Statement I: Corporate tax is deducted from National Income to arrive at Personal Income because it does not accrue to the households.
Statement II: Net interest payments made by households are added to National Income to arrive at Personal Income.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Statement I is true but Statement II is false.
Statement I: Corporate tax is deducted from National Income to arrive at Personal Income because it does not accrue to the households. — True. Corporate tax does not accrue to households, so it is deducted.
Statement II: Net interest payments made by households are added to National Income to arrive at Personal Income. — False. The net interest households pay to firms and government is deducted.
NCERT (2026-27): “2.3 Some Macroeconomic Identities … Similarly, Corporate Tax, which is imposed on the earnings made by the firms, will also have to be deducted from the NI, since it does not accrue to the households. On the other hand, the households do receive interest payments from private firms or the government on past loans advanced by them. And households may have to pay interests to the firms and the government as well, in case they had borrowed money from either. So, we have to deduct the net interests paid by the households to the firms and government. …” |