Discussion
Disposable income is equal to:
Answer: A
Disposable income is the income left to households after paying direct taxes, so it is personal income minus direct taxes. The answer is option A.
Disposable income is what households can spend or save, so DI = C + S. Personal income is the base because private income also contains the undistributed profits of firms, and indirect taxes are already inside the prices households pay, so subtracting them is not how disposable income is found.
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