Personal Income and Disposable Personal Income
Personal Income (PI):
This measures all of the income that is received by individuals, but not necessarily earned. Examples of this include social security benefits, unemployment compensation, welfare payments, benefits for veterans, and food stamps. Individuals also contribute income which they do not receive. This includes corporate profits that are undistributed, indirect business taxes, and the contribution of employers to Social Security.
PI = NI + income received but not earned - income earned but not received
Disposable Personal Income (DI):
There are other personal taxes which are not considered when calculating personal income. In order to derive disposable personal income we must subtract these personal taxes from personal income.
DI = PI - Personal Income Taxes
Disposable personal income represents what people actually have that they can spend. It is also a result of consumer spending as well as private saving.
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