Question:
Arrange the National Product or Income estimates in the sequence they are calculated.
• [(A).] Disposable Personal Income (DPI)
• [(B).] National Income (NI)
• [(C).] Gross National Product (GNP)
• [(D).] Personal Income (PI)
Choose the correct answer from the options given below:
Arrange the National Product or Income estimates in the sequence they are calculated.
• [(A).] Disposable Personal Income (DPI)
• [(B).] National Income (NI)
• [(C).] Gross National Product (GNP)
• [(D).] Personal Income (PI)
Choose the correct answer from the options given below:
Show Hint
To remember this sequence:
- Start with Gross production (GNP).
- Move to Net production/national income (NI).
- Filter for individuals (PI).
- Finally, subtract personal taxes to find what can actually be spent (DPI).
- Start with Gross production (GNP).
- Move to Net production/national income (NI).
- Filter for individuals (PI).
- Finally, subtract personal taxes to find what can actually be spent (DPI).
Updated On: Jul 13, 2026
- (A), (B), (C), (D)
- (D), (B), (A), (C)
- (B), (A), (D), (C)
- (C), (B), (D), (A)
Show Solution
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The Correct Option is D
Solution and Explanation
Step 1: Understanding the Concept:
National income accounting involves deriving different aggregates of national output and income from the broadest measure down to the actual income available to households for spending.
Each estimate is calculated in a specific sequence by subtracting or adding specific economic components.
Step 2: Detailed Explanation:
Let us examine the correct sequence of calculation starting from the broadest aggregate:
1. Gross National Product (GNP) - (C): This is the starting estimate among the options.
It measures the total value of all finished goods and services produced by a nation's factors of production, regardless of their location, in a given year.
2. National Income (NI) - (B): National Income is Net National Product (NNP) at factor cost.
It is calculated from GNP by subtracting consumption of fixed capital (depreciation) to get Net National Product (NNP), and then adjusting for indirect taxes and subsidies:
\[ \text{NI} = \text{NNP at Factor Cost} = \text{NNP at Market Price} - \text{Indirect Taxes} + \text{Subsidies} \] 3. Personal Income (PI) - (D): This is the total income received by individuals in an economy.
It is derived from National Income by subtracting undistributed corporate profits, corporate income taxes, and social security contributions, and then adding transfer payments received from the government:
\[ \text{PI} = \text{NI} - \text{Undistributed Profits} - \text{Corporate Taxes} - \text{Social Security Contributions} + \text{Transfer Payments} \] 4. Disposable Personal Income (DPI) - (A): This is the final income remaining with households for consumption and saving.
It is calculated by subtracting personal direct taxes and non-tax payments from Personal Income:
\[ \text{DPI} = \text{PI} - \text{Personal Direct Taxes} \] Therefore, the correct chronological sequence of calculations is (C) \(\rightarrow\) (B) \(\rightarrow\) (D) \(\rightarrow\) (A).
Step 3: Final Answer:
The correct sequential arrangement is Option (D).
National income accounting involves deriving different aggregates of national output and income from the broadest measure down to the actual income available to households for spending.
Each estimate is calculated in a specific sequence by subtracting or adding specific economic components.
Step 2: Detailed Explanation:
Let us examine the correct sequence of calculation starting from the broadest aggregate:
1. Gross National Product (GNP) - (C): This is the starting estimate among the options.
It measures the total value of all finished goods and services produced by a nation's factors of production, regardless of their location, in a given year.
2. National Income (NI) - (B): National Income is Net National Product (NNP) at factor cost.
It is calculated from GNP by subtracting consumption of fixed capital (depreciation) to get Net National Product (NNP), and then adjusting for indirect taxes and subsidies:
\[ \text{NI} = \text{NNP at Factor Cost} = \text{NNP at Market Price} - \text{Indirect Taxes} + \text{Subsidies} \] 3. Personal Income (PI) - (D): This is the total income received by individuals in an economy.
It is derived from National Income by subtracting undistributed corporate profits, corporate income taxes, and social security contributions, and then adding transfer payments received from the government:
\[ \text{PI} = \text{NI} - \text{Undistributed Profits} - \text{Corporate Taxes} - \text{Social Security Contributions} + \text{Transfer Payments} \] 4. Disposable Personal Income (DPI) - (A): This is the final income remaining with households for consumption and saving.
It is calculated by subtracting personal direct taxes and non-tax payments from Personal Income:
\[ \text{DPI} = \text{PI} - \text{Personal Direct Taxes} \] Therefore, the correct chronological sequence of calculations is (C) \(\rightarrow\) (B) \(\rightarrow\) (D) \(\rightarrow\) (A).
Step 3: Final Answer:
The correct sequential arrangement is Option (D).
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