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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 t...
Explanation:
The given statements are related to the concepts of Personal Income and Private Income. Let us understand these concepts in detail:
Personal Income:
Personal income is the income received by individuals/households from all sources such as wages, salaries, rent, interest, dividends, profits, etc. It is the part of the national income that is received by the households for their personal consumption and savings. Personal income can be calculated by subtracting undistributed corporate profits, corporate taxes, and social security contributions from National Income.
Private Income:
Private income is the total income received by the private sector, which includes households and firms. It is the sum of factor incomes and transfer incomes received from all sources by the private sector. Factor incomes include wages, salaries, rent, interest, and profits earned by the private sector, while transfer incomes include pensions, unemployment benefits, social security benefits, etc.
Therefore, the correct statement is:
Both 1 and 2: Personal income is the part of the National Income which is received by the households and Private income is the total of factor incomes and transfer incomes received from all sources by the private sector.
Conclusion:
In a nutshell, Personal Income represents the income received by households, while Private Income represents the total income received by the private sector. Both these concepts are important to understand the distribution of income in the economy.
The given statements are related to the concepts of Personal Income and Private Income. Let us understand these concepts in detail:
Personal Income:
Personal income is the income received by individuals/households from all sources such as wages, salaries, rent, interest, dividends, profits, etc. It is the part of the national income that is received by the households for their personal consumption and savings. Personal income can be calculated by subtracting undistributed corporate profits, corporate taxes, and social security contributions from National Income.
Private Income:
Private income is the total income received by the private sector, which includes households and firms. It is the sum of factor incomes and transfer incomes received from all sources by the private sector. Factor incomes include wages, salaries, rent, interest, and profits earned by the private sector, while transfer incomes include pensions, unemployment benefits, social security benefits, etc.
Therefore, the correct statement is:
Both 1 and 2: Personal income is the part of the National Income which is received by the households and Private income is the total of factor incomes and transfer incomes received from all sources by the private sector.
Conclusion:
In a nutshell, Personal Income represents the income received by households, while Private Income represents the total income received by the private sector. Both these concepts are important to understand the distribution of income in the economy.
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Community Answer
Consider the following statements: Personal Income is the part of t...
Personal Income is the part of the National Income which is received by the households.
The formula for calculating Personal Income (Pl) is:
- Personal income (Pl) = National Income - Undistributed profits (profits utilised by manufacturers for further production) - Net interest payments made by households - Corporate tax + Transfer payments to the households from the Government and firms( old-age pensions, unemployment compensation, relief payment etc.). So, statement (1) is correct.
- Private income is the total of factor incomes and transfer incomes received from all sources by the private sector (private enterprise and households) within and outside the country. The formula for Private Income is: Private Income= Factor income from net domestic product accruing to the private sector + National debt interest+ Net factor income from abroad + Current transfers from Government + Other net transfers from the rest of the world. The concept of private income is broader than personal income because private income consists of personal income + profit tax + undistributed profit. So, statement (2) is correct.
Therefore, the correct answer is c.
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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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