Calculate disposable income in a hypothetical economy?
Consumption (C) 300
Investment (I) 50
Government purchases (G) 70
Government transfer payments (TP) 15
Taxes (T) 75
Exports (X) 10
Imports (M) 5
3.1. Disposable income in the economy equals ____________.
A. $485 million
B. $365 million
C. $425 million
D. $240 million
How do I calculate disposable income?
Answer:
I took me while to figure this out but i think i got it.
To find Disposable Income (DI) you first need to find your GDP (Y).
Y= C + I + G + (X-M)
Y = 300 + 50+ 5 + 70
Y=425
So the formula for DI ( Gross Income - Taxes + Transfer Payments) is
DI = Y - T + TP
DI = 425 - 75 + 15
DI = 365
From that you can find savings (Whatever is not consumed is saved)
S= DI - C
S = 365 - 300
S = 65
To find the leakage (Withdraws) just add up the components (Savings + Net Tax +Imports)
W=S + NT + M
W= 65 + 75 + 5
W = 145?
*Edit* I really don't know why the last number is not adding up but this is the RIGHT formula.
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