Chapter 3R, Problem 2MCQ

To determine

The question requires us to determine the value of disposable income.

Explanation of Solution

The disposable income is the total income left after paying taxes to the government and receiving transfers from the government.

From the given circular-flow chart,

The value of GDP = $750

Amount of taxes to the government = $100

Disposable income = GDP − Taxes to the government = $750 − $100 = $650

The value of disposable income is $650.

Thus, option “b” is correct.