In an economic context, crowding out refers to the replacement of priv

Question

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.

Arjun123321 · Accepted Answer

The order of questions may have been varied.

For question 1 presented above, 
Option 1: Use the trends tab for the above question. There has been a change of Private funds for   Non-Farmers   in the year of 1995-1997, which counters the 1st options.
Hence it should be marked as No.
(P.S- Its easier to misread and then misinterpret   Non-Farmers as Farmers  , as I did . Be carefull. However, the answer wont change though)

Option 2: Yes, since for majority of the study duration, the graph for Private funds received by Farmers was nearly flat. There was just one considerable dip in the year 1996. 
Hence it should be marked Yes.

Option 3: As you can see in the "Statistical Tab", the PCI didnt change significantly.. Hence the answer should be Yes.

For question 2:
Option 1: Yes, as you can see, the PCI (Excluding FPP and Private Funds) didnt change for the farmers. However, the consumption changed by a lot after the introduction of FPP. That leads me to belive the answer should be Yes.

Option 2: No, there is no comparison of between the funds received by Private sources and by FPP sources and how much each conbtributed to the change of Consumption.

Option 3:This study is strictly regarding Taiwan as mentioned in the Program Brief.

Question 3:
Option 1: This is not true. Smallest Private fund were received in the year of 1998, while the largest FPP received was in 1999. (Eliminate)
Option 2: True. Largest Private fund were received in 1993, which is earlier than the start of FPP program 1995. (Hold on this ans)
Option 3: It might be true till 1997, however, the difference reduced  to <15000, from 1998. Hence it doesnt apply to  EVERY YEAR. (Tricky GMAT  ) (Eliminate)
Option 4: Not true, sunce there was a drop in FPP Payments from 1999 to 2000 as per Trends Chart. (Eliminate)
Option 5: Not True. As you can see in the Statistical Tab, the PCI for Non Farmers has increased during the study period. So it has had effect on consumption. 
We cant directly infer if the FPP introduction for Farmers is the sole reason for rice in PCC.(Eliminate)
( P.S  If the PCI for Non farmers hadnt changes between the 2 period, and yet still the PCC had increased, then it would have tempted me to mark this answer as YES)

So answer for Question 3 is Option 3. 
Drop a Kudos!

KarishmaB · Answer

2. For each study described, select Yes if the study would likely corroborate one or more findings indicated in the last paragraph of the Farmer's Pension Program discussion. Otherwise select No.

Findings:
- Significant but incomplete crowding out in that one FPP dollar replaced 30 to 39 cents of private funds. So for every $1 that farmers got as pension, the children reduced the amount they gave their parents by 30 to 39 cents. 
- A significant, positive effect of the FPP on recipients' household consumption spending. Farmers started spending more after getting pension.

We need to find the study that will further corroborate these findings, further support these findings.

A study showing that the household consumption spending of farmers receiving FPP benefits increased after the introduction of the FPP

Yes, the findings do say that there was a significant positive effect of the FPP on spending. So if another study shows that the household consumption spending of farmers receiving FPP benefits increased after the introduction of the FPP, it will support the findings.

ANSWER: YES

A study indicating that private funds induce more household consumption among pension-aged people than FPP payments do

Our findings say that FPP has positive effect on spending. Whether private funds induce more spending that FPP, the findings do not say. Hence this does not corroborate our findings.

ANSWER: NO

A study about the effectiveness of public pensions in reducing poverty in parts of Asia other than Taiwan

Poverty has no been defined by the question. We don't know whether FPP is effective and we are discussing Taiwan only.

ANSWER: NO

Sb1131 · Answer

Sajjad1994 , can you please post explanation for Q1, I see the max jump of around 10 in 1996-97 , and that is one of the 3 years in the given option.Not sure why this is wrong.Thanks

Apoorvisb · Answer

because if you see the graph the greatest change happened in 1998 and graph was alost straight from 1995 to 1997.

Runjhun26 · Answer

Sajjad1994  Please share the explanation to questions 2 & 3

nazii · Answer

Question 3
B. is referring to year 1993: we can see that farmers received the largest average amount of private funds in this year. Moreover, FPP has not yet been introduced and its amount is zero. 
so, the year 1993, in which farmers received the largest fund, was earlier than the year in which the FPP was Introduced (after 1994, the chart for FPP is increasing and starting)

nazii · Answer

Question 1
 in order to solve the questions in this section I used TAB: TRENDS and I used the trends in the lines
a. answer is NO. Looking at the graph for non-farmers , the value for 1995 is 60 and for 1997 is 70. So, we see it has changed
b. looking at graph for average private funds received by farmers 1995-1997, I see no change in the trend, it is quite stable, let a lone great change! So, again answer is NO.
C, this part , I checked the tab: Statistical Table: in the first row, Per capita income among farmers ages 66 and up : by comparing the value (109733 & 109868) I can see no change, so, answer is YES

MihirBathia · Answer

need help with this set, please post solutions and explanations

curiousPope · Answer

does anyone have explanation to this question?
Thanks

Robo_123 · Answer

Hi  KarishmaB  could you please explain this.
1. 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.YesNo 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.

KarishmaB · Answer

The question discusses crowding out - when Taiwan farmers were given pension, how much reduction did they see in the amount they got from their children?
Did their children feel that now the parents have enough money so they didn't need to help out or did the children continue the same support such that parents earning increased due to pension?

The study compared data from 1990 to 2001 for two groups:
- Old Farmers who received FPP benefits beginning in 1995
- Old Nonfarmers who did not receive FPP benefits.

Results from the study:
- Significant but incomplete crowding out in that one FPP dollar replaced 30 to 39 cents of private funds. So for every $1 that farmers got as pension, the children reduced the amount they gave their parents by 30 to 39 cents. So if farmers got $100 as pension, their children started reducing the money they gave them by $30 to $39.
- A significant, positive effect of the FPP on recipients' household consumption spending. Farmers started spending more after getting pension.

1. 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.

Average private funds received by nonfarmers did not change during the first three years of the program (1995-1997).

Funds received by non farmers in 95 - 97 are shown only in tab 3. From 96 to 97, the private funds received by non farmers increased (from 60 to 70)

ANSWER: NO

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).

Again in tab 3, from 95 to 97, the private funds received by farmers did not change at all (solid squares represent private funds received by farmers). They stayed steady at 60.

ANSWER: NO

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.

Per capita income is given in tab 2. It does not include FPP and pension. So this could be income from their jobs or assets say from farming, from their bank deposits etc. 
For farmers, per capita income was 109,733 in 90-94 and 109,868 from 99-01. Hence the per capita income before and after the program did not change.
 ANSWER: YES

KarishmaB · Answer

3. Which one of the following statements about the FPP study receives the strongest support from the information provided?

The year in which the farmers included in the study received the smallest average amount of private funds was the same year in which the nonfarmers received the largest average amount of private funds.

Private funds received are shown in tab 3. 
 year in which the farmers included in the study received the smallest average amount of private funds - 1998
year in which the nonfarmers received the largest average amount of private funds - 2001

Incorrect.

The year in which the farmers included in the study received the largest average amount of private funds was earlier than the year In which the FPP was Introduced.

year in which the farmers included in the study received the largest average amount of private funds - 1993
FPP was introduced in 1995. 
So this is correct. There are no two ways about it. Hence mark the answer here and move on in the actual exam.

ANSWER

For every year included in the graph, average private funds received by the farmers included in the study exceeded average FPP payments by at least NT$15,000.

Not true. In 1999, FPP payments were about 48k (certainly more than 45k) and private funds received were 60k.

The average FPP payment to farmers increased every year included in the study.

Not correct. It decreased in 2000 compared with 1999.

The increase in per capita consumption by nonfarmers is a direct consequence of FPP funding to farmers.

We don't know why per capita consumption of nonfarmers increased. We have no data on the reason behind the increase.

DUMDUM21 · Answer

Question 3
B. year in which the farmers included in the study received the Largest amount of private funds - 1993; 
Note the key word here is EARLIER NOT PREVIOUS
so, the year 1993, in which farmers received the largest fund, was earlier than the year in which the FPP was Introduced (1995)

Komal324 · Answer

Hi, Arjun

Thank you for sharing the responses on the questions. I wanted to request you to kindly elaborate on Question 1, Option 3 as to how it is YES? It would be great if you can a detailed explanation on it.

Thanking you in advance!

MalachiKeti · Answer

Hi for Q2 
Can someone pls mention which tab to see and which exact line as reference?

ki870409 · Answer

Lol even Taiwanese could not get this right

amoeba99 · Answer

For Q1, option 3:

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.

We have data in table from 1990-94 and 1999-2001. 
 However FPP was introduced in 1995 and we do not have the data around it. So how can we conclude if per capita income was affected by *introduction* of FPP or not?

KarishmaB · Answer

It means whether there was a difference between 'before FPP' and 'after FPP.' It does not mean at the point in time when FPP first came in. Government programs take years to implement. Their effects can be properly seen only after a few years.

In an economic context, crowding out refers to the replacement of priv

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In an economic context, crowding out refers to the replacement of priv

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