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Consider the following statements.
1. If we deduct the Personal Tax Payments and Non-tax Payments from Personal Income, we obtain what is known as the Personal Disposable Income
2. Personal Disposable Income is the part of the aggregate income which belongs to the households
Which of these statements are correct?
  • a)
    1 Only
  • b)
    2 Only
  • c)
    Both 1 and 2
  • d)
    None of them
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements. 1. If we deduct the Personal Tax P...
  • Personal Income (PI) ≡ NI – Undistributed profits – Net interest payments made by households – Corporate tax + Transfer payments to the households from the government and firms.
  • However, even PI is not the income over which the households have complete say. They have to pay taxes from PI. If we deduct the Personal Tax Payments (income tax, for example) and Non-tax Payments (such as fines) from PI, we obtain what is known as the Personal Disposable Income.
  • Thus Personal Disposable Income (PDI ) ≡ PI – Personal tax payments – Non-tax payments. Personal Disposable Income is the part of the aggregate income which belongs to the households.
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Community Answer
Consider the following statements. 1. If we deduct the Personal Tax P...
Explanation:

Statement 1: If we deduct the Personal Tax Payments and Non-tax Payments from Personal Income, we obtain what is known as the Personal Disposable Income.

Correct: Personal Disposable Income is calculated by subtracting Personal Tax Payments and Non-tax Payments from Personal Income. It represents the amount of income that households have available for spending and saving after deducting taxes and other compulsory payments.



Statement 2: Personal Disposable Income is the part of the aggregate income which belongs to the households.

Correct: Personal Disposable Income represents the income that households have available for consumption and saving. It is a part of the aggregate income, which includes income earned by all individuals and entities within an economy. Therefore, statement 2 is also correct.



Conclusion:

Both statements 1 and 2 are correct. Personal Disposable Income is the income that households have available for spending and saving after deducting taxes and other compulsory payments from their total income. It is a part of the aggregate income that belongs to the households.
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Consider the following statements. 1. If we deduct the Personal Tax Payments and Non-tax Payments from Personal Income, we obtain what is known as the Personal Disposable Income2. Personal Disposable Income is the part of the aggregate income which belongs to the householdsWhich of these statements are correct?a) 1 Onlyb) 2 Onlyc) Both 1 and 2d) None of themCorrect answer is option 'C'. Can you explain this answer?
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