NI - undistributed(UP form to be utilized for future...

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NI, PI , DI: After the explanation of the process of arriving at the value of NI, two further operations need consideration: these make it possible to arrive at disposable income (DI) and personal income value (PI). These are other important national aggregates in the system of income accounting. Let’s begin with personal income ( PI ) value. In modern times with an increased public expenditure, the government carries undertakes a considerable amount of transfer of incomes in the form of gifts, loans, assistance etc. Some citizens may also receive similar donations from foreign countries. With such gratuities the individual’s capacity to spend will be enhanced. However, this additional compensation is not a part of the NI. On the other hand big corporate agencies are subjected to corporate tax to the extent of which national income reduces before it falls in private hands. Some corporate bodies may also set aside part of their profits in an
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Unformatted text preview: undistributed (UP) form to be utilized for future investment , which further reduces the size of the NI before it becomes Personal Income. Therefore we have: NNI - (CT + UP) + Unearned income = PI 1190 - (80 + 90) + 310 = 1330 where CT = 80, UP = 90 and Unearned income = 310 In a reverse operation we have: PI - Unearned Income + (CT + UP) = NNI 1330 - 310 + 170 = 1190 While moving on from personal income to disposable income (DI) we need to make some further adjustments. The entire personal income is not available for disposal and for private consumption or investment expenditure. Part of the Personal Income is taxed away in the form of personal income taxation (PT) . The value of Disposable Income will be smaller than that of Personal Income to the extent of the tax. We have then: PI - PT = DI 1330 - 130 = 1200, where PT = 130 In its reverse form: DI + PT = PI 1200 + 130 = 1330...
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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