Net National Product at Factor Cost of a particular country in a year is Rs. 1900 crores. There are no interest payments made by the households to the firms/government to the households. The personal disposable income of the households is 1200 crores. The personal income taxes paid by them is 600 crores and the value of retained earnings of the firms and government is valued at 200 crores. What is the value of transfer payments made by the government and firms to the households?

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Solution

Given, Personal Disposable Income (PDI) = 1200 crores

Personal Tax (Direct tax) = 600 crores

Personal Income = PDI + Direct taxes

= 1200 + 600 = 1800 crores

Private Income = Personal Income + Retained savings

= 1800 + 200 = 2000 crores

$∴ {NNP}_{F C}$ = Private Income - Transfer payments

1900 = 2000 - TP

TP = 100 Crores

Value of Transfer Payments = 100 crores

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From the following data, calculate Personal Income and Personal Disposable Income.

		Rs (crore)
(a)	Net Domestic Product at factor cost	8,000
(b)	Net Factor Income from abroad	200
(c)	Undisbursed Profit	1,000
(d)	Corporate Tax	500
(e)	Interest Received by Households	1,500
(f)	Interest Paid by Households	1,200
(g)	Transfer Income	300
(h)	Personal Tax	500

From the following data calculate personal disposable income:

$\begin{matrix} (Rs in Crores) (i) & Net domestic product at factor cost accruing to private sector & 800 (ii) & National Debt interest & 50 (iii) & Current transfers from government & 70 (iv) & Savings of private corporate sector & 200 (v) & Corporation tax & 40 (vi) & Direct taxes paid by households & 30 (vii) & Depreciation & 60 (viii) & Net factor income from abroad & 20 (ix) & Net current transfers to abroad & (-) 10 \end{matrix}$

Q. In a two-sector economy model factor income of the households is equal to factor payments by firms.

(a) Is it true to say that "capital formation is a stock variable"?

(b) Find National Income from the following data:

$\begin{matrix} (R s . C r o r e) (i) Direct purchases of households from domestic market & 1, 000 (i i) Plant and machinery purchased & 2, 500 (i i i) Residential construction & 1, 550 (i v) Investments by Government & 1, 550 (v) Exports by Firms & 700 (v i) Inventory investment & 400 (v i i) Net factor income to abroad & (-) 40 (v i i i) Depreciation & 150 (i x) NIT & (-) 20 (x) Imports by households & 200 \end{matrix}$