Which of the following is true of disposable income?
A) It excludes transfer payments.
B) It is the portion of income that is used solely for consumption.
C) It is the part of total earned income that is paid to the government in the form of taxes.
D) It is the difference between income and saving.
E) It equals consumption expenditures plus saving.

Question

Quizplus · Accepted Answer

Disposable income is the portion of total earned income that is available for spending or saving after taxes have been paid. It includes both consumption expenditures and saving. Therefore, option E, which states that disposable income equals consumption expenditures plus saving, is correct. Option A is incorrect as transfer payments are included in disposable income. Option B is incorrect as disposable income includes both spending and saving. Option C is incorrect as taxes are subtracted from total earned income to calculate disposable income. Option D is incorrect as disposable income includes both spending and saving.

Which of the Following Is True of Disposable Income