Explain why a man who marries his cook reduces his country's GNP and the difference between Personal Income and Personal Disposable Income.

a) A man who marries his cook reduces his country's GNP.

This statement is correct because Gross National Product (GNP) measures the market value of all final goods and services produced. When a man employs a cook, the cook's wages are a payment for a service rendered in the market, contributing to GNP. If the man marries the cook, the cooking services become household production or non-market production. These services are no longer exchanged for a wage in the formal market and are therefore not counted in the calculation of GNP, leading to a reduction in the measured GNP.

b) Difference between Personal Income and Personal Disposable Income.

• Personal Income (PI) is the total income received by individuals and households from all sources before personal taxes are paid. It includes wages, salaries, rental income, interest, dividends, and transfer payments.
• Personal Disposable Income (PDI) is the income that households have left after paying personal income taxes and other mandatory deductions (like social security contributions). It represents the amount of income available for spending or saving.

The relationship is:

$$\text{Personal Disposable Income} = \text{Personal Income} - \text{Personal Taxes}$$