Which formula accurately represents disposable income? income + income tax = disposable income income – goods and services = disposable income income – income tax = disposable income income tax – income = disposable income

The correct equation is

*income – income tax = disposable income

Explanation:

Disposable income shows the income that can be used for personal uses after the mandatory income taxes are paid to the government.

Disposable income is an important concept in economics as it allows to reasonably deduce how the income taxes has to be adjusted and how the taxes will effect the consumption and savings by the individuals.

More disposable income for individuals generally means that person may have a higher standard of living. But if most of that income is spent on consumption rather than savings and investing, then the economy loses its advantage.

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