Discretionary Income

Examples of Discretionary Income in the following topics:

• Disposable Income

  • Income left after paying taxes is referred to as disposable income.
  • Discretionary income is disposable income minus all payments that are necessary to meet current bills.
  • Discretionary income = Gross income - taxes - all compelled payments (bills)
  • Disposable income is often incorrectly used to denote discretionary income.

• Arguments For and Against Discretionary Monetary Policy

  • Discretionary policies refer to subjective actions taken in response to changes in the economy.
  • For much of the 20th century, governments adopted discretionary policies to correct the business cycle.
  • A discretionary policy is supported because it allows policymakers to respond quickly to events.
  • This can create compounding issues related to the discretionary policy enacted.
  • A compromise between strict discretionary and strict rule-based policy is to grant discretionary power to an independent body.

• Automatic Stabilizers Versus Discretionary Policy

  • Automatic stabilizers and discretionary policy differ in terms of timing of implementation and what each approach sets out to achieve.
  • In practice, most policy changes are discretionary in nature.
  • With discretionary policy there is a significant time lag.
  • Discretionary policies can target other, specific areas of the economy.
  • Discretionary policies can address failings of the economy that are not strictly tied to aggregate demand.

• Difficulty in Getting the Timing Right

  • Discretionary fiscal policy relies on getting the timing right, but this can be difficult to determine at the time decisions must be made.
  • A nation can respond to economic fluctuations through automatic stabilizers or through discretionary policy.
  • With discretionary fiscal policy, timing plays a very significant role.
  • Discretionary policy often requires that a set of laws must be passed through a legislature.
  • Once the discretionary program is in place, the next step is to measure its effectiveness.

• Arguments For and Against Fighting Recession with Expansionary Monetary Policy

  • Monetary policy uses a variety of discretionary tools to control one or both of these to influence outcomes like economic growth, inflation, exchange rates with other currencies, and unemployment.
  • Assess the value of discretionary expansionary monetary policy and the associated shortcomings.

• Current Topics in Income Distribution

  • Income inequality in the United States has grown significantly since the early 1970s.
  • Income inequality in the United States has grown significantly since the early 1970s and has been the subject of study of many scholars and institutions.

• Income Elasticity of Demand

  • Income elasticity of demand measures the percentage change in quantity demanded as income changes.

• Impact of Income on Consumer Choices

  • Income effects on consumer choice grow more complex as the type of good changes, as different product and services demonstrate different properties relative to both other products/services and a consumers preferences and utility.
  • Income increases will thus affect the consumption of these goods interchangeably, resulting in increase in the quantity of either or both.

• Personal Income

  • Income from production is generated both by the labor of individuals (for example, in the form of wages and salaries and of proprietors' income) and by the capital that they own (in the form of rental income of persons).
  • Income that is not earned from production in the current period—such as capital gains, which relate to changes in the price of assets over time—is excluded.

• National Income