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    Question

    Personal Disposable Income refers

    to:
    A Income available to households after paying direct taxes Correct Answer Incorrect Answer
    B Total income received by households before any taxes are deducted Correct Answer Incorrect Answer
    C Income earned only from wages and salaries Correct Answer Incorrect Answer
    D Income available to spend on luxuries Correct Answer Incorrect Answer
    E Income remaining after total expenditure is deducted Correct Answer Incorrect Answer

    Solution

    Personal Disposable Income (PDI) is the income households can actually spend or save , calculated as Personal Income minus Direct Taxes (like income tax) . It represents the amount available for consumption and saving . •       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. ü  Includes both factor income as well as transfer income •       Personal Income (part of income which is received by households from all sources) ü  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 ü  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.)

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