The United States government uses only a household's cash : GMAT Critical Reasoning (CR)
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# The United States government uses only a household's cash

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02 Oct 2010, 10:05
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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.
[Reveal] Spoiler: OA
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Re: The United States government uses only a household's cash [#permalink]

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02 Oct 2010, 10:26
Orange08 wrote:
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.
Good candidate.

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
Out of scope.

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.
Good candidate.

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.
Out of scope since this offers other methods to calculate the poverty line.

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.
Out of scope since this options provides a cause for changing the government's calculation method.

To choose between option A and C

Looking closely, option A seems to in the wrong direction. The government calculation is based on the cash income and option A says that for 99% the yearly cash income is the majority of its disposable income and this means that the governments calculation here is correct. This option thus supports the governments calculation.

Option C wins.
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Re: The United States government uses only a household's cash [#permalink]

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02 Oct 2010, 10:35
Used POE to narrow down to A & E, and then picked E.

Maybe true, but does not show that the method needs to be altered. It is showing a fact. Just because the % is 99%, does not mean anything because for everyone they are considering yearly cash income 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.

Not relevant. The variation does not show we the method should be altered due to wrong underlying basis 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.

Out of scope to show that the current method needs to be changed 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.

Again not relevant 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.

Correct - the current system is counting people who are living off their assets as living below the poverty line because they did not have any income in a given year. In reality they are not living below poverty line coz they have money from assets, which are just not considered as income 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.
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Re: The United States government uses only a household's cash [#permalink]

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02 Oct 2010, 10:37
ezhilkumarank wrote:
Orange08 wrote:
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.
Good candidate.

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
Out of scope.

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.
Good candidate.

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.
Out of scope since this offers other methods to calculate the poverty line.

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.
Out of scope since this options provides a cause for changing the government's calculation method.

To choose between option A and C

Looking closely, option A seems to in the wrong direction. The government calculation is based on the cash income and option A says that for 99% the yearly cash income is the majority of its disposable income and this means that the governments calculation here is correct. This option thus supports the governments calculation.

Option C wins.

IMO, C would be stretching it too far. Maybe the private sector research studies are wrong. You are letting your judgement be affected by outside knowledge. Just because it is a private sector research study does not mean it is correct.
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02 Oct 2010, 13:53
+1 for C. OA plz?
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Re: The United States government uses only a household's cash [#permalink]

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02 Oct 2010, 19:15
Option E for me. As per PowerScore CR Bible the correct answer for the Must-Be-True question would be a rephrase of the stimulus given in the answer.

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.

I would rule out C as it talks about people who are "truly living in poverty". I believe truly living in poverty is an ambiguous term which has not been qualified.

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.
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03 Oct 2010, 01:35
OA is C
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03 Oct 2010, 06:25
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Orange08 wrote:
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. -- This actualy weakens the contention

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 -- This is irrelevant as we are not debating the results of the statistics
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. -- Strong Contender
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.-- Irrelevant as it is too much to assume that what prominent economists endorse is gospel.
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. -- Another contender

Between C and E,
Option E - Rephrases the premise that Someone with no income inflow can still make hundreds of thousands of dollars ... basically it does not provide any new information.

For strengthen questions, the Answer choice must provide new evidence/information to support the conclusion.
Hence Option C is correct
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03 Oct 2010, 09:58
Hey devashish, thats correct. For strengthen questions, the Answer choice must provide new evidence/information to support the conclusion.

I miss interpreted this question to be "Must be True" question but in fact its a strengthen question.
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22 Apr 2012, 09:27
Can somebody explain the reasoning followed to eliminate E from race. I was confused between E and C and finally went for E

C is enticing because it exposes the discrepancy by pointing out statistics. I decided to forgo E because the research apparently adopted a technique that was different from the technique adopted by government. The argument does not talk about whether the research techniques are more enticing than government techniques.

E on the other hand points out a similar flaw that he argument has already pointed out, which is not counting individuals who did not earn that specific year into the taxable bucket.

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Re: The United States government uses only a household's cash [#permalink]

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09 Jul 2013, 13:15
Orange08 wrote:
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.

HERE IS OE

The conclusion of the argument is that the government's calculation methods must be altered in order to provide statistics that measure true poverty. To support this position, the author first explains how the government’s method works and then introduces a hypothetical example that would return a "false positive" - that is, a person who has a large income, yet is classified by the government as living in poverty. One example, however, is generally not enough to invalidate an entire method; no method is perfect and there are always a few results that are not consistent with the overall conclusion. In order to validate, or strengthen, the conclusion, we need to show that the government’s method is fundamentally inferior to some alternative that would produce more valid results.

(A) This choice weakens the argument by minimizing the importance of the author's evidence (the hypothetical retiree with capital gains). According to this choice, the use of cash income to designate poverty levels is a very sound method because it provides valid results for more than 99% of those classified as living in poverty.

(B) This choice shows that the government’s method provided a wide range of results for the poverty rate over a certain period of time, but it is irrelevant to the argument at hand. It tells us nothing about whether the method provides relevant statistics in any given year.

(C) CORRECT. If this statement is true, then the government’s calculation method seems to overstate the number of people living in poverty, while the various private sector studies generally agree with each other that the number of people is lower. Thus, the methods used in the private sector are likely to be more valid than the government’s method, lending credence to the author's contention that the government’s method should change.

(D) Although this choice provides an example of people who might agree with the conclusion (several prominent economists), this choice provides no evidence that the alternate method they endorse would provide more relevant statistics than the government’s method.

(E) This choice adds another hypothetical example of how the current method could include someone in the poverty count who does not actually live in poverty. It does not, however, address whether there are other calculation methods that are more accurate than the government’s method.
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25 Jul 2013, 00:50
I have read all the discussions, D still seems to be the better answer.

On what grounds can we confirm that irrigation gain is minimized to an extent that it will double the profit?
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25 May 2016, 12:15
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The United States government uses only a household's cash [#permalink]

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23 Oct 2016, 00:56
honchos wrote:
I have read all the discussions, D still seems to be the better answer.

On what grounds can we confirm that irrigation gain is minimized to an extent that it will double the profit?

IMO, Opn D is partly a strengthener. In the absence of opn C, I would choose Opn D. But in such questions where opns are really close, try to stop for 5 seconds and ask 'which of the opns is valid?' Opn D just talks about the preference of some economists, but is the opn strong enough to put some concrete results and prove that the conclusion is true? No.
Opn C does that. The keyword here in opn C is Established.
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