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Disposable income

Disposable income is that which is available for consumption and is equal to all income from wages and salaries, self-employment, private pensions and investments, plus cash benefits less direct taxes.

Changes in real disposable income are thought to have a strong relationship over time with the level of consumer spending on goods and services. The Keynesian theory of consumption focused on this link between current real disposable income and household spending and saving. Keep in mind that expectations of future changes in post tax and benefit income also have a role in determining spending levels.

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