Assertion (A): The part of national income that goes to firms and households is known as public income.
Reason (R): The government sector affects the personal disposable income of households by making transfers and collecting taxes.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A) is false but (R) is true.
Assertion (A): The part of national income that goes to firms and households is known as public income. — False. That part is private income. Public income is the part that goes to the government.
Reason (R): The government sector affects the personal disposable income of households by making transfers and collecting taxes. — True. This is how the redistribution function works.
NCERT (2026-27): “Redistribution Function of Government Budget From chapter two we know that the total national income of the country goes to either the private sector, that is, firms and households (known as private income) or the government (known as public income). Out of private income, what finally reaches the households is known as personal income and the amount that can be spent is the personal disposable income. The government sector affects the personal disposable income of households by making transfers and collecting taxes. It is through this that the government can change the distribution of income and bring about a distribution that is considered ‘fair’ by society. This is the redistribution function.” |