Final answer:
Disposable income is the income that a household or individual has after taxes and transfers, and it is the sum of consumption expenditures and savings.
Step-by-step explanation:
The question relates to the concept of disposable income which is particularly relevant to the field of Economics within the Business subject area. When examining the options provided in relation to what constitutes disposable income, the correct answer is E) It equals consumption expenditures plus saving.
Disposable income refers to the income that is available to a household or individual after taxes have been paid and transfers received. It is this income that households have at their disposal for spending on consumption and saving. Therefore, it is neither solely used for consumption (which excludes saving) nor the total earned income paid to the government in the form of taxes. It also does not exclude transfer payments; quite the contrary, it includes them. Further, disposable income is not just the difference between income and saving because it also accounts for consumption.