideal, as systemic factors contribute to deep-rooted inequalities, such as access to education, social networks, and capital.

Factual Information Question

1. According to paragraph 1, what is one of the systemic factors that contribute to inequalities in capitalism? 
   
   1. Access to education 
   2. Government regulations 
   3. Globalisation 
   4. Technological advancements 

Negative Factual Information Question

1. The author mentions all of the following as characteristics of capitalism EXCEPT: 
   
   1. Private ownership of production 
   2. Encouragement of innovation 
   3. Equal wealth distribution 
   4. Seeking of profit 

Paragraph 2

One of the main ways capitalism creates inequality is through the gathering of capital. Wealth tends to create more wealth; individuals or entities that have capital can invest it to earn additional income. This process creates a cycle where the rich get richer, while those without capital struggle to improve their financial standing. For example, owning assets like real estate, stocks, and businesses allows wealth holders to benefit from appreciation and dividends, further widening the gap between the wealthy and the economically disadvantaged. As a result, the layering of wealth among a few can lead to social inequality, where access to opportunities is heavily influenced by ones economic background. This occurrence is evident in various studies, which show that the wealthiest 10% of households in many countries control an unequal share of national wealth.

Inference Question

1. What can be inferred about the relationship between capital accumulation and social inequality from paragraph 2? 
   
   1. Capital accumulation has no impact on social mobility. 
   2. The wealthy are likely to maintain their status due to capital accumulation. 
   3. Individuals without capital can easily improve their financial situation. 
   4. Wealth distribution is becoming more equal over time. 

Paragraph 3

Also, the labor market under capitalism often reflects and worsens existing inequalities. Factors like education, social networks, and geographic location play crucial roles in determining a person's employability and earning potential. Those with higher levels of education and specialized skills can typically command higher wages, while individuals from lower socioeconomic backgrounds may find themselves stuck in low-paying, unstable jobs. This gap is worsened by systemic bias, including discrimination based on race, gender, or ethnicity, which can limit access to quality education and job opportunities. As a result, the labor market can perpetuate cycles of poverty, making it harder for disadvantaged groups to climb the economic ladder. For example, studies have shown that individuals from minority backgrounds often face significant wage gaps compared to their peers, even when accounting for education and experience.

Rhetorical Purpose Question

1. Why does the author discuss the role of the labor market in paragraph 3? 
   
   1. To illustrate how capitalism benefits all individuals equally 
   2. To highlight how existing inequalities are exacerbated under capitalism 
   3. To argue that education is the only solution to inequality 
   4. To provide examples of successful individuals from disadvantaged backgrounds 

Paragraph 4

Critics of capitalism argue that its inherent structure leads to exploitation and sidelining of certain groups. The profit motive often favors shareholder returns over employee welfare, resulting in practices like wage suppression, unstable employment, and poor working conditions. For instance, the gig economy, defined by short-term contracts and freelance work, has become a significant part of modern capitalism. While it offers flexibility, it often lacks the benefits and job security associated with traditional employment. This shift has disproportionately affected lower-income workers, who may not have the resources to handle economic ups and downs. So, the rise of the gig economy shows how capitalism can create new forms of inequality, even as it generates wealth. Reports indicate that gig workers often earn less than minimum wage when considering expenses, highlighting the unstable nature of such jobs.

Vocabulary Question

1. In paragraph 4, the term "exploitation" is closest in meaning to: 
   
   1. Fair treatment 
   2. Utilisation for profit 
   3. Equal opportunity 
   4. Generosity 

Paragraph 5

On the other hand, supporters of capitalism argue that it provides the best framework for economic mobility and innovation. They say that the competitive nature of capitalism motivates individuals to work harder, innovate, and create value, ultimately benefiting society as a whole. Historical evidence suggests that capitalist economies have performed better than their socialist counterparts in terms of growth and technological progress, especially during the late 20th century. However, this view often overlooks the structural inequalities that can hinder social mobility. While some individuals may find success through business creation or innovation, many others remain trapped in cycles of poverty due to systemic barriers. So, the idea of meritocracy in capitalism is frequently challenged by the realities of inequality, as shown by the growing wealth gap seen in many developed nations.

Sentence Simplification Question

1. Which of the sentences below best expresses the essential information in the following text from paragraph 5? 
   

   "While some individuals may find success through business creation or innovation, many others remain trapped in cycles of poverty due to systemic barriers."

   1. Some individuals succeed in business, but many do not due to barriers. 
   2. Business creation is the only way to succeed in capitalism.
   3. All individuals have equal opportunities in capitalism.
   4. Success in capitalism is guaranteed for everyone. 

Paragraph 6

The effects of capitalism and inequality go beyond economic measures; they also impact social unity and political stability. High levels of inequality can lead to social unrest, as those who feel left out may push for change. Also, political power often goes hand in hand with economic power, leading to policies that favour the wealthy and maintain inequality. Addressing these gaps requires a varied approach, including fair taxation, better access to education, and strong social safety nets. As societies deal with the challenges posed by capitalism, its important to find a way to balance economic growth with fair opportunities for all individuals. Finally, the discussion about capitalism and inequality remains a key area of study, with significant implications for the future of economic systems around the world. Questions about the sustainability of capitalism in its current form and the potential for reform continue to spark discussion among scholars and policymakers alike.

Purpose of the Passage Question

1. What is the main purpose of paragraph 6? 
   
   1. To argue that capitalism is the best economic system 
   2. To discuss the broader implications of capitalism and inequality 
   3. To provide examples of successful capitalist economies 
   4. To suggest that inequality is not a significant issue 

Insert Missing Sentence Question

1. In paragraph 6, there is a missing sentence. The paragraph is repeated below and shows four letters (A, B, C, and D) that indicate where the following sentence could be added. 
   

   "These discussions are crucial for shaping future policies." 
   

   Where would the sentence best fit? 

   The effects of capitalism and inequality go beyond economic measures; they also impact social unity and political stability. High levels of inequality can lead to social unrest, as those who feel left out may push for change. (A) Also, political power often goes hand in hand with economic power, leading to policies that favour the wealthy and maintain inequality. (B) Addressing these gaps requires a varied approach, including fair taxation, better access to education, and strong social safety nets. (C) As societies deal with the challenges posed by capitalism, its important to find a way to balance economic growth with fair opportunities for all individuals. (D) Finally, the discussion about capitalism and inequality remains a key area of study, with significant implications for the future of economic systems around the world. 

Prose Summary Question

1. Directions: An introductory sentence for a brief summary of the passage is provided below. Complete the summary by selecting the THREE answer choices that express the most important ideas in the passage. Some sentences do not belong in the summary because they express ideas that are not presented in the passage or are minor ideas in the passage. This question is worth 2 points. 
   

   Capitalism has a complex relationship with inequality, influencing both economic and social structures. 

   Answer Choices

   1. Capitalism encourages innovation but can also lead to significant wealth gaps.
   2. The gig economy has improved job security for all workers. 
   3. Structural barriers often prevent individuals from achieving economic mobility. 
   4. Critics argue that capitalism favours the wealthy and exploits lower-income workers.
   5. Supporters of capitalism believe it is the best system for economic growth and social progress. 

Prose Summary Question

1. What is the main conclusion drawn in the passage regarding capitalism and inequality? 
   
   1. Capitalism is the only viable economic system. 
   2. Inequality is an inevitable outcome of capitalism that needs addressing. 
   3. All individuals have equal opportunities in a capitalist society. 
   4. The gig economy is a solution to economic inequality.

Answer Key with Explanation for TOEFL Reading Passage - Capitalism and Inequality

1. Answer: A

Explanation: The passage explicitly mentions that systemic factors contributing to deep-rooted inequalities include "access to education." This indicates that educational opportunities can significantly influence an individual's economic standing, highlighting the disparities present in a capitalist system.

2. Answer: C

Explanation: The passage discusses private ownership, encouragement of innovation, and the seeking of profit as characteristics of capitalism. However, it also highlights that capitalism is linked to significant gaps in wealth distribution, making "equal wealth distribution" an incorrect characteristic.

3. Answer: B

Explanation: The passage states that wealth tends to create more wealth, suggesting that those who accumulate capital are likely to continue doing so, thereby maintaining their status. This indicates a direct relationship between capital accumulation and the perpetuation of social inequality.

4. Answer: B

Explanation: The author illustrates how the labor market reflects and worsens existing inequalities, particularly through factors like education and systemic bias. This discussion serves to underscore the negative impact of capitalism on social equity, rather than suggesting that it benefits everyone equally.

5. Answer: B.

Explanation: In the context of the passage, "exploitation" refers to the way capitalism can take advantage of workers for profit, often at the expense of their welfare. This aligns closely with the idea of utilising individuals for profit, rather than treating them fairly.

6. Answer: A

Explanation: This sentence captures the essence of the original text, which contrasts the success of some individuals with the systemic barriers that prevent many others from achieving similar success. It succinctly summarises the disparity in opportunities within capitalism.

7. Answer: B

Explanation: The paragraph addresses the effects of capitalism and inequality on social unity and political stability, indicating that the discussion extends beyond economic measures. This broader perspective is central to the paragraph's purpose.

8. Answer: D

Explanation: The sentence "These discussions are crucial for shaping future policies" fits best after the sentence discussing the need to balance economic growth with fair opportunities. It logically follows the idea that addressing inequality is essential for future policy-making.

9. Answer Choices: A, C and D.

Explanation: These choices encapsulate the main ideas of the passage, highlighting both the positive aspects of capitalism and the significant issues of inequality and barriers to mobility.

10. Answer: B

Explanation: The passage discusses how capitalism inherently leads to inequality and suggests that this issue requires attention and reform. This conclusion reflects the overall argument presented throughout the text.

Studying passages like 'Capitalism and Inequality' is a smart way to boost your performance in the TOEFL Reading section. Regular practice with these kinds of texts will sharpen your comprehension abilities and prepare you for the diverse range of questions you'll face on test day. Consistent exposure to similar materials will help you develop the skills needed to succeed in the TOEFL Reading section.

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