Plan: Concerned about the welfare of its senior citizens,

Question

Plan: Concerned about the welfare of its senior citizens, the government of Runagia decided two years ago to increase by 20 percent the government-provided pension paid to all Runagians age sixty-five and older.

Result: Many Runagian senior citizens are no better off financially now than they were before the increase.

Further information: The annual rate of inflation since the pension increase has been below 5 percent, and the increased pension has been duly received by all eligible Runagians.

In light of the further information, which of the following, if true, does most to explain the result that followed implementation of the plan?

(A) The majority of senior citizens whose financial position has not improved rely entirely on the government pension for their income.

(B) The Runagian banking system is so inefficient that cashing a pension check can take as much as three weeks.

(C) The prices of goods and services that meet the special needs of many senior citizens have increased at a rate much higher than the rate of inflation.

(D) The pension increase occurred at a time when the number of Runagians age sixty-five and older who were living below the poverty level was at an all-time high.

(E) The most recent pension increase was only the second such increase in the last ten years.

KapTeacherEli · Accepted Answer

Hi Betterscore,

Despite the oddness of the question stem and the unusual formatting of the stimulus, we shouldn't be concerned. Reading and  identifying the question stem  makes it clear that this is an "explain" type question, which means that there is a mystery or contradiction that we are attempting to resolve. The question stem also tells us WHAT that mystery is: why did this plan did not result in what was expected?

So, we should  untangle the stimulus . What's the mystery of the plan? Well, the elderly citizens of Runagia are getting substantially more pension money. But, this money isn't actually helping them! They are no better off.

When you predict an answer to an explain question (and you should always  predict the answer! ), sometimes a single solution will leap into your head, but other times multiple resolutions present themself. On first read through, I immediately thought of two explanations: 1) the pensions make up way too small a proportion of Runagian retirement plans to help, so the increase is useless, or 2) some expense, tax, or lifestyle change offset the extra money.

With a few well-thought, if loose, predictions, we can move to the final step:  evaluating the answer choices . Sure enough, (C) matches our prediction exactly, and is the correct answer. Note that our other prediction wasn't useless; it is 180 degrees the opposite of (A), letting us quickly rule out this potentially distracting trap answer!

Thanks for posting this question, and good luck on your studies!

Regards,

thevenus · Answer

The galloping price hike of the goods.more than the inflation could not get adjusted by the increased pension.
So, (C)

prepat · Answer

Can some one shed some light on A again ? 
Why is A eliminated ?
It seems that persons whose sole source of income is pension will not be better off than those who have multiple sources of income. So A can still play a role in explaning the paradox.

brugopal · Answer

Hey There,

Option A just says that the only source of income for pensioners is government pension and it is not enough to bridge the gap between pension amount increase and financial improvement.

So, it is eliminated by PoE. Hope this helps.

ravikrishna1979 · Answer

But in Option C the price increase of the items used by senior citizens could be less than 8%, because it is just mentioned that the rate is higher than inflation. So if it is far less than the % increase of welfare then the argument fails. Can some please explain.

sayantanc2k · Answer

Unlike in  assumption type questions , in which "must be true" kind of reasoning needs to be satisfied, in  explain discrepency type questions  (like this one), one does not need to CONFIRM the result; a statement that COULD be a possible explanation would suffice. Here option C could be a possible explanation (IF the rate of increase of price is high enough so as to offset the effect of pension rise), hence is the right answer.

sayantanc2k · Answer

Responding the following question received in a PM:
"When the argument said that inflation is not much high, then how come few goods of old people got increased?
Doesn't inflation cover the prices of different products/goods?"

The inflation rate is calculated taking into account the price change of a basket of specific items - the basket does not contain ALL the items in the economy, but only some that the economists consider representative of the complete economy. "Few goods of old people" may not be in the basket.

adkikani · Answer

Hi  GMATNinja

Can you explain how we ruled out (E)

ydmuley · Answer

Hello  adkikani  Let me try to explain why E is incorrect if you don't mind.

(E) The most recent pension increase was only the second such increase in the last ten years.

First of all, we are not sure of:
 - How much was the initial pension?
 - How much did the pension increase for the first time? It may be 5% or it may be 100%

As we are not sure of above information, we cannot conclude that the second increase will not help the senior citizens. The only thing what we know from the passage is that the second increase could have made the life the senior citizens better. If it is not we need to find reasons for the same based on the given information in the passage.

Hope this helps.

TheUltimateWinner · Answer

Hello,
My honorable instructor,
In the argument, then word "many" may indicate 80 senior citizens out of 100 people. But in the answer choice (C), "many" could be 79 senior citizens out of 100. So, how C will show it's reasoning that WHY this 1 (80-79=1) senior citizen is still financially  no  better off?

AndrewN · Answer

Hello, Asad. I think you read over the  no  in  no better off , which indicates that  most  senior citizens are  not  better off than they were before. It does not matter whether one senior citizen is, in fact, better off, since the majority are worse for wear, so to speak.

Please let me know if you have further questions.

- Andrew

TheUltimateWinner · Answer

MentorTutoring 
Thank you for your reply.
Suppose,
In C, the word "many" indicates senior citizens like  Mr. X, Mr. Y, Mr. Z . In the argument, the word "many" may indicate senior citizens like  Mr. X, Mr. Y, and Mr. Z , and Mr. Asad. Here, the highlighted part is overlapping each other. So, my question is how will C guarantee that Mr. Asad (discussed in the argument NOT in the answer choice C) is financially no better of? I just want to mean that if argument talks about 1 crore peoples, then I must find out a reason, which will definitely prove this 1 crore peoples discrepancy. In short, my understanding is that the argument's "many" and the answer choice's "many" may or may not be the SAME thing. 
 Edited in the previous post...  
Thanks__

AndrewN · Answer

You love your guarantees,  Asad . There is no guarantee, via the passage, question, or answer, that Mr. Asad in your scenario would be no better off, financially, just that this vague  many  will be no better off, financially. Any single individual could be left out of the group, and the argument would remain intact as long as  others  find themselves in a financial stalemate (or worse). Non-committal language is often a sign of promise in the answer choices, since vague statements are harder to argue against, while specific statements are easier to pick apart and potentially disprove. In short, it does not really matter whether  many  refers to the exact same group (i.e. individuals) between the passage and the answer, as long as the  many  refers to the target group of, in this case, senior citizens of Runagia. The two vital pieces of information match, so that is the end of the line of logic. Keep your approach to these GMAT™ questions simple, and you will find the task much easier. An overwrought mind will find holes in anything.

Cheers,
Andrew

CEdward · Answer

Plan: Concerned about the welfare of its senior citizens, the government of Runagia decided two years ago to increase by 20 percent the government-provided pension paid to all Runagians age sixty-five and older.

Result: Many Runagian senior citizens are no better off financially now than they were before the increase.

Further information: The annual rate of inflation since the pension increase has been below 5 percent, and the increased pension has been duly received by all eligible Runagians.

In light of the further information, which of the following, if true, does most to explain the result that followed implementation of the plan?

(A) The majority of senior citizens whose financial position has not improved rely entirely on the government pension for their income. 
-this doesn’t resolve the paradox…if it’s true that the senior citizens whose financial position relies entirely on the pension why would it be the case that many seniors are no better off? Any help is help.

(B) The Runagian banking system is so inefficient that cashing a pension check can take as much as three weeks.
-so what happens after three weeks? Presumably they’ve cashed a check

(C) The prices of goods and services that meet the special needs of many senior citizens have increased at a rate much higher than the rate of inflation.
Correct

(D) The pension increase occurred at a time when the number of Runagians age sixty-five and older who were living below the poverty level was at an all-time high.
-this actually gives us reason to think that they WOULD be better off financially

(E) The most recent pension increase was only the second such increase in the last ten years.
-what happened in the past is irrelevant…this still doesn’t help us understand why the CURRENT pension increase made them no better off financially

KanikaJain · Answer

I am still not able to understand the reason for choosing C over D. Please help.
Thanks

ManifestDreamMBA · Answer

KanikaJain  , sharing my thoughts

Considering option D  - The question mentions finally better, it doesn't mean above poverty line. Just think of better in literal sense. Say BPL = 10. People had 1, and after the 20% increase had 1.2. This is still better than before. One should not assume as finally better = above poverty line.

Also, another thing to consider is timing. It has been mentioned in a way that suggests the policy went into action when people below BPL was a all time high. But we don't care when it went into effect.

Considering option C  - We only care for a reason which explains why people are still not better off after getting 1.2. C) explains that some goods which have costed say 0.1 before (leaving 1- 0.1 = 0.9) are costing say 0.4 now, leaving (1.2 - 0.4 = 0.8), which is less than what they had before

Sivathmika · Answer

Hi, but the further info is talking about the rate of inflation, as the prices were increased, senior citizens were not coping up with the expenses. So  option C is the answer . Hope it helps!

RobertVericPrep · Answer

The first step is always to identify the mystery we are trying to explain. This is an Explain the Paradox question, so there is no conclusion to strengthen or weaken. Instead, we are given a surprising result and asked to identify the answer choice that makes the two facts compatible.

Before looking at the answer choices, make two observations about the result. First, the result begins with the word "Many." Many does not necessarily mean all. In fact, it does not even necessarily mean most. "Many" could refer to a relatively small portion of the senior population. Therefore, we do not need an answer that explains why every senior citizen failed to benefit from the plan. We only need an answer that explains why this happened to many of them.

Second, the phrase "no better off financially" is intentionally a little vague. Although the plan concerns a 20% increase in government pensions, whether someone is "better off financially" depends on more than just the size of that pension. A person's overall financial position depends on all sources of income as well as expenses. Thus, an increase in pension income could easily be offset by increases in expenses or by changes affecting other sources of income.

Now let's examine the choices.

Choice (A) tells us that many of the seniors who did not improve rely entirely on the government pension for their income. If anything, this makes the result more puzzling. Someone who relies exclusively on a pension would seem more likely to benefit from a 20% increase than someone who has many other sources of income. This choice does not explain the paradox.

Choice (B) says that cashing a pension check can take as long as three weeks. Although inconvenient, a delay in receiving money does not mean someone is financially no better off. They still receive the larger pension eventually. This does not resolve the discrepancy.

Choice (C) explains the paradox perfectly. The problem tells us that overall inflation has remained below 5%, but that does not mean every category of goods and services has increased in price by less than 5%. Seniors often spend a disproportionate amount of their income on medical care, prescription drugs, and other services tailored to their needs. If the prices of those particular goods and services increased much faster than overall inflation, then the additional pension income could easily be offset by higher expenses. As a result, many seniors would be no better off financially despite receiving a 20% increase in their pensions.

Choice (D) tells us that many seniors were living below the poverty level when the increase occurred. This describes the financial condition of seniors before the plan but does not explain why the pension increase failed to improve their financial position.

Choice (E) merely states that this was only the second pension increase in ten years. The frequency of past pension increases has no bearing on why many seniors were no better off after this particular increase.

The correct answer is (C) because it provides a plausible reason why a substantial increase in pension income failed to improve the financial position of many senior citizens.

guddo · Answer

Plan: Concerned about the welfare of its senior citizens, the government of Runagia decided two years ago to increase by 20 percent the government-provided pension paid to all Runagians age sixty-five and older. 
 
Result: Many Runagian senior citizens are no better off financially now than they were before the increase.
 
 Further information: The annual rate of inflation since the pension increase has been below 5 percent, and the increased pension has been duly received by all eligible Runagians.
 
 In light of the further information, which of the following, if true, does most to explain the result that followed implementation of the plan?

The puzzle is that pensions increased by 20 percent, inflation was below 5 percent per year, and everyone received the higher pension, yet many seniors are not financially better off.  The best explanation  must show why seniors’ actual costs rose enough to cancel out the  pension increase .

(A) The majority of senior citizens whose financial position has not improved rely entirely on the government pension for their income.

This does not explain the result. If they rely entirely on the pension, a 20 percent increase should make them better off unless their costs also increased.

(B) The Runagian banking system is so inefficient that cashing a pension check can take as much as three weeks.

This may cause delay, but it does not explain why seniors are no better off financially after two years, especially since the increased pension was received.

(C) The prices of goods and services that meet the special needs of many senior citizens have increased at a rate much higher than the rate of inflation.

This is correct. General inflation was below 5 percent, but seniors may mainly buy goods and services whose prices rose much faster. So their higher pension could be offset by higher senior-specific expenses.

(D) The pension increase occurred at a time when the number of Runagians age sixty-five and older who were living below the poverty level was at an all-time high.

This does not explain why they are no better off after the increase. It describes their situation before or at the time of the increase.

(E) The most recent pension increase was only the second such increase in the last ten years.

This does not explain the result. The frequency of past increases does not show why this 20 percent increase failed to improve many seniors’ financial position.

Answer: (C)

Plan: Concerned about the welfare of its senior citizens,

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Plan: Concerned about the welfare of its senior citizens,

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