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PATENT: The guaranteed ownership and control of an invention, innovation, or production technique by government for a period of time (currently 17 years). A patent gives the owner the exclusive rights to sell, market, license, or otherwise generate revenue from an invention, innovation, or production technique. Patents are designed to encourage inventions and other developments that promote technological advances. However, they are also an entry barrier and lead to market control.
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                           DISPOSABLE INCOME: The total income that can be used by the household sector for either consumption expenditures or saving during a given period of time, usually one year. Disposable income (DI) is one of three measures of income reported in the National Income and Product Accounts maintained by the Bureau of Economic Analysis. The other two are national income (NI) and personal income (PI). Two related measures of production are gross domestic product (GDP) and net domestic product (NDP). Disposable income, also commonly called disposable personal income (DPI), is after-tax income that the household sector has at its "disposal." It other words the household sector can use this income for either saving or consumption. It is officially calculated as the difference between personal income and personal tax and nontax payments. In the numbers game, personal tax and nontax payments are about 15 percent of personal income, which makes disposable income about 85 percent of personal income.The derivation of disposable income (DI) from personal income (PI) by subtracting personal taxes (PT) is illustrated in this equation: A reasonable question might arise: "Of what use is disposable income in the study of the macroeconomy?" After all, national income measures the total income EARNED by factors of production and personal income measures the total income RECEIVED by the household sector. What more is needed?Disposable income provides useful information about the amount of income received by the household sector that is actually available for spending. The key is that a portion of personal income is gobbled up by income taxes. While the household sector officially receives personal income, the government sector is primed and ready to extract a portion of this personal income in income taxes. Disposable income is the income available to the household sector AFTER income taxes are paid. It is disposable income, not personal income, that the household sector has available for spending. In particular, the two uses of disposable income are consumption expenditures (C) and saving (S), which is illustrated in this equation: These consumption expenditures (C), by the way, are the very same consumption expenditures that together with investment expenditures, government purchases, and net exports, are used to purchase gross domestic product. And the saving (S) is the very same saving that enters the financial markets and is borrowed by the business and government sectors to help pay for investment expenditures and government purchases.While the division between consumption and saving ebbs and flows, saving is typically only 2 to 3 percent (or less) of disposable income, making consumption expenditures 97 to 98 percent (or more) of disposable income. This 2 to 3 percent portion of disposable income used for saving is often referred to as the saving rate.
Recommended Citation:DISPOSABLE INCOME, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: July 11, 2025].
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Okun's Law posits that the unemployment rate increases by 1% for every 2% gap between real GDP and full-employment real GDP.
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