lectur3-page43 - Those are social security and medicare...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Now that we have a little knowledge about fiscal policy, and understand the complexities of the federal spending; let us use the consumption-production model to explain a few things. First, we need to define another term, disposable income. A person’s disposable income is their gross income minus all of there government obligations. Think of the last paycheck your received. You opened it up and you probably saw a number that made you think something was wrong. So, you look at your pay stub that has all the details. You look at something that says “Gross Pay”, and you think, “Yea, this is what I thought I should be getting.” Then you look on down further and see all these deductions: OASDI tax, HI tax, Fed W/H, and NC W/H.
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Those are social security and medicare taxes, as well as, the federal and state income taxes that were withheld by your employer. These are your government obligations . Next you look at that number next to “Net Pay”, and you probably say, “Daggone!!!” Well if taxes are the only thing “pulled” from your paycheck then Daggone!!! Well, if taxes are the only thing pulled from your paycheck, then that “Daggone!!!” number is your disposable income. When taxes are increased, your disposable income decreases When taxes are decreased, your disposable income increases 43...
View Full Document

This note was uploaded on 12/29/2011 for the course ECO 210 taught by Professor Malls during the Fall '10 term at SUNY Stony Brook.

Ask a homework question - tutors are online