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Real Disposable Income

Real disposable income is a measure of the purchasing power of a household or individual, taking into account the effect of inflation. It is calculated by subtracting taxes and other mandatory payments from a household's disposable income, and then adjusting for inflation.

Here is an example of how real disposable income can be calculated:

  • Disposable income: £50,000 per year
  • Taxes and mandatory payments: £10,000 per year
  • Disposable income after taxes: £40,000 per year
  • Inflation rate: 3%
  • Real disposable income: £40,000 / (1.03) = £38,235

Real disposable income is an important measure of economic well-being, as it reflects the ability of a household or individual to afford goods and services over time. It can be used to compare the purchasing power of different households or individuals, and can be used to track changes in economic well-being over time.

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