Personal Income & Personal Disposable Income

Personal income is a broad measure of household income and measures the ability of consumers to make purchases.

Personal income = National income

+ Indirect business taxes

− Corporate income taxes

− Undistributed corporate profits

+ Transfer payments

Personal disposable income (PDI) is equal to personal income less personal taxes.

It measures the amount of after-tax income that households have to spend on goods and services or to save.

Household saving is equal to PDI less three items: consumption expenditures, interest paid by consumers to business, and personal transfer payments to foreigners.

Saving for the business sector equals undistributed corporate profits plus the capital consumption allowance.