MGMAT CAT CR - household's cash income and poverty level

[jtg0101]

This is a MGMAT CAT CR question.
Although I have seen the official answer and explanation, I am NOT satisfied with that.

Here is what I think:
IMO answer should be 'A'
Option (a) provides a solid proof of the example author gave about people's earning but still flagged under poverty category.
Option (c) If Option (a) is what I think, option (c) is not that important.
Option (e) merely restates the part of the argument

Could the Tutors please explain these points versus the official answer/explanation? This is rather URGENT.

Question:
The United States government uses only a household's cash income before taxes to determine whether that household falls below the poverty line in a given year; capital gains, non-cash government benefits, and tax credits are not included. However, yearly cash income is not a fool-proof measure of a given household's disposable income. For example, retirees who live off of capital gains from an extensive portfolio could earn hundreds of thousands of dollars, yet be classified by the government as living in "poverty" because this income is not included in the calculation.

Which of the following, if true, validates the contention that the government's calculation methods must be altered in order to provide statistics that measure true poverty?

(a) For more than 99% of those classified as living in poverty, yearly cash income comprises the vast majority of each household's disposable income.
(b) While the government’s calculation method indicated a 12.5% poverty rate in 2003, the same calculation method indicated anywhere from a 9% to a 16% poverty rate during the preceding decade.
(c) Most established research studies conducted by the private sector indicate that the number of people truly living in poverty in the U.S. is less than that indicated by the government’s calculation method.
(d) Several prominent economists endorse an alternate calculation method which incorporates all income, not just cash income, and adjusts for taxes paid and other core expenses.
e) The government’s calculation method also erroneously counts those who do not earn income in a given year but who have substantial assets on which to live during that year.

Cheers
JTG[/i]

[StaceyKoprince]

Given what you said in your explanation, I think you might be reading something incorrectly, either in the question or in the answer choice.

The argument says that the government DOES currently measure poverty level based upon cash income. The author of the argument then says that this method is flawed b/c there could be people who are classified at poverty level due to very little cash income, yet they could have substantial income from other sources.

The question asks us to find a choice that demonstrates that the government's current method is, in fact, flawed and needs to be fixed.

Answer A says that, for more than 99% of people classified at poverty level, cash income really does comprise the "vast majority" of that household's disposable income. This supports the government's current method - the vast, vast majority of people fit the current way of calculating poverty level. It doesn't support the argument's contention that the "cash income" method is flawed and should be changed.

You explain A by saying "provides a solid proof of the example author gave about people's earning but still flagged under poverty category." This leads me to think you're interpreting A to mean that these are the people who are being flagged at poverty level who shouldn't be b/c they have other sources of income - but that's not the group that this choice describes. This choice describes the group that, according to the government's current method, really should be flagged at poverty level.

[jtg0101]

Stacey,

Thanks for your detailed response. Though I still have one nagging question about the premise and option A. Here it is:

your response quoted:
You explain A by saying "provides a solid proof of the example author gave about people's earning but still flagged under poverty category." This leads me to think you're interpreting A to mean that these are the people who are being flagged at poverty level who shouldn't be b/c they have other sources of income - but that's not the group that this choice describes. This choice describes the group that, according to the government's current method, really should be flagged at poverty level.

Premise:
However, yearly cash income is not a fool-proof measure of a given household's disposable income. For example, retirees who live off of capital gains from an extensive portfolio could earn hundreds of thousands of dollars, yet be classified by the government as living in "poverty" because this income is not included in the calculation.


Here in the example given in the stem, retirees living off capital gains from... yet be classified by the govt as living in poverty because their income is not included in calculation.
Doesn't this mean that the Capital gains may fall under the 'yearly income'? And, their household income falls in the "below poverty" category. Consequently, the retirees would fall in the 99% "below poverty" category?

Whereas, your assumption in that 'A' suggests that the govt. calculations reflect set of people whose household income genuinely fall in the 99% "below poverty" category. There is no keyword to suggest, that I have noticed, this assumption to be so.

Apologies, if it may sound repetitive in some places!
Please reconfirm ?
:idea:

Merry Christmas and a happy new year!

cheers
JTG :D

[StaceyKoprince]

Doesn't this mean that the Capital gains may fall under the 'yearly income'?

Nope. That's the opposite of what it's saying. The "could" refers to how much they earn - they "could earn" $2 or they "could earn" $200,000. The clause "this income is not included in the calculation" later in the sentence is a statement of fact - not that the income could be (or may not be) included in the calculation. Rather, capital gains are NOT included in "yearly cash income."

Whereas, your assumption in that 'A' suggests that the govt. calculations reflect set of people whose household income genuinely fall in the 99% "below poverty" category.

Technically, A doesn't assume that they "genuinely" fall into anything - you have to define what you mean by "below poverty." In this case, the government defines "below poverty" as making below a certain amount in yearly cash income. So 100% of the people the government places in that category have been rated based upon their yearly cash income. If that yearly cash income really is the primary source of income for 99% of that 100%, then it looks like the government is measuring the category accurately according to its own definition.

The main point of the argument is simply a claim that the government has defined something, but then calculates that something in a bad way such that you don't actually get accurate data according to that definition. Answer A indicates that the government's calculations are pretty accurate for the definition it set.

I know this one's a tough one. Happy holidays to you too!

[chunyang.yu]

I am a little confused with which is better as the answer between C and E? Although I prefer E, but I don't know how can get rid of C?

[mschwrtz]

C isn't terrible, and does in fact seem to support the conclusion. But E is better.

E ties the evidence in the argument, yearly cash income is not a fool-proof measure of a given household's disposable income, to the conclusion described in the question, the government's calculation methods must be altered....

The question ask us which answer choice would "validate" the conclusion. An argument is valid if the evidence leads ineluctably to the conclusion. That means that the correct answer should be one which shows the evidence to lead to the conclusion. One way to recast E is "and here's a way in which you might not be poor even if your income is low." Not perfect, but better than C.

[pmmalkan+gmat]

C isn't terrible, and does in fact seem to support the conclusion. But E is better.

Wait a sec.. then why does mgmat say that C is correct???



Im confused.

[mschwrtz]

Well, that's embarrassing....

I have to admit that I focused a little too narrowly on chunyang's question--Why is E rather than C right?--and didn't adequately consider the question from scratch. Let me remedy that.

To telegraph my direction a bit, I think that this question is a bit flawed, but provides a great example of what to do when two or more answer choices to an assumption/strengthen/weaken question seem acceptable: check the language of the conclusion more carefully. Usually, when I find that two answers seem right, it's because I haven't been careful enough about the precise language of the conclusion.

The conclusion, or "contention," we need to support is given in the question stem, the government's calculation methods must be altered in order to provide statistics that measure true poverty.

I glossed the conclusion as the government's calculation methods don't measure poverty accurately enough. There is some information lost in that gloss. For instance, you might reasonably argue that the contention as originally given assumes that some altered method would give a truer count than does the government's current method. Or you might argue that the the contention as originally given assumes that it matters whether the government's count is true. I'd resist that second argument, though. Don't read too much into the "must"; it doesn't indicate urgency or moral necessity.

I'm going to go with my rough gloss for now, though. The government's calculation methods don't measure poverty accurately enough.

What's the evidence for that contention?
-the government uses only cash income to determine poverty
-there are relevant sources of income other than cash income (e.g. capital gains, benefits, credits)

Don't spend a lot of time looking for gaps between evidence and conclusion. Many correct answers to strengthen questions work by making explicit or otherwise supporting some assumption of the argument, but not all do. And in any event, even when we know we're looking for an assumption, we can't reliably anticipate answers. So, using the S W -- method, but not going into any real detail just yet,

(A) W
(B) --
(C) S
(D) s
(E) S

This result, at least two apparently acceptable answers, means that I've missed something. Wrong answers are wrong, not just less right. I have probably missed something in the conclusion, and... yes, there it is... the conclusion would better be glossed as the government's calculation methods don't measure poverty as accurately as some alternative method might.

That's what makes C the right answer. More evidence that the government's method is flawed (that's what E gives us) doesn't argue for altering that method, unless there's a better option. On this reading, E isn't "less right," it is in fact wrong.

Well, that last might be pushing things a little too much, and for that reason I'm going to refer this to our curriculum committee. Every wrong answer to a real GMAT question will be wrong on its own merits, not just wrong relative to some better answer. I'm not completely sold that this one passes that test. But maybe that's just face-saving.

[chitrangada.maitra]

small clarification

option C says:
Most established research studies conducted by the private sector indicate that the number of people truly living in poverty in the U.S. is less than that indicated by the government’s calculation method.

To select option C, don't we need to make the additional assumption that private sector research companies are more reliable than government research?

[sandeep.19+man]

I have a few questions in addition to that of the poster above

1. As posted above

small clarification

option C says:
Most established research studies conducted by the private sector indicate that the number of people truly living in poverty in the U.S. is less than that indicated by the government’s calculation method.

To select option C, don't we need to make the additional assumption that private sector research companies are more reliable than government research?

I believed this assumption is not warranted because of the words "MOST(meaning >50%) ESTABLISHED (meaning authoritative ones) research studies". Correct?

2. C says "Most established research studies conducted by the private sector indicate that the number of people truly living in poverty in the U.S. is less than that indicated by the government’s calculation method. "
Thus govt #s might show 10000 and the Most established research studies conducted by the private sector might show 9999. This does not warrant a change in calculation method

3. Why is option D "s" and not "S" ? As opposed to C, D talks about alteration of calculation method, which is what we have to validate.

I understand that D is limited by the word "several"

Thanks

[himanshu1_gupta]

Even I got the CR in my CAT. I think the answer can't be C. If we assume it to be C, then we have to assume that the method used in 'Most established research studies' is correct.

Can somebody please confirm!

-Thanks

[tim]

D is wrong because it just says that several economists propose an alternative. C is the only answer that demonstrates that the current calculations actually provide an overcount of people living in poverty; notice that even E doesn't do that conclusively. For those of you worried about the validity of the studies in C, refer back to the fact that they are "established"; this is the question's way of telling you that you can take this information at face value..

[Gavan]

I did this wrong in my CAT today.

I forgot to read 'if true' which is given in the question. It removes the ambiguity in C and also removes the doubt on the reliability of 'Most established research studies'. E sounds better (to me) if 'if true' is absent in question stem.

[tim]

ah yes, the importance of reading carefully.. :)

[zenarys904]

Thanks for sharing details. Sadly, poverty has always been one of the major issues we face today. A report published Tuesday by the U.S. Census Bureau shows that increasingly Americans are giving up their fight to remain profitable in an economic climate that refuses to recover. The amount of Americans living below the poverty line has increased to its highest amount since the bureau started keeping such records in 1959.