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Concept of Private Income, Personal Income and Personal Disposable Income.

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.

Question paper of 2011 Delhi,All India,Foreign set

Question Paper of 2011 All India Set
Question Paper of 2011 Delhi Set
Question Paper of 2011 Foreign Set

Gross National Disposable Income GNDI & NNDI

GNDI = GNPmp + Net Current Transfer from Rest of The World
GNDI = GNPmp + NCTrow

The GNPmp can be determined with the help of Given data and then by putting in the formula we will be able to determine Gross National Disposable Income.
 If NDPfc is given
then
GNPmp = NDPfc + Depriciation +NFIFA + NIT


 If GDPfc is given
GNPmp = GDPfc + NFIFA + NIT


So
NNDI = NNPmp + NCT row

How to get edge in National Income Accounting (2)

How to determine National Income by Value Added Method


The first step is to determine Gross Value added at market Price.


GVAmp =Value of Output - Intermediate Consumption


Value of Output = Sales + Change In stock


Intermediate Consumption = Purchase of Raw material.


So


GVAmp =Sales + Change in Stock-Intermediate Consumption


Few things to remember -:


Sales = Domestic Sales+ Exports


Purchase of Raw material = Domestic Purchase + Imports


If Sales is given then no need to add exports as sales include Exports.

or the Expanded Farmula may be


GVAmp =Sales + Change in Stock-Intermediate Consumption


GVAmp = ( Domestic Sales + Exports) + Change in Stock-Intermediate Consumption


GVAmp = [( Domestic Sales + Exports) + Change in Stock] -(domestic purchase of raw material + Imports)
   Purchase of machinery  is not considered as intermediate consumption as it is not for resale.



If GVAmp of all the firms is determined in the economy it becomes GDPmp



NNPfc = GDPmp - Depriciation + NFIFA  - NIT