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Which of the following are excluded from the National Income to calculate Personal Income?
1. Corporate Tax
2. Personal Tax payments
3. Transfer payments to the households from the Government
4. Undistributed profits
Select the correct answer using the code given below.
- a)1 and 4 only
- b)1, 3 and 4 only
- c)2 and 3 only
- d)2, 3 and 4 only
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Which of the following are excluded from the National Income to calcul...
The correct answer is option 'A' - 1 and 4 only.
To understand why, let's first define National Income and Personal Income:
National Income: National income is the total value of all goods and services produced within a country's borders in a specific period of time, usually a year. It includes the income earned by individuals, businesses, and the government.
Personal Income: Personal income is the income received by individuals from all sources, including wages, salaries, rent, interest, and transfer payments, after deducting personal income tax payments.
Now, let's analyze each option:
1. Corporate Tax: Corporate taxes are taxes paid by businesses on their profits. They are excluded from the calculation of personal income because they are not directly received by individuals.
2. Personal Tax payments: Personal tax payments, such as income tax, are included in the calculation of personal income. They represent the amount of income that individuals have to pay to the government.
3. Transfer payments to households from the Government: Transfer payments are payments made by the government to individuals or households, such as social security benefits, unemployment benefits, and welfare payments. These transfer payments are included in the calculation of personal income because they represent income received by individuals.
4. Undistributed profits: Undistributed profits are the profits earned by corporations that are not distributed to shareholders as dividends. They are excluded from the calculation of personal income because they are not directly received by individuals.
Based on the above analysis, it can be concluded that corporate tax and undistributed profits are excluded from the national income to calculate personal income. Therefore, the correct answer is option 'A' - 1 and 4 only.
To understand why, let's first define National Income and Personal Income:
National Income: National income is the total value of all goods and services produced within a country's borders in a specific period of time, usually a year. It includes the income earned by individuals, businesses, and the government.
Personal Income: Personal income is the income received by individuals from all sources, including wages, salaries, rent, interest, and transfer payments, after deducting personal income tax payments.
Now, let's analyze each option:
1. Corporate Tax: Corporate taxes are taxes paid by businesses on their profits. They are excluded from the calculation of personal income because they are not directly received by individuals.
2. Personal Tax payments: Personal tax payments, such as income tax, are included in the calculation of personal income. They represent the amount of income that individuals have to pay to the government.
3. Transfer payments to households from the Government: Transfer payments are payments made by the government to individuals or households, such as social security benefits, unemployment benefits, and welfare payments. These transfer payments are included in the calculation of personal income because they represent income received by individuals.
4. Undistributed profits: Undistributed profits are the profits earned by corporations that are not distributed to shareholders as dividends. They are excluded from the calculation of personal income because they are not directly received by individuals.
Based on the above analysis, it can be concluded that corporate tax and undistributed profits are excluded from the national income to calculate personal income. Therefore, the correct answer is option 'A' - 1 and 4 only.
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Which of the following are excluded from the National Income to calculate Personal Income?1. Corporate Tax2. Personal Tax payments3. Transfer payments to the households from the Government4. Undistributed profitsSelect the correct answer using the code given below.a)1 and 4 onlyb)1, 3 and 4 onlyc)2 and 3 onlyd)2, 3 and 4 onlyCorrect answer is option 'A'. Can you explain this answer?
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