Q.Distinguish between Personal Income (PI) and Personal Disposable Income (PDI). Why is PDI generally less than PI?

PI is the total income households actually receive; PDI is what remains after households pay direct taxes and other compulsory payments to the government. …

Personal Income (PI) is the total income actually received by individuals/households in a year, whether or not they themselves earned it in the current period. It is derived from National Income as:

Corporate tax, undistributed profits and social security contributions are amounts earned in the economy but never actually paid out to individual households, so they are deducted; transfer payments (pensions, scholarships) are received by households without corresponding current production, so they are added back.

Personal Disposable Income (PDI) goes one step further — it is the amount a household is actually free to spend or save, after meeting its compulsory obligations to the government:

$PDI = PI - \text{Direct Personal Taxes} - \text{Other Compulsory Payments (e.g., fines, fees)}$ …