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The national income identity is: = + + + In this equation, () is the balance of trade (exports minus imports). Private saving is still =, so again combining (by solving for on one side and equating) gives:
Discretionary income is disposable income (after-tax income), minus all payments that are necessary to meet current bills. It is total personal income after subtracting taxes and minimal survival expenses (such as food, medicine, rent or mortgage, utilities, insurance, transportation, property maintenance, child support, etc.) to maintain a certain standard of living. [7]
The national income identity can be rewritten as following: [2] + = where T is defined as tax. (Y-T-C) is savings of private sector and (T-G) is savings of government. Here, we define S as National savings (= savings of private sector + savings of government) and rewrite the identity as following:
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The disposable income of the households is the income Y minus the taxes net of transfers: = + Disposable income can only be used for saving or for consumption: = + where the subscript P denotes the private sector.
Private sector: A surplus balance means U.S. households and businesses together are net savers, building their financial asset position. In other words, savings by households exceed the amount borrowed and invested by businesses. There is a net inflow of money into the private sector. The private sector had a 4.4% GDP surplus in 2019. [3]
where Y is again GDP, C is consumption, S is private saving, and T is taxes. This is because national income is also equal to output, and all individual income either goes to pay for consumption (C), to pay taxes (T), or is saved (S).