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:

• A. (A), (B), (C), (D).
• B. (D), (C), (B), (A).
• C. (B), (A), (D), (C).
• D. (C), (B), (D), (A).

Hint:

National income flow: GNP $\to$ NI $\to$ PI $\to$ DPI.

Answer 1

The Correct Option is D

The calculation of national income estimates follows a logical sequence:
1. Gross National Product (C - GNP): The total market value of all final goods and services produced by a nation’s residents, both domestically and abroad, in a given period. It is the starting point for national income accounting.
2. National Income (B - NI): Calculated as GNP minus depreciation (consumption of fixed capital), representing the total income earned by residents from production.
3. Personal Income (D - PI): Derived from NI by subtracting corporate profits, social security contributions, and other retained earnings, then adding transfer payments (e.g., pensions, subsidies).
4. Disposable Personal Income (A - DPI): Obtained by subtracting personal taxes from PI, representing the income available to individuals for consumption or saving. This sequence reflects the flow from total production to individual spending power, making option (4) correct.