1. Three people climb quickly into one of the boats. It is the Farriner family from Pudding Lane.

2. Three people climb quickly into one of the boats. They are the Farriner family from Pudding Lane.
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Which one is right? Do we have to use 'it' or 'they' when we refer to 'the Farriner family'?

Both are right.

Doesn't 'they'refer to 'three people'?

If #1 is right, what does 'it' refer to in the second sentence in Sentence 1?

Both sentences can be correct, depending on the intended meaning and context.

1. "Three people climb quickly into one of the boats. It is the Farriner family from Pudding Lane."

In this sentence, the pronoun "it" is used to refer back to the action of people climbing into the boat. The focus is on the action rather than specifically on the family. This usage suggests that the emphasis is not on the individuals but rather on the fact that someone is getting into the boat. The mention of the Farriner family from Pudding Lane provides additional information about the people boarding the boat.

2. "Three people climb quickly into one of the boats. They are the Farriner family from Pudding Lane."

In this sentence, the pronoun "they" is used to directly refer to the people, specifically the Farriner family. The emphasis is on the individuals themselves, indicating that the family members are the ones boarding the boat. The mention of the Farriner family from Pudding Lane immediately clarifies who the individuals are.

The choice between using "it" or "they" depends on whether the focus is on the action (the boarding of the boat) or on the individuals (the Farriner family). Therefore, both options can be correct, but the context and intended meaning should guide the choice of pronoun.