What is the Difference Between National Income and Disposable Income?
🆚 Go to Comparative Table 🆚The difference between national income and disposable income lies in the tax and transfer payment components. National income represents the total income earned by all factors of production within an economy, while disposable income is the amount of income available for consumption, saving, or investment after accounting for personal income taxes and transfers.
National Income:
- It is the total income earned by all factors of production within an economy.
- It includes compensation of employees, corporate and government enterprise profits before taxes, interest income, unincorporated net income of businesses, rent, indirect business taxes, and subsidies.
- National income is calculated as follows: National Income = Compensation of employees + Corporate and government enterprise profits before taxes + Interest income + Unincorporated net income of businesses + Rent + Indirect business taxes – subsidies.
Disposable Income:
- It is the amount of money that a population has left after paying personal income taxes and other direct taxes.
- Disposable income represents the actual amount of money available for households to spend on goods and services, save, or invest.
- It is calculated by subtracting personal income taxes and other direct taxes from personal income.
In summary, national income represents the total income earned by all factors of production within an economy, while disposable income represents the actual amount of money available for households to spend on goods and services, save, or invest after accounting for personal income taxes and transfers.
Comparative Table: National Income vs Disposable Income
The difference between national income and disposable income lies in the way they measure the economic health of a country. Here is a table comparing the two concepts:
| Concept | Definition | Calculation | Key Differences |
|---|---|---|---|
| National Income | The total value of goods and services produced by a country in a given period, such as a year. | Calculated using three methods: Income Method, Expenditure Method, and Value Added Method. | Represents the output of a country, including all goods and services produced. |
| Disposable Income | The amount of money that an individual or household has to spend or save after income taxes have been deducted. | Disposable Income = Total Income - Taxes - Mandatory Deductions. | Represents the net income available for spending or saving by individuals or households after taxes. |
In summary, national income is the total value of goods and services produced by a country, while disposable income is the net income available for spending or saving by individuals or households after taxes have been deducted. Both concepts are important for understanding the economic health of a country, but they measure different aspects of the economy.
- Personal Income vs Personal Disposable Income
- Disposable vs Discretionary Income
- GDP Per Capita vs Income Per Capita
- Salary vs Income
- Gross vs Net Income
- Cash Flow vs Net Income
- Net Income vs Net Profit
- Wage vs Income
- Operating Income vs Net Income
- GDP vs GNP
- Income vs Revenue
- National Debt vs Budget Deficit
- Financial vs Taxable Income
- Capital Gains vs Income
- Taxable Income vs Adjusted Gross Income
- GDP vs GDP per Capita
- Capital Gains Tax vs Income Tax
- Passive vs Non-passive Income
- Payroll Tax vs Income Tax