Question : Which of the following is added to the national income to obtain the personal income of the households?
Option 1: Net interest payments
Option 2: Transfer payments from the government and firms
Option 3: Undistributed profits
Option 4: Corporate tax
Correct Answer: Undistributed profits
Solution : The correct answer is Undistributed profits.
Deducting undistributed corporate earnings, profit taxes, and employee contributions to social security programmes from the national income yields personal income. It does not include unreported corporate profits.
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