What do you call the income that is not earned through labor but through investments or savings?

What do you call the income that is not earned through labor but through investments or savings?

• A. Active income
• B. Unearned income
• C. Passive income
• D. Capital gains

Answer: (B)

The term that describes income not earned through direct labor but rather through investments or savings is unearned income. This category encompasses various forms of revenue such as dividends from stocks, interest from savings accounts, rental income from properties, and other types of portfolio earnings. This income is distinct from active income, which is generated through direct employment or providing services. Understanding this distinction is crucial for financial literacy, as it highlights the different streams of income that can contribute to an individual’s overall financial health without the necessity of active work or effort. While passive income typically refers to earnings generated from investments where the individual does not have to be actively involved, unearned income is a broader term that includes not only passive income but also income generated from other investment avenues. Capital gains, on the other hand, refer specifically to the profit made from selling assets such as stocks or real estate at a higher price than they were bought, and is thus a subset of unearned income but not an exhaustive term.

The term that describes income not earned through direct labor but rather through investments or savings is unearned income. This category encompasses various forms of revenue such as dividends from stocks, interest from savings accounts, rental income from properties, and other types of portfolio earnings. This income is distinct from active income, which is generated through direct employment or providing services. Understanding this distinction is crucial for financial literacy, as it highlights the different streams of income that can contribute to an individual’s overall financial health without the necessity of active work or effort.

While passive income typically refers to earnings generated from investments where the individual does not have to be actively involved, unearned income is a broader term that includes not only passive income but also income generated from other investment avenues. Capital gains, on the other hand, refer specifically to the profit made from selling assets such as stocks or real estate at a higher price than they were bought, and is thus a subset of unearned income but not an exhaustive term.