With reference to 'Personal Disposable Income (PDI)', consider the following statements: 1. It includes the income that households must pay as taxes to the government. 2. It is calculated by deducting personal tax payments and non-tax payments from Personal Income. 3. It is always less than Personal Income if personal taxes are positive. Which of the statements given above is/are correct?

The correct option is 2 and 3 only. Explanation Personal Disposable Income (PDI) refers to the income that is actually available to households for consumption and saving. It is derived from Personal Income (PI) by subtracting the liabilities that households owe to the government, specifically direct taxes and miscellaneous fees. Statement-wise Analysis: - Statement 1 is Incorrect. Personal Disposable Income does not include the portion of income that must be paid as taxes. It represents the net income remaining with individuals after they have met their tax obligations. The income before tax deduction is referred to as Personal Income. - Statement 2 is Correct. PDI is mathematically calculated by deducting personal tax payments (such as income tax) and non-tax payments (such as fines and administrative fees) from Personal Income. The formula is: Personal Disposable Income = Personal Income - Personal Tax Payments - Non-tax Payments. - Statement 3 is Correct. Since PDI is obtained by subtracting taxes and other payments from Personal Income, it will mathematically always be less than Personal Income, provided that personal tax payments are positive. Key Takeaway: Personal Disposable Income is the maximum amount households can use for consumption expenditure or savings. Ideally, PDI = Consumption + Saving.

With reference to 'Personal Disposable… - NCERT Class 12 Economics MCQ

NCERT Class 12 Economics — Chapter 4: National Income Accounting

mcqeasy

With reference to 'Personal Disposable Income (PDI)', consider the following statements:

It includes the income that households must pay as taxes to the government.
It is calculated by deducting personal tax payments and non-tax payments from Personal Income.
It is always less than Personal Income if personal taxes are positive.

Which of the statements given above is/are correct?

NCERT textbook question

From NCERT Introductory Macroeconomics · Page 18

Options

A1 and 2 only
B2 only
C1, 2 and 3
D2 and 3 only

Did you get this right?

Solution

The correct option is 2 and 3 only.

Explanation

Personal Disposable Income (PDI) refers to the income that is actually available to households for consumption and saving. It is derived from Personal Income (PI) by subtracting the liabilities that households owe to the government, specifically direct taxes and miscellaneous fees.

Statement-wise Analysis:

Statement 1 is Incorrect. Personal Disposable Income does not include the portion of income that must be paid as taxes. It represents the net income remaining with individuals after they have met their tax obligations. The income before tax deduction is referred to as Personal Income.
Statement 2 is Correct. PDI is mathematically calculated by deducting personal tax payments (such as income tax) and non-tax payments (such as fines and administrative fees) from Personal Income. The formula is:
Personal Disposable Income = Personal Income - Personal Tax Payments - Non-tax Payments.
Statement 3 is Correct. Since PDI is obtained by subtracting taxes and other payments from Personal Income, it will mathematically always be less than Personal Income, provided that personal tax payments are positive.

Key Takeaway:

Personal Disposable Income is the maximum amount households can use for consumption expenditure or savings. Ideally, PDI = Consumption + Saving.

Your note

More from Chapter 4: National Income Accounting

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Which of the following is NOT considered a 'Final Good'?

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With reference to the 'GDP Deflator', consider the following statements: 1. It is the ratio of Nominal GDP to Real GDP. 2. It measures the change in the quantity of goods produced, not prices. 3. Unlike the Consumer Price Index (CPI), it does not include the prices of imported goods. Which of the statements given above is/are correct?

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Which of the following is NOT a reason for the difference between CPI and GDP Deflator?

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