Question

what are the differences between national income personal income and disposable personal income?

Answer 1

National income

National income refers money value of goods and services produced in a country during an accounting year.

Methods of measuring national income

1. Product method - Under product method national income is calculated as a flow of goods and services, that is money value of all goods and services produced during an accounting year.

2. Income method - National income is measured as a flow of factor income. Factor income are rent, wage, salaries, interest and profit.

3. Expenditure method - National income is calculated as a flow of expenditure. Government consumption expenditure, gross capital formation, and net exports.

National income concepts

1. Gross Domestic Product (GDP)

2. Gross Domestic Product at Factor Cost (GDPfc)

3. Net Domestic Product (NDP)

4. Nominal and real GDP

5. GDP Deflator

6. Gross Net Product

Personal income

Personal income refers total earnings of an individual from all several sources.

Personal income = Income from salary + wage + investment + other ventures

Personal income is the income before tax or tax is not considered here.

Disposable personal income

Disposable personal income refers amount of money available to an individual after subtracting taxes. It is a net amount of an individual or household available to spent on needs, to invest after paying tax.

Disposable personal income = Personal income - tax