What does 'passive income' refer to?

Passive income refers to earnings that are generated with minimal ongoing effort or direct involvement from the recipient. Typically, this kind of income comes from investments, rental properties, or other financial vehicles where the initial setup requires work but the ongoing revenue can be earned without continuous input.

In contrast, options that describe income from active work or that requires constant involvement emphasize scenarios where the individual must consistently engage in productive activities to earn money. Such characterizations do not align with the essence of passive income, which is designed to create a steady revenue stream with less hands-on effort after the initial investment or setup.

While stock dividends can be a form of passive income, they do not encompass the broader definition that includes various other forms of investment earnings. Therefore, the idea that income received regularly with minimal effort can originate from various sources beyond just stock dividends establishes why this definition is the most comprehensive and appropriate for describing passive income.