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Chapter 4: Problem 120

If consumption for a household is $$\$ 5000,$$ savings are $$\$ 3000,$$ and $$\$ 2000$$ is paid out in taxes, \(\quad\) a) What is the personal income? b) What is the disposable income?

Short Answer

Expert verified
The Personal Income is \( \$10,000 \) and the Disposable Income is \( \$8,000 \).

Step by step solution

01

Determine the Personal Income

To find the Personal income, one has to add the amount of consumption, savings, and taxes. Thus, according to the given values in the problem, this would be calculated as follows: Personal Income = Consumption + Savings + Taxes \(Personal Income = \$5000 (Consumption) + \$3000 (Savings) + \$2000 (Taxes)\) After performing the addition operation, you find that the Personal income is \$10,000.
02

Calculate the Disposable Income

The Disposable income can be found by subtracting the amount of taxes from the Personal income. Inputting the given values into the formula results in the following operation: Disposable Income = Personal Income - Taxes \(Disposable Income = \$10,000 (Personal Income) - \$2000 (Taxes)\) After subtracting, you find that the Disposable Income is \$8000. So, the Personal Income is \$10,000, and the Disposable Income is \$8000.

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Most popular questions from this chapter

Explain fully why, in the calculation of GNP, the sale of I final goods is included while the sale of intermediate goods is excluded.

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