Disposable Income is a term used to describe the remaining money a person has after accounting for all mandatory deductions, such as income taxes, federal taxes, state taxes, and Social Security contributions. This particular income is usually associated with consumer spending, as it is typically the money that consumers have available to use as they wish without worrying about repaying loans or money that is owed to another source.

Disposable income is important in the context of consumer spending since it is an indicator of consumer confidence. If individuals feel secure in their economic position and have access to disposable income, this is an indication that consumer sentiment is strong and an economy is growing. This is due to the fact that disposable income suggests that individuals have funds that are specifically for discretionary purchases, such as vacations, holiday gifts, and clothing.

In order to assess the disposable income of a population, economists use surveys to gather data from households in order to determine how much money is available for each individual to spend, as well as how this money is allocated between different forms of expenditure.

For example, data collected from these surveys can reveal information regarding the general trends of consumer spending in the United States, such as how much of the available disposable income is allocated towards purchases of durable items such as cars or electronics, medical expenses, travel, and leisure activities.

At a macro level, disposable income serves as a measure of consumer spending power. The more disposable income a population has, the more likely its members are to have the funds necessary to make necessary purchases. In addition, as consumer disposable income increases, companies have the potential to make greater profits from sales of consumer goods and services.

Overall, disposable income serves as an important economic indicator of consumer health, consumer confidence, and consumer spending power. By tracking disposable income levels at both the macro and micro levels, economists can attain insight into the fiscal state of both a population and the world economy.