Class 12 Economics Solutions

Distinguish between Factor income and Transfer income

Question 1. Distinguish between Factor income and Transfer income?
Class  Class 12
Subject Economics (Macroeconomics)
Category Sandeep garg Macroeconomics Class 12 Solutions

Q.1 Distinguish between Factor income and Transfer income?
“OR”
Difference between Factor income and Transfer income ?

Solution :-

FACTOR INCOME:-

Factor Income , refers to income received by factors of production (land, labour, capital and entrepreneur),  for factor services,  provided by household sector in the production process. The following are the characterstics of Factor Income : –

  • It is income received by factors of production (land, labour, capital and entrepreneur) ;
  • It is received for providing factor services , which  are provided by household sector ;
  • Services are provided by household sector in the production process.

Factor income of Normal resident is included in the NATIONAL INCOME.

For example: Rent, Interest, Wages and Profit.

TRANSFER INCOME:-

Transfer Income refers to income received by households or Government, without rendering any productive services in return of them.

It is a one sided concept. It can be received either form domestic territory or abroad.

The following are the characterstics of Transfer Income : –

  • It is income received without rendering any productive services ;
  • It is a one sided concept since no services are provided in return of such income ;

It is NOT included in NATIONAL INCOME.

For example: – Old Age Pension, gifts and grants, pocket money, scholarships etc….

BASIS FACTOR INCOME TRANSFER INCOME
Meaning It refers to the income received by factors of production for providing factor services. It refers to the income received , without rendering any factor services in the production process.
Concept It is an earning concept. It is a receipt concept.
Recipient It is received by FACTORS OF PRODUCTION. It is received by HOUSEHOLDS OR GOVERNMENT.
Example Rent, Wages, Interest and Profit. Old age pension, scholarships, gifts and grants etc….

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Sandeep Garg Macroeconomics Solutions

Short Questions Solutions

  1. Explain Circular flow of income in two sector economy.
  2. What are the different phases of a circular flow of income.
  3. What is meant by circular flow of income? Distinguish between Real flow and Money flow.
  4. “Households and Firms depend on each other in the circular flow of income. Justify the statement in case of a two-sector model.
  5. Distinguish between Stock and Flow. Give an example of each.
  6. Discuss briefly, the circular flow of income in a two sector economy with the help of a suitable diagram.

Long Questions Solutions

  1. Briefly discuss the money flow and the real flow of income.
  2. Describe the circular flow of income in a two-sector economy (without financial market).
  1. Distinguish between Factor income and Transfer income.
  2. Distinguish between Final goods and Intermediate goods.
  3. Machine purchased is always a final good.” Do you agree?
  4. Which of the following expenditure are Intermediate or Final goods?
  5. Discuss the meaning of Consumption goods and Capital goods.
  6. Distinguish between Consumer goods and Capital goods.

Short Questions Solutions

  1. State three objectives of a government budget
  2. Explain objective of stability of prices of government budget
  3. How can a government budget help in reducing inequalities reducing inequalities of income? Explain.
  4. Explain the ‘allocation of resources’ objective of Government budget.
  5. What is a government budget? Name two sources each of non-tax revenue receipts and capital Receipts.
  6. What is a government budget? Give the meaning of: (a) Revenue deficit; (b) Fiscal deficit.
  7. What are the two broad divisions of receipts of the government budget? Name two sources of each kind of receipt.
  8. Define tax revenue. What are the two kinds of tax revenues? Give two examples of each.
  9. Distinguish between Direct Tax and Indirect Tax
  10. Explain with the help of suitable examples the basis of classifying taxes into direct and indirect taxes
  11. Distinguish between revenue receipts and capital receipts
  12. Give meanings of Capital receipts and Revenue receipts with an example of each.

Long Questions Solutions

  1. Define Government budget. Explain the various objectives of a government budget.
  2. What is meant by non-tax revenue? Explain the different sources of non-tax revenue
  3. What is meant by budget expenditure? Distinguish between revenue expenditure and capital expenditure.
  4. What is the meaning of revenue receipts? What are the two main sources of revenue receipts?
  5. Discuss the meaning of following deficits: (i) Revenue Deficit; (ii) Fiscal Deficit; and (iii) Primary Deficit.
  6. Distinguish between: (a) Direct Tax and Indirect tax (b) Primary deficit and Revenue deficit
  7. Distinguish between the following (a) Revenue receipts and Capital receipts (b) Revenue deficit and Fiscal deficit