The correct option is 2 and 3 only.
Explanation
Personal Disposable Income (PDI) refers to the income that is actually available to households for consumption and saving. It is derived from Personal Income (PI) by subtracting the liabilities that households owe to the government, specifically direct taxes and miscellaneous fees.
Statement-wise Analysis:
- Statement 1 is Incorrect. Personal Disposable Income does not include the portion of income that must be paid as taxes. It represents the net income remaining with individuals after they have met their tax obligations. The income before tax deduction is referred to as Personal Income.
- Statement 2 is Correct. PDI is mathematically calculated by deducting personal tax payments (such as income tax) and non-tax payments (such as fines and administrative fees) from Personal Income. The formula is:
Personal Disposable Income = Personal Income - Personal Tax Payments - Non-tax Payments. - Statement 3 is Correct. Since PDI is obtained by subtracting taxes and other payments from Personal Income, it will mathematically always be less than Personal Income, provided that personal tax payments are positive.
Key Takeaway:
Personal Disposable Income is the maximum amount households can use for consumption expenditure or savings. Ideally, PDI = Consumption + Saving.