In an economic context, crowding out refers to the replacement of private sources of money with public funding. A researcher...
GMAT Multi Source Reasoning : (MSR) Questions
In an economic context, crowding out refers to the replacement of private sources of money with public funding. A researcher measured the extent to which the introduction of the Farmer's Pension Program (FPP) in Taiwan in 1995 induced crowding out of private funds given to pension-aged farmers, mainly by their adult children. The study compared data from 1990 to 2001 for two groups. farmers ages 66 and older who received FPP benefits beginning in 1995, and nonfarmers of the same age group who did not receive FPP benefits. A table and graph from the study are provided.
The key question is this: When a pensioner receives a dollar of benefit from the government program, to what extent does his or her income rise? Results from the study indicate significant but incomplete crowding out in that one FPP dollar replaced 30 to 39 cents of private funds. The results also suggest a significant, positive effect of the FPP on recipients' household consumption spending.
For each of the following statements about the effects of the FPP, select Yes if the statement accurately reflects the information provided. Otherwise select No.
OWNING THE DATASET
Text Source - Research Study Description
| Information from Dataset | Analysis |
|---|---|
| ""crowding out refers to the replacement of private sources of money with public funding"" |
|
| ""A researcher measured the extent to which the introduction of the Farmer's Pension Program (FPP) in Taiwan in 1995 induced crowding out of private funds given to pension-aged farmers, mainly by their adult children"" |
|
| ""compared data from 1990 to 2001 for two groups: farmers ages 66 and older who received FPP benefits beginning in 1995, and nonfarmers of the same age group who did not receive FPP benefits"" |
|
| ""one FPP dollar replaced 30 to 39 cents of private funds"" |
|
| ""significant, positive effect of the FPP on recipients' household consumption spending"" |
|
Summary: Taiwan's 1995 Farmer's Pension Program partially replaced family support (30-39% crowding out) but still increased farmers' net income and consumption spending.
Table - Financial Data for Elderly Farmers and Nonfarmers
Table Analysis
- Shows financial data for farmers and nonfarmers (both 66+) comparing 1990-1994 vs. 1999-2001
- All values are in 1990 New Taiwan dollars (inflation-adjusted for fair comparison)
- ""Per capita income excludes FPP payments and private funds received"" - shows only earned income/assets
Key Patterns Observed
- Farmers' base income stayed flat: 109,733 → 109,868 (almost no change)
- Nonfarmers' base income grew: 147,716 → 161,250 (about 9% increase)
- Farmers' private funds stayed nearly constant: 60,926 → 60,510 (slight decrease of ~NT$400)
- Nonfarmers' private funds increased substantially: 58,427 → 76,619 (31% growth)
- Percent of farmers receiving private funds decreased slightly: 91.7% → 89.3%
- Farmers' consumption jumped dramatically: 91,931 → 132,716 (44% increase!)
Key Findings
- Despite flat income and private support, farmers' consumption rose 44% - this gap must be filled by FPP benefits
- The table confirms the ""significant, positive effect on consumption"" - the 44% consumption increase quantifies this positive effect
- The slight decrease in farmers' private funds (NT$400) while nonfarmers' increased by NT$18,000 supports the crowding out finding
Summary: The table reveals farmers' consumption increased 44% despite flat income and private support, while the control group (nonfarmers) showed natural growth in both income and private support.
Graph - Time Series of Private Funds and FPP Payments
Graph Analysis
- Shows year-by-year trends from 1990-2001 for three variables
- Tracks private funds for farmers and nonfarmers (both 66+) plus FPP benefit amounts
- Values are in thousands of 1990 New Taiwan dollars
Key Patterns Observed
- FPP payments: Zero until 1995, then rapidly rise to ~45-48 thousand by 1999
- Farmers' private funds: Stable around 57-63 thousand (1990-1994), then drop and stabilize around 53-60 thousand (1995-2001)
- Nonfarmers' private funds: Gradual increase throughout entire period, accelerating after 1996, reaching ~78 thousand by 2001
- Clear divergence: Between farmers and nonfarmers starting exactly in 1995
Key Insights
- The diverging trends after 1995 visually demonstrate the crowding out effect - farmers' support stabilized lower while nonfarmers' continued rising
- The graph visually confirms the 1995 FPP introduction timing and shows how private support patterns changed exactly when the program began
- The 30-39% crowding out rate is visible in the diverging trend lines - farmers' private support didn't drop as much as FPP benefits increased
- The graph's endpoint values align with the table - nonfarmers' rising trend explains their 31% increase in private funds, while farmers' flat trend matches their minimal change
Summary: The graph dramatically illustrates how FPP benefits starting in 1995 coincided with farmers' private support stabilizing at lower levels while nonfarmers' support continued its natural upward trajectory.
Overall Summary
The Taiwan Farmer's Pension Program study reveals a nuanced success story: while government pensions did partially replace family financial support (30-39% crowding out), elderly farmers still came out significantly ahead. The data shows farmers' consumption increased by 44% despite receiving slightly less family support, because each pension dollar provided a net gain of 61-70 cents. Meanwhile, the nonfarmer control group demonstrated what would have happened naturally - continued growth in both income and family support - validating that the changes for farmers were indeed caused by the pension program.
Question Analysis
- In Plain Terms: I need to verify if three specific claims about the Farmer's Pension Program's effects are supported by the data provided
- Key Constraints:
- Must evaluate each statement as Yes (accurate) or No (inaccurate)
- Accuracy must be based on information provided in the sources
- Answer Type Needed: Fact verification against data
Connecting to Our Passage Analysis
- Available Data: The cross-source analysis contains data on private funds trends, income levels, and program effects that directly address all three statements
- Can Answer from Analysis: Yes - the collated analysis and source data contain all needed information
Statement Evaluations
Statement 1 Evaluation
- Claim: Nonfarmers' private funds stayed flat from 1995-1997
- Data from Source C:
- 1995: 60 thousand NT$
- 1996: 60 thousand NT$
- 1997: 69 thousand NT$
- Analysis: Shows increase from 60 to 69 (9 thousand NT$ increase) which contradicts 'did not change'
- NO - The data shows an increase, not no change
Statement 2 Evaluation
- Claim: Farmers had their biggest single-year change in private funds during 1995-1997
- Data Analysis:
- Year-to-year changes 1995-1997: +2, 0, 0
- Largest changes occurred: -7 (1997-98) and +7 (1998-99)
- Analysis: Greatest changes occurred after 1997, not during 1995-1997
- NO - The largest changes happened outside the specified period
Statement 3 Evaluation
- Claim: Farmers' base income (excluding FPP and private funds) barely changed
- Data Comparison:
- 1990-1994: 109,733 NT$
- 1999-2001: 109,868 NT$
- Difference: Only 135 NT$ increase over ~10 years (0.1%)
- YES - The income was indeed 'little affected'
Verification
- Statement 1: Source C clearly shows nonfarmers' funds increased to 69 by 1997
- Statement 2: Calculated all year-to-year changes; biggest were ±7 in 1997-99
- Statement 3: Source B table explicitly shows near-identical income levels
Final Answer
- NO - Nonfarmers' private funds increased from 60 to 69 during 1995-1997
- NO - The greatest single-year changes (±7) occurred in 1997-1999, not 1995-1997
- YES - Per capita income changed by only 0.1% (from 109,733 to 109,868)
Average private funds received by nonfarmers did not change during the first three years of the program (1995-1997).
The greatest change in average private funds received by farmers in a single year occurred during the first three years of the program (1995-1997).
Per capita income among farmers ages 66 and up, not including FPP payments or private funds received, was little affected by the introduction of the FPP.