Question

Gross Investment 18
National Income 100
Net Exports 2
Personal income 85
Personal Consumption Expenditures 70
Saving 5
Government Purchases 20
Net Domestic Product 105
Statistical Discrepancy 0
Refer to the above data. Disposable income is:
a) $83.
b) $73.
c) $75.
d) $77

Answer 1

Answer:

c) $75.

Explanation:

The disposable income is the amount of personal income after taxes

we can solve for taxs using the savings identity:

Savings = Private Savings + Public Savings

where:

Private savings: personal income - personal consumption

and Public Savings = taxes - government spending

We plug the value in the formula and solve for T

5 = 85 - 70 + T - 20

5 = T - 5

T = 10

Now, we derive personal income:

85 income - 10 taxes = 75 disposable income