alleryStart learning →Disposable income is arrived at by taking personal income and:
AAdding all the transfer payments received
BDeducting undistributed corporate profits
CAdding subsidies given by the government
DDeducting the direct tax that is payable
Answer & Solution
Correct answer: D. Deducting the direct tax that is payable
1. Personal income is the total income received by individuals from all sources before payment of direct taxes.
2. Disposable income, also called disposable personal income, is the individual's income after the payment of income tax.
3. So disposable income equals personal income minus direct tax, and it is the amount available to households.
4. The textbook adds that since the whole of it is not spent, disposable income equals consumption plus saving.
5. Transfer payments and undistributed corporate profits belong to the earlier step, which derives personal income from national income.
_Source: TN HSC Class 12 Economics (Samacheer Kalvi, Govt of Tamil Nadu), Ch 2 "National Income", §2.4.6_
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