Answer to Question #120844 in Macroeconomics for Sakshi

Question

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 firm/government Or by the firms/government to the household. The personal disposable income of the household is Rs. 1200 crores. The personal income takes paid by them are Rs. 600 crores and the value retained earnings of the firms and government is valued at Rs. 200 crores. What is the value of transfer payments made by the government and firms to the households.

Answer 1

$NNP$$fc$ $=RS.1900$ $Crores$

$Personal$ $Disposable$ $Income(PDI)$ $=Rs.1200$ $crores$

$Personal$ $income$ $tax$ $=Rs.600$ $crores$

$Value$ $of$ $retained$ $earnings$ $=Rs.200$ $crores$

$PDI=NNP$$fc$ $-$ $value$ $of$ $retained$ $earnings$ $and$ $government$ $+$ $value$ $of$ $transfer$ $payments$ $-personal$ $tax$

$1200=1900-200+value$ $of$ $transfer$ $payments-600$

$1200=1100 +value$ $of$ $transfer$ $payments$

$Value$ $of$ $transfer$ $payments$ $=1200-1100$

$=Rs.100$ $crores$.