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Exercises · Q8

Q.National Income of a country is ₹8,00,000 crore. From this, Undistributed Profits of ₹40,000 crore and Corporate Tax of ₹25,000 crore are deducted, and Transfer Payments of ₹35,000 crore are added, to arrive at Personal Income. If Personal Taxes of ₹50,000 crore are then paid, find

(i) Personal Income and
(ii) Personal Disposable Income. If households then spend ₹6,50,000 crore on consumption, what is their saving?
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Step 1 — Personal Income (PI):

PI=NI−Undistributed Profits−Corporate Tax+Transfer PaymentsPI = NI - \text{Undistributed Profits} - \text{Corporate Tax} + \text{Transfer Payments}

PI=8,00,000−40,000−25,000+35,000=₹7,70,000 crorePI = 8,00,000 - 40,000 - 25,000 + 35,000 = ₹7,70,000\ \text{crore}

Step 2 — Personal Disposable Income (PDI):

PDI=PI−Personal Taxes=7,70,000−50,000=₹7,20,000 crorePDI = PI - \text{Personal Taxes} = 7,70,000 - 50,000 = ₹7,20,000\ \text{crore}

Step 3 — Saving, using the identity PDI=Consumption+SavingPDI = \text{Consumption} + \text{Saving}:

Saving=PDI−Consumption=7,20,000−6,50,000=₹70,000 crore\text{Saving} = PDI - \text{Consumption} = 7,20,000 - 6,50,000 = ₹70,000\ \text{crore} …

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