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What is disposable personal income?

After-tax income. The amount that U.S. residents have left to spend or save after paying taxes is important not just to individuals but to the whole economy. The formula is simple: personal income minus personal current taxes.

Why do economists look at disposable income?

Economists look at disposable income to better understand consumer spending and saving habits on local, regional, and national levels. Despite its name, disposable income isn't money you throw in the trash. It describes your earnings after taxes and other necessary deductions.

How does disposable income affect consumption?

In a society as a whole, when disposable income increases, people spend or save more, leading to a growth in overall consumption. Consumer spending is one of the most important measures of demand, in turn driving business expansion and the creation of jobs.

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