Disposable income is the amount of income that a household has available for spending and saving after income taxes have been deducted. It is calculated by subtracting taxes from income and adding transfer payments (such as Social Security, unemployment benefits, etc.). Option B is the correct formula for calculating disposable income.

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Disposable Income Is

Question 8

Multiple Choice

Disposable income is

A) income plus transfer payments minus consumption expenditure.
B) income minus taxes plus transfer payments.
C) total income divided by the price level.
D) income minus saving.

Correct Answer: