1. Running Head: Dollar Bill 1
Charles Browne
July 21, 2014
July 21, 2014
Personal Income: Dollar Dollar Bill
Macroeconomics
Mondays, 12:15-3:00 p.m.
Professor Lauren Brown
2. Dollar Bill 2
For as long as I can remember I have been told that the thing that makes the world go
round, and the object that makes one want to pursuit happiness has been call a lot of names. The
root of all evil, cabbage, filthy green stuff and rappers refer to it as C.R.E.A.M. Cream is an
acronym for cash rules everything around me, which is definitely important to know when
attempting to explain the complexity of personal income.
Personal Income is total revenue received by an individual, whether it is sales,
investment, assets or any type of profit resulting in financial gain. Talking about personnel
income as a whole would take almost an entire day, but I would like to mention just a few of the
stand outs about personnel income, and the first is quite simple to explain. It is called work.
Work, of all the things to do, but it brings in income. Work is energy, an action, and most
important what we all must do to earn money. Earned income is a key factor in making our
society economic structure function. Earned income is the start of the circular flow of economy.
The circular flow of economy is a depiction of how money and products are exchanged within
an economy. “A circular flow diagram might be used by a business to show how a specific series
of exchanges of goods, services and payments make up the building blocks of a given economic
system of interest”.(“BusinessDictionary.com,” 2014, para.1). To explain (see chart) work
creates the income for a household, and the spending for the market to operate.
(www.harpercollege.edu, n.d, “Measuring the Economy”).
Personal income is a very big subject, so another part of topic that I would like to focus
on is connected to the buying and selling of goods. This is called capital gains, and capital gains
are large one time payments from real estate, stock, or investments. This says any if not all of
ones assets could be considered capital gains if sold for more than what the sellers pays for it. So
3. Dollar Bill 3
if the seller wants to sell a $35,000 house, and gets forty grand in return there is a capital gain of
five thousand dollars. There are more facts when it comes to capital gain. “Capital gains and
losses are classified as long-term or short-term. If you hold the asset for more than one year
before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less,
your capital gain or loss is short-term. To determine how long you held the asset, count from the
day after the day you acquired the asset up to and including the day you disposed of the asset.”
(www.irs.gov/ Capital Gains and Losses, 2014, para.2).
Another form of personal income, and it should be called an allowance, but instead the
technical term is passive income. A “passive income is payments that you receive from the assets
you have created. These payments usually come monthly, and require little or no work for you to
receive them. Some types of assets that produce passive income are rental properties, dividend
stocks, and businesses. Assets that produce passive income continue to do so until the asset is
liquidated (sold). Passive income is what makes a person rich. If a person has more than enough
passive income to cover his or her expenses, that person is rich”. (Press. M. Personal Finance,
n.d. para 2).
This is possibly one some of us all look forward to. This is why some of us work till we
cannot neither stand nor barely walk. This is the form of income in which we all call the pension.
There are different kinds of pensions. One is the Social and state, disability and the one known to
all who look toward to retirement the Employment-based pensions. “The source of pension
payments is determined by the portion of the distribution that constitutes the compensation
element (employer contributions) and the portion that constitutes the earnings element (the
investment income). The compensation element is sourced the same as compensation from the
performance of personal services. The portion attributable to services performed in the United
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States is U.S. source income, and the portion attributable to services performed outside the
United States is foreign source income. The earnings portion of a pension payment is U.S. source
income if the trust is a U.S. trust. (www.irs.gov/ Source of Income - Personal Service Income,
para13). Pension comes at either a ones well-earned retirement, or when one is too old and does
not realizes that they are too old to continue to perform at the level they once were, so than the
company pushes them out in order to continue progression.
Personal income is a very complex topic, because there is a lot of ways a person can get
their hands one some legitimate paydays in our society, based on the ideas of economic activity
one thing helps the other going and coming by the wage, going into the income. The income
becoming the households who spends to keep the market going, now money becomes revenue
for the firm. All these sources of income help to keep the circular flow rolling along. The
personal income of a working person, capital gains, the passive income, and the goal to reach
after working to long, the pension. These are just a few parts that make up personal income. I
feel they stick out because of a common path token by movies. One could either work forever,
live on the edge by the hustle of investment, stock and real estate, just plain luck form just
having things or prepare for the guarantee of the pension. However you look at money as we
know it makes the world go round. Funny how that saying about money is circular flow irony, so
C.R.E.A.M is the truth. Dollar, Dollar Bill y’all.
5. Dollar Bill 5
References
Circular flow. (2014). In BusinessDictionary.com. Retrieved from
http://www.businessdictionary.com/circular flow
Measuring the Economy.(n.d) In www.harpercollege.edu. Retrieved from
http://www.harpercollege.edu.
(2014). Capital Gains and Losses. Retrieved from http://www.irs.gov
Press. M. (n.d). Three Income Types. Retrieved from http:// http://www.personal-finance-
/hq.com
(2014). Source of Income - Personal Service Income. Retrieved from http://www.irs.gov
