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Consider the following statements:
- Personal Income is the part of the National Income which is received by the households.
- Private income is the total of factor incomes and transfer incomes received from all sources by the private sector.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Consider the following statements: Personal Income is the part of the ...
Explanation:
The given statements are related to the concepts of personal income and private income. Let's understand each statement in detail:
Statement 1: Personal Income is the part of the National Income which is received by the households.
- Personal income refers to the income received by individuals or households. It includes various sources of income such as wages, salaries, rent, interest, and dividends.
- National income, on the other hand, refers to the total income earned by all individuals and entities in a country during a specific period.
- Personal income is a part of national income as it represents the income received by households from the total national income. However, it does not include income earned by businesses, government entities, or foreign individuals.
Statement 2: Private income is the total of factor incomes and transfer incomes received from all sources by the private sector.
- Private income refers to the income received by the private sector, which includes individuals, households, and privately-owned businesses.
- Factor incomes include wages, salaries, rent, interest, and profits earned by the private sector from the productive factors of land, labor, capital, and entrepreneurship.
- Transfer incomes refer to incomes that are received without any corresponding production or exchange of goods and services. These include social security benefits, pensions, unemployment benefits, and subsidies received by the private sector.
Analysis:
- Statement 1 is correct as personal income represents the income received by households, which is a part of the national income.
- Statement 2 is also correct as private income comprises both factor incomes and transfer incomes received by the private sector from all sources.
Conclusion:
Both statements 1 and 2 are correct. Personal income is the part of national income received by households, while private income includes factor incomes and transfer incomes received by the private sector from all sources. Hence, option C, "Both 1 and 2" is the correct answer.
The given statements are related to the concepts of personal income and private income. Let's understand each statement in detail:
Statement 1: Personal Income is the part of the National Income which is received by the households.
- Personal income refers to the income received by individuals or households. It includes various sources of income such as wages, salaries, rent, interest, and dividends.
- National income, on the other hand, refers to the total income earned by all individuals and entities in a country during a specific period.
- Personal income is a part of national income as it represents the income received by households from the total national income. However, it does not include income earned by businesses, government entities, or foreign individuals.
Statement 2: Private income is the total of factor incomes and transfer incomes received from all sources by the private sector.
- Private income refers to the income received by the private sector, which includes individuals, households, and privately-owned businesses.
- Factor incomes include wages, salaries, rent, interest, and profits earned by the private sector from the productive factors of land, labor, capital, and entrepreneurship.
- Transfer incomes refer to incomes that are received without any corresponding production or exchange of goods and services. These include social security benefits, pensions, unemployment benefits, and subsidies received by the private sector.
Analysis:
- Statement 1 is correct as personal income represents the income received by households, which is a part of the national income.
- Statement 2 is also correct as private income comprises both factor incomes and transfer incomes received by the private sector from all sources.
Conclusion:
Both statements 1 and 2 are correct. Personal income is the part of national income received by households, while private income includes factor incomes and transfer incomes received by the private sector from all sources. Hence, option C, "Both 1 and 2" is the correct answer.
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Consider the following statements: Personal Income is the part of the National Income which is received by the households. Private income is the total of factor incomes and transfer incomes received from all sources by the private sector.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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