Question:
If personal income exceeded national income in a particular year, it can be concluded that
(1) the amount of transfer payments exceeded the sum of social security contributions, corporate income taxes and undistributed corporate profits.
(2) the sum of social security contributions, corporate income taxes and undistributed corporate profits exceeded transfer payments.
(3) the sum of social security contributions and corporate income taxes exceeded indirect taxes.
(4) the amount of transfer payments exceeded the sum of social security contributions, corporate income taxes and indirect taxes.
(5) the sum of corporate income taxes and indirect taxes exceeded the sum of transfer payments and undistributed profits.
Correct Answer:
(1)
Answer Explanation:
Personal Income (PI) = National Income (NI) – (Corporate Taxes + Undistributed Profits + Social Security Contributions) + Transfer Payments. Mathematically, for PI to be greater than NI, the additions (Transfer Payments) must be larger than the total deductions (Taxes, Retained Earnings, and Social Security).
Topic: National Income Year: 2020
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