Remember, the very definition of the macroeconomy is the economy on a large scale or in consideration of the grand scheme of things. Therefore, measures of the macroeconomy are going to be in large numbers, especially when dealing with national measurements.
To measure the disposable personal income of a nation, one has to start with the GDP, which is basically consumption plus investment plus government consumption and investments plus net exports. Once you have the GDP, it must be adjusted for depreciation.
The National Income (NI) measures the income earned by households, Therefore depreciation must be subtracted from the GDP. That is because used capital must be replaced as it is consumed. With that being said, the next formula for measuring the macroeconomy is GDP-Depreciation=National Income.
However, the national income is not an accurate assessment of how much a household actually receives. If you've ever seen a paycheck of yours or your parents, you know that what they earn and what they receive are two completely different amounts. To figure out the Personal Income of the nation, one must use the formula NI-(corporate profits + FICA or contributions to Social Security + Transfer Payments and other income)=Personal Income (PI).
However, even after taxes are taken out of paychecks, there are still personal taxes to pay and those are not considered to be figured into a nations Disposable Personal Income (DPI). To figure out the nation's DPI, the formula is PI- personal taxes= disposable income.
Use this formula to figure out a nations disposable personal income using the following variables.
- GDP=$12,973 billion
- Depreciation= $2,003 billion
- Corporate profits= $1,281 billion
- FICA= $951 billion
- Transfer payments and other income= $2,943 billion
- Personal taxes= $4, 779 billion