The first requirement to understand this concept isto know how Net Domestic Product is Divided between Private sector and Government.
NDPfc can be divided in to two parts :- Part of NDPfc accruing to Private sector and Part of NDPfc accruing to Government Sector.
NDPfc = Part of NDPfc accruing to Private sector + Part of NDPfc accruing to Government Sector.
Part of NDPfc accruing to Government Sector = Savings of Non Departmental enterprises + Income of Government from Property and Entrepreneurship
Part of NDPfc accruing to Private sector = NDPfc - Part of NDPfc accruing to Government Sector.
Part of NDPfc accruing to Private sector = NDPfc – (Savings of Non Departmental enterprises + Income of government from Property and Entrepreneurship)
After getting through this concept now private Income can be calculated easily.
In order to determine Private Income you need to remember
Private Income= Part of NDPfc accruing to private sector + Net factor Income from Abroad + Current Transfer from Government + Net Current Transfer from Rest of World + Interest on Public Debt
Private Income= (NDPfc - Part of NDPfc accruing to Government) + Net factor Income from Abroad + Current Transfer from Government + Net Current Transfer from Rest of World + Interest on Public Debt
Private Income= NDPfc – (Savings of Non Departmental enterprises + Income of government from Property and Entrepreneurship) + Net factor Income from Abroad + Current Transfer from Government + Net Current Transfer from Rest of World + Interest on Public Debt
This way private Income can be determined depending on the requirement of the situation.
· Interest on public debt may be given as Interest on National Debt or Public debt Interest or National Debt Interest.
Now to determine Personal Income.
Personal Income = Private Income – Corporation Tax – Undistributed Profits
Undistributed Profits may be given as Net retained earnings of private sector enterprises or savings of private sector enterprises or corporate savings
Personal disposable Income = Personal Income- Direct tax paid by households – Miscellaneous receipts of Government administrative undertakings
Direct tax paid by household may be given as personal direct tax.
is net current transfers from rotw the same as net current transfers from abroad?
ReplyDeleteoff course yes. Both the terms are interchangeable.
ReplyDeleteWhy is income tax excluded from personal income even though it is a part of the persons income
ReplyDeletebecause you are forced to pay Income Tax . You may not spend it. So It is a personal income but not Disposable Income. Disposable Income =P I- Income tax
DeleteIncome tax is the part of personal income but it is not the part of personal disposable income, so it has to be excluded from personal income to arrive at personal disposable income.
ReplyDeletei got through a question plz answer its tough to from (s. chand)
ReplyDeletejzt answer what is-interest paid by households and interest received by households is treated as??
--we need to find personal income and private income accruing to domestic sector is mentioned
is there any use of (interest paid by households and interest received by households is treated as)or is it treated as ((Miscellaneous receipts of Government administrative undertakings))
Any interest which is generated on production is treated as factor income and if interest is generated on consumption it is Transfer Income.
DeleteWhen households borrows they do it for the purpose of consumption so any interest paid by them is not included in national income as it is transfer income.
Govt borrows for the purpose of consumption so interst received on public debt by households is transfer income for households. Bank invest funds so the interest paid by them to household is factor income.
Misc receipts of govt are fees ,challans ,license fee etc.
Plz tell that What exactly is interest on national debt and why it is added in NNP @ fc accrue to private sector to calculate private income
ReplyDeleteIs capital transfers from rest of the world included in calculating private income??
ReplyDelete