Consider the following statement s 1 Transfer Payments have no affect on Personal Disposable I...........

Economic Affairs Public Finance and Debt Management

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Consider the following statement(s):

1) Transfer Payments have no affect on Personal Disposable Income.

2) Only private goods can be provided through Market Mechanism and not public goods.

Mark the correct statement(s)

Only 1

Only 2

Both 1 and 2

Neither 1nor 2

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Explanation:

The government affects the personal disposable income of households by making Transfer payments and collecting taxes.

PI= National income - undistributed profits - net interest payments made by households - corporate tax + transfer payments to households from government and firms.( Undistributed profit is part of profit not distributed among factors of production)

Therefore

Personal disposable income= PI - Personal tax payments- Non tax payments.

Public good such as public parks are made available free of any direct payment to everyone whereas if peeonp consumes private goods like shirt, chocolate will not be available to other individual.

Market mechanism means sale and purchase of goods in market.