CLEP Marketing Practice Exam 2025 – All-in-One Guide to Achieve Top Scores!

Disposable income refers to the amount of money that an individual or household has available for spending and saving after income taxes have been deducted. This figure reflects the financial resources that remain after obligations to the government have been fulfilled, enabling consumers to spend on goods and services or save for future use.

Considering the other options, income before taxes represents the total earnings without accounting for any deductions, which does not reflect the actual funds available for discretionary spending. Income after essential purchases pertains to what's left after mandatory expenses like housing and food, which moves beyond the concept of disposable income as it does not only consider tax deductions. Income that is saved for investments focuses specifically on funds allocated for investment purposes, rather than the broader category of all available funds post-tax. Thus, the definition of disposable income is accurately captured by the correct answer, as it is specifically concerned with what remains after taxation.