CLEP Microeconomics Exam Prep

Answer - B - When state and federal taxes are directly removed from a person’s income, the remaining is referred to as disposable income.

Key Takeaway: Disposable income is the remaining amount after taxes are directly removed from one’s personal income. Every state and district has developed its own calculations and method in removing taxes from personal incomes. Exceptions are also granted to those who qualify. A large disposable income is often a factor in a consumer-driven economy.