Throughout the last few chapters in macroeconomic the book has talked about things such as national income, disposable income, and gross domestic product. National income is the sum of incomes of all individuals in the economy that excludes transfer payments and is before taxes. On the other hand, disposable income is the money individuals can spend after taxes and transfer payments. Finally, gross domestic product is the total amount of goods and services, or output, produced in America during a certain time period. Both national and disposable income as well as output play an important part in the circular flow diagram which explains how consumption spending, investment spending, government spending, net export, and business firms contribute
