Correct Option: B. Personal income minus taxes Detailed Explanation: What is Disposable Income? Disposable income refers to the amount of money that households have available for spending and saving after income taxes have been deducted. It is a crucial measure because it indicates how much money individuals can use for consumption or saving, which directly affects economic activity. Why Option B is Correct: - Definition of Personal Income: Personal income is the total income received by individuals from all sources, including wages, salaries, dividends, interest, and rents, before taxes are deducted. - Calculating Disposable Income: To find disposable income, you subtract taxes from personal income. The formula is: [ \text{Disposable Income} = \text{Personal Income} - \text{Taxes} ] This means that after paying taxes, the remaining income is what individuals can spend or save, which is exactly what disposable income represents. Why the Other Options are Incorrect: Option A: Personal income minus personal savings - Explanation: This option suggests that disposable income is calculated by subtracting personal savings from personal income. However, this is incorrect because personal savings are not deducted from income to determine disposable income. Instead, disposable income is what remains after taxes, and savings are a choice made from that disposable income. Therefore, this option misrepresents the concept of disposable income. Option C: National income minus depreciation - Explanation: National income refers to the total income earned by a nation's residents and businesses, including wages, profits, rents, and taxes, minus subsidies. Depreciation is the reduction in value of capital goods over time. The calculation of national income minus depreciation gives us "Net National Income," which is not related to disposable income at the individual level. Thus, this option is irrelevant to the definition of disposable income. Option D: Exports minus imports - Explanation: This option refers to the concept of "net exports," which is a measure of a country's trade balance. It indicates whether a country is exporting more than it is importing. This has no direct connection to disposable income, which is focused on individual financial situations rather than national trade balances. Therefore, this option is also incorrect. Summary of Key Points:

• Disposable Income Definition: The income available for spending and saving after taxes are deducted.
• Correct Calculation: Disposable Income = Personal Income - Taxes.
• Incorrect Options:
• A misrepresents the relationship between savings and income.
• C is unrelated to individual disposable income.
• D pertains to national trade, not individual income.
• Importance: Understanding disposable income is crucial for analyzing consumer behavior and economic health.

This thorough understanding of disposable income will help you in both theoretical and practical applications in economics.