Page 32 - DECO402_Macro Economics

Unit-2: National Income : Concept of National Income

In private income, factor income from net domestic product, net factor income from abroad, and Notes
transfers of payment are included to private sector. Consequently in private income factor income
and transfers payment both are included.

Private Income = Factor Income from net domestic product accruing to private sector + Interest on
National loan + Net factor income from abroad + Current transfers from government + Current
transfers from rest of the world.
Or
Private Income = National income + Transfers payment from government + Current transfers
from abroad + Interest on national loan – Government accruing income from property and
entrepreneurship – Savings of non-departmental enterprises.

(xi) Personal Income

Personal income is the total of accruing from factor income from all sources and current transfers
payment of residents and household of a country, during a financial year.
In peterson’s words, “Personal income is the income actually receive by persons from all sources in
the from of current transfer payments and factor income.”
Personal income deals person’s actually received from all sources income is included. Fro example,
profit accruing by firms and corporates, some part of that is not distributed to persons. That
undistributed profit which is called corporate saving in that form remain to firms.
It uses, (a) paid corporate tax and (b) for doing corporate saving (reserved fund). Therefore it is not
included in personal income.
Personal Income = Private income – Corporate tax – Savings of corporates (less Foreign companies’
paid income)
(xii) Personal Disposable Income
To get personal disposable income from personal income direct taxes and miscellaneous receipts of
government administrative departments means fees, fines etc. are deducted. Households are free
to expense or saving only this income. Personal disposable income is the indicator of household’s
purchasing power.
Personal Disposable Income = Consumption of households + Saving of family
According to Peterson, “Disposable income is the income available to persons from all sources and
remaining with them after deduction of all taxes levied against their income and their property by
the government.”
Disposable Income = Personal income – Direct tax (income tax and wealth tax) – Miscellaneous
receipt of government administrative departments (By person, paid to government fees and
fine)

(xiii) National Disposable Income-Gross and Net Concepts

National disposable income is the income accruing from all sources (earned income and from abroad
accruing transfers payment) that is available for a country’s residents for consumption or saving
during a year.

LOVELY PROFESSIONAL UNIVERSITY 25