Question:
Arrange the National Product or Income estimates in the sequence they are calculated:
(A). Disposable Personal Income (DPI)
(B). National Income (NI)
(C). Gross National Product (GNP)
(D). Personal Income (PI)
Choose the correct answer from the options given below:
Arrange the National Product or Income estimates in the sequence they are calculated:
(A). Disposable Personal Income (DPI)
(B). National Income (NI)
(C). Gross National Product (GNP)
(D). Personal Income (PI)
Choose the correct answer from the options given below:
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National income flow: GNP $\to$ NI $\to$ PI $\to$ DPI.
Updated On: Jul 2, 2026
- (A), (B), (C), (D).
- (D), (C), (B), (A).
- (B), (A), (D), (C).
- (C), (B), (D), (A).
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The Correct Option is D
Approach Solution - 1
The calculation of national income estimates follows a logical sequence:
1. Gross National Product (C - GNP): The total market value of all final goods and services produced by a nation’s residents, both domestically and abroad, in a given period. It is the starting point for national income accounting.
2. National Income (B - NI): Calculated as GNP minus depreciation (consumption of fixed capital), representing the total income earned by residents from production.
3. Personal Income (D - PI): Derived from NI by subtracting corporate profits, social security contributions, and other retained earnings, then adding transfer payments (e.g., pensions, subsidies).
4. Disposable Personal Income (A - DPI): Obtained by subtracting personal taxes from PI, representing the income available to individuals for consumption or saving. This sequence reflects the flow from total production to individual spending power, making option (4) correct.
1. Gross National Product (C - GNP): The total market value of all final goods and services produced by a nation’s residents, both domestically and abroad, in a given period. It is the starting point for national income accounting.
2. National Income (B - NI): Calculated as GNP minus depreciation (consumption of fixed capital), representing the total income earned by residents from production.
3. Personal Income (D - PI): Derived from NI by subtracting corporate profits, social security contributions, and other retained earnings, then adding transfer payments (e.g., pensions, subsidies).
4. Disposable Personal Income (A - DPI): Obtained by subtracting personal taxes from PI, representing the income available to individuals for consumption or saving. This sequence reflects the flow from total production to individual spending power, making option (4) correct.
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Approach Solution -2
Dependency-chain approach:
Each of these income measures is derived from the one before it, so the sequence can be fixed by tracing what each figure needs as an input rather than defining every term separately. Gross National Product (GNP) is the broadest, self-contained figure - it does not depend on any of the others - so it must come first. National Income (NI) is obtained only after GNP is known (by removing depreciation), so it must follow GNP. Personal Income (PI) in turn needs NI as its starting point (adjusting for undistributed profits, taxes and transfers), placing it third. Finally, Disposable Personal Income (DPI) is simply PI minus personal taxes, so it can only be computed last.
Following this input-output chain gives GNP -> NI -> PI -> DPI, i.e. (C), (B), (D), (A), which is option (4).
Each of these income measures is derived from the one before it, so the sequence can be fixed by tracing what each figure needs as an input rather than defining every term separately. Gross National Product (GNP) is the broadest, self-contained figure - it does not depend on any of the others - so it must come first. National Income (NI) is obtained only after GNP is known (by removing depreciation), so it must follow GNP. Personal Income (PI) in turn needs NI as its starting point (adjusting for undistributed profits, taxes and transfers), placing it third. Finally, Disposable Personal Income (DPI) is simply PI minus personal taxes, so it can only be computed last.
Following this input-output chain gives GNP -> NI -> PI -> DPI, i.e. (C), (B), (D), (A), which is option (4).
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