I was taught this formula: Yd ( disposable income) = Y (Net domestic product) -

Question

I was taught this formula:

Yd ( disposable income) = Y (Net domestic product) - T ( taxes) - Sb (investment by the business sector)

Yet this webpage

http://www.questionhub.com/YahooAnswers/20081022183323AAJhT6b

says that in a closed economy,

Yd = Y - T

How can this be so? What happened to Sb? I understand the term "closed economy" to mean an economy that has no exports and imports. Why should that make Sb be Zero? Why do we make the assumption that if an economy is closed, the business sector does not make any investments?

I don't understand this.

I had a question on an exam that made a similar assumption, so I don't think the webpage is in error. I just need to understand it.

Thanks

Explanation / Answer

disposable income is your income after all fixed and variable costs are accounted for. so both are right the one you mentioned was of a business or government probably. and its the left over funds from all the money collected - taxes given back and - investements owed to public. the second is a personal one. your income -taxes paid

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