8.National Income Accounting and Aggregates-III

Question 1

What is Private Income?

Answer 1

Private Income is the income earned by the private sector, including both earned and unearned income.

Question 2

How is Private Income calculated?

Answer 2

Private Income = Earned income of the private sector + Unearned income of the private sector (e.g., transfer payments, gifts).

Question 3

What is private income?

Answer 3

Private income is the income earned by the private sector. It is calculated from NNP at factor cost by making certain additions and deductions.

Question 4

What are the components of private income?

Answer 4

The components of private income are:

• Wages and salaries
• Rent
• Interest
• Dividends
• Profits
• Transfer payments

Question 5

What are examples of Unearned Income in the private sector?

Answer 5

Unearned Income in the private sector includes transfer payments like pension, scholarships, gifts, and donations.

Question 6

How is Private Income calculated using Net National Product at Factor Cost (NNP at FC)?

Answer 6

Private Income = NNP at FC + Transfer Payments + Interest on public debt – Expenditure on Social Security – Profit and Surplus of Public undertakings.

Question 7

What are the differences between private income and personal income?

Answer 7

The main difference between private income and personal income is that personal income is the income that is actually received by the households, while private income is the income that is earned by the private sector.

Question 8

How is personal income calculated?

Answer 8

Personal income is calculated by subtracting undistributed corporate profits and taxes on profits from private income.

Question 9

What components are included in the additions while calculating Private Income?

Answer 9

Additions include transfer payments, remittances, gifts, interest on public debt, and some surpluses.

Question 10

What components are included in the deductions while calculating Private Income?

Answer 10

Deductions include income from government departments, some surpluses from public undertakings, and employee contributions to social security.

Question 11

What is personal disposable income?

Answer 11

Personal disposable income is the income that is available for spending or saving after taxes have been paid. It is calculated by subtracting direct taxes from personal income.

Question 12

What is per capita income?

Answer 12

Per capita income is the average income of the individual people in a country. It is calculated by dividing the national income by the population.

Question 13

What is Personal Income?

Answer 13

Personal Income is the portion of national income actually received by households before payment of direct taxes in a year.

Question 14

How is Personal Income derived from National Income?

Answer 14

Personal Income = National Income + Profit taxes + Transfer payments + Interest on public debt - Undistributed Corporate Profits - Tax on Profit

Question 15

What is the importance of per capita income?

Answer 15

Per capita income is an important indicator of the standard of living of the people in a country. It is used to compare the living standards of different countries and to track the changes in the living standards of a country over time.

Question 16

How can per capita income be improved?

Answer 16

Per capita income can be improved by increasing the national income and by reducing the population.

Question 17

What is Personal Disposable Income (PDI)?

Answer 17

Personal Disposable Income is the income that individuals and families actually spend after deducting direct taxes from personal income.

Question 18

How is Per Capita Income calculated?

Answer 18

Per Capita Income in a specific year = National Income for that year / Population in that year.

Question 19

What are the limitations of per capita income?

Answer 19

Per capita income has some limitations as an indicator of the standard of living of the people in a country. These limitations include:

• It does not take into account the distribution of income.
• It does not take into account the cost of living.
• It does not take into account the non-monetary benefits that people receive.

Question 20

How can the limitations of per capita income be addressed?

Answer 20

The limitations of per capita income can be addressed by using other indicators of the standard of living, such as the Gini coefficient and the Human Development Index.

Question 21

What is money?

Answer 21

Money is any item or medium of exchange that is accepted by people for the payment of goods and services.

Question 22

What are the different types of money?

Answer 22

The different types of money include:

• Barter money
• Token money
• Metallic money
• Paper currency
• Plastic money
• Digital money
• Crypto currency

Question 23

What is money?

Answer 23

Money is an item or medium of exchange accepted for payment of goods and services.

Question 24

What is the barter system?

Answer 24

The barter system involves direct trade of goods and services without using money.

Question 25

What are the functions of money?

Answer 25

The functions of money are:

• Medium of exchange
• Measure of value
• Standard of deferred payment
• Store of value

Question 26

What is fiat money?

Answer 26

Fiat money is a money which is issued by the order of any Government/Monarchy/authority. It is not backed by any physical commodity such as gold or silver.

Question 27

What is token money?

Answer 27

Token money has less intrinsic value than face value and is accepted due to custom or legal enactment.

Question 28

How did metallic money evolve?

Answer 28

Metals like silver, gold, and copper were used as money; punch marked coins were introduced in Mahajanapadas.

Question 29

What is legal tender?

Answer 29

Legal tender is anything recognised by law as means to settle payments, public or private debt or to meet financial obligations. It is the currency that is accepted by law as a valid form of payment.

Question 30

What is the history of money?

Answer 30

The history of money can be traced back to the barter system, which was a system of exchanging goods and services directly without the use of money. The first forms of money were likely to be commodities such as gold and silver, which were used because they were scarce and valuable.

Question 31

What is paper currency?

Answer 31

Paper currency replaced metal coins, reducing their weight and improving convenience.

Question 32

What is plastic money?

Answer 32

Plastic money refers to digital card strips used as a form of currency.

Question 33

What is cryptocurrency?

Answer 33

Cryptocurrency is digital currency using blockchain technology; it’s banned in India.

Question 34

What are the functions of money?

Answer 34

Money serves as a medium of exchange, measure of value, standard of deferred payment, and store of value.

Question 35

How did money evolve over time?

Answer 35

Over time, money has evolved from being a physical commodity to being a fiat currency. Fiat currency is not backed by any physical commodity, but is instead backed by the government that issued it.

Question 36

What are the advantages of using money?

Answer 36

The advantages of using money include:

• It makes it easier to exchange goods and services.
• It makes it easier to store value.
• It makes it easier to make payments.
• It helps to reduce the risk of fraud.

Question 37

What is fiat money?

Answer 37

Fiat money is issued by governmental authority and is recognized as legal tender.

Question 38

What is legal tender?

Answer 38

Legal tender is recognized by law as a means to settle payments and meet financial obligations; RBI and government issue legal tender.

Question 39

What are the disadvantages of using money?

Answer 39

The disadvantages of using money include:

• It can be counterfeited.
• It can be lost or stolen.
• It can be used to finance illegal activities.

Question 40

What is the future of money?

Answer 40

The future of money is uncertain. Some experts believe that fiat currency will eventually be replaced by a digital currency, while others believe that fiat currency will continue to be the dominant form of money for the foreseeable future.