Disposable income is the amount of money that an individual or household has to spend or save after income taxes have been deducted. It is calculated by subtracting current income taxes from total personal income. Disposable income is a key economic indicator used to measure the health of the economy, as it indicates the amount of goods and services that can be purchased at different prices over a particular period.

Disposable income can be used to derive several economic indicators and measures such as discretionary income and personal saving rate. Discretionary income is the amount of net income remaining after all necessities are covered. It is the money that people or families have left over after paying their taxes and other mandated costs.

It is important to note that disposable income should not be confused with discretionary income. Disposable income should be used to cover the cost of living and non-negotiable expenses such as rent, transportation, health insurance, and food. On the other hand, discretionary income is the money that is left over after all necessary expenses have been covered, and it can be used for leisure activities, savings, or investments.

In summary, disposable income is the amount of money that an individual or household has to spend or save after income taxes have been deducted. It is a key economic indicator used to measure the health of the economy, and it is important to distinguish it from discretionary income, which is the money left over after all necessary expenses have been covered.