Disposable income in national income accounting is an income which

Step 1: Analyze the question The question asks for the meaning of disposable income in national income accounting.

Step 2: Explain the concept Disposable income is the income left to households after direct taxes (such as personal income tax) have been deducted, and after any transfer payments have been added.

Disposable income = Personal income − Direct taxes

The household can do only two things with this money:

• Spend it (consumption), or
• Keep it (saving).

So: Disposable income (Yd) = Consumption (C) + Saving (S)

Step 3: Check each option

• A. cannot be used again: Wrong. Income can be spent or saved, and it circulates through the economy.
• B. is available for consumption and saving: Correct. This matches the definition exactly.
• C. is available to disabled people: Wrong. "Disposable" has nothing to do with disability.
• D. must be wasted once and for all: Wrong. It is not meant to be wasted.
• E. pensioners receive from the treasury board: Wrong. Pensions are only one type of transfer payment, not the definition.

Step 4: Answer

Exam tip: Remember "Disposable = what you can dispose of": you either spend it or save it. Don't be misled by the everyday meaning of "disposable" (throwaway), because in economics it simply means income available for use after tax.