In National Income (NI) accounts, Personal Income (PI) is defined as
- A.NI - undistributed profits - net interest payments made by households - corporate tax + transfer payments to the households from the government and firms
- B.NI - undistributed profits - corporate tax + transfer payments to the households from the government and firms
- C.undistributed profits - net interest payments made by households + transfer payments to the households from the government and firms
- D.undistributed profits - net interest payments made by households - corporate tax
Correct answer
Explanation
The correct answer is A. Personal Income is the part of National Income that actually reaches households, plus the transfers they receive.
National Income counts all factor incomes earned in the economy, but not all of it is paid out to people. Firms keep some profit as undistributed profits (retained earnings) and pay corporate tax to the government, so both are subtracted. Households also pay interest to firms and the government on their borrowing, so their net interest payments are subtracted. Finally, transfer payments such as pensions, scholarships and subsidies reach households without any service in return, so they are added. Subtracting personal taxes from Personal Income then gives Personal Disposable Income.
B is wrong because it leaves out the deduction of net interest payments made by households. C is wrong because it starts from undistributed profits instead of National Income and also drops corporate tax. D is wrong because it neither starts from National Income nor adds transfer payments.
Exam tip: PI = NI - undistributed profits - net interest by households - corporate tax + transfers; PDI = PI - personal taxes.
Practice Questions
View allThe Reserve Bank of India defines narrow money as
- A.CU (currency notes + coins) + DD (net demand deposits held by commercial banks)
- B.CU + DD + saving deposits with post office savings banks
- C.CU + DD + net time deposits of commercial banks
- D.CU + DD + net time deposits of commercial banks + total deposits of post offices
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Narrow money, M1, is currency held by the public plus net demand deposits with commercial banks, the most liquid forms of money.
Read the full explanation →The Khushkhera-Bhiwadi-Neemrana Investment Region is a node of the Delhi Mumbai Industrial Corridor in which state?
- A.Haryana
- B.Rajasthan
- C.Uttar Pradesh
- D.Gujarat
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Khushkhera, Bhiwadi and Neemrana lie in the Alwar and Khairthal-Tijara belt of north-eastern Rajasthan, close to the Delhi border and on the Delhi-Jaipur highway, and the region is already a cluster of automobile ancillary, electronics and Japanese-owned units.
Read the full explanation →The Vikram Udyogpuri integrated industrial township, a node of the Delhi Mumbai Industrial Corridor, lies near which city?
- A.Indore
- B.Ujjain
- C.Bhopal
- D.Jabalpur
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Vikram Udyogpuri is an integrated industrial township developed near Ujjain in Madhya Pradesh as one of the state's two nodes in the Delhi Mumbai Industrial Corridor.
Read the full explanation →The National Industrial Corridor Development Corporation works under which ministry?
- A.The Ministry of Road Transport and Highways
- B.The Ministry of Commerce and Industry
- C.The Ministry of Heavy Industries
- D.The Ministry of Railways
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The National Industrial Corridor Development Corporation, which was earlier the Delhi Mumbai Industrial Corridor Development Corporation, is the implementing agency of the National Industrial Corridor Development Programme and functions under the Department for Promotion of Industry and Internal Trade in that ministry.
Read the full explanation →Ponneri, Tumakuru and Krishnapatnam are the nodes of which industrial corridor?
- A.The Bengaluru Mumbai Economic Corridor
- B.The Chennai Bengaluru Industrial Corridor
- C.The Hyderabad Nagpur Industrial Corridor
- D.The East Coast Economic Corridor
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Its three nodes are Ponneri in Tamil Nadu, Tumakuru in Karnataka and Krishnapatnam in Andhra Pradesh, and the corridor is developed with Japanese cooperation to link the engineering and automobile cluster of Chennai with the electronics and machine tool cluster of Bengaluru.
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