Question

Net National Product at Factor Cost of a particular country in a year is Rs 1,900 crores. There are no interest payments made by the households to the firms/government, or by the firms/government to the households. The Personal Disposable Income of the households is Rs 1,200 crores. The personal income taxes paid by them is Rs 600 crores and the value of 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

PDI = Rs.1200 crores

Personal income tax = Rs.600 crores

Value of retained earnings = Rs.200 crores

PDI = NNP_FC − Value of retained earnings of firms 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 payment = 1200 − 1100 = Rs 100 crores