Real Personal Disposable Income
- Thursday, November 6, 2008, 13:45
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Real Personal Disposable Income
More often than not it is real PDI which we need to consider. For example, the basic consumption function relates real consumers’ expenditure to real PDI. To calculate it we use the consumers’ expenditure deflator as a measure of the relevant price level. (Why this and not, say, the GDP deflator?) Hence,
Real PDI = (Nominal PDI/Cons. Exp. Deflator) x 100
Table 1-8 below shows the calculation of real PDI for the period 1985 to 1990 (selected years).
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