Which of the following would lead to increase in private

Solution

If government transfers increases, private disposable income would increase. • Private Income (income of private sector from all sources) = Factor income from net domestic product accruing to the private sector + National debt interest + NFIA + Current transfers from government + Current transfers from the rest of the world.  Includes both factor income as well as transfer income • Personal Income (part of income which is received by households from all sources)  NNPfc– Net interest payments made by households + Transfer payments to the households from the government and firms (pensions, scholarship, prizes) –Corporate tax – Corporate Saving (Undistributed profits) – Social Security Contributions  Private Income – Corporate tax – Corporate Saving (Undistributed profits) • Personal Disposable Income (part which belongs to households to spend) = Personal Income – Direct personal tax payments (income tax) – Non-tax payments (fees and fines). • National Disposable Income (maximum amount of goods and services the domestic economy has at its disposal) = NNPmp + Current transfers from the rest of the world (gifts, aids, etc.)