Transcript The Balance Sheet Entries of the Household Sector

CHAPTER
Financial Aspects of the Household,
Firm, Government, and Rest-of-theWorld Sectors
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23
The Balance Sheet Entries of the
Household Sector
Assets
Liabilities
Real estate
Other real assets
Money
Other financial assets
Real estate mortgages
Installment debt
Other personal debt
Net worth
Total assets
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Total liabilities plus net worth
Household Portfolio Choices
Households accumulate real and financial
assets and liabilities in an attempt to
maximize their well-being.
Changes and expected changes in income,
wealth, and interest rates change the
economic and financial environment.
In response to the changing environment,
households change their desired portfolios of
assets and liabilities
Households will spend more or less and
accumulate more or less real and financial
assets and liabilities in an attempt to reach
their desired portfolios.
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The Balance Sheet of the
Business Sector
Assets
Liabilities
Real assets
Capital goods
Inventories
Financial assets
Currency, checkable
Deposits
Money market mutual funds
Certificates of deposit (CDs)
Mutual funds
Trade credit
Other financial assets
Equity
Common stock
Total assets
Total liabilities plus net worth
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Debt
Long-term
Short-term
Other financial liabilities
Business Investment
Business
Investment
To replace worn-out or
obsolete capital (plant,
equipment, and
machinery)
To add to inventories
(raw materials, goods in
process, finished goods)
To increase the capital
stock (plant, equipment,
and machinery)
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Business Finance
Financing Need
Internal
Retained Earnings
External
Equity
Debt
Short-Term Debt
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Long-Term Debt
The Difference between Federal Outlays and
Federal Receipts, 1960 to 2001 (Billions of
Dollars)
Fiscal Year
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
Receipts
$92.5
94.4
99.7
106.6
112.6
116.8
130.8
148.8
153.0
186.9
192.8
187.1
207.3
230.8
263.2
279.1
298.1
355.6
399.6
463.3
517.1
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Surplus or
Outlays
$92.2
97.7
106.8
111.3
118.5
118.2
134.5
157.5
178.1
183.6
195.6
210.2
230.7
245.7
269.4
332.3
371.8
409.2
458.7
503.5
590.9
Deficit (2)
$ .3
-3.3
-7.1
-4.8
-5.9
-1.4
-3.7
-.86
-25.2
3.2
-2.8
-23.0
-23.4
-14.9
-6.1
-53.2
-73.7
-53.7
-59.2
-40.2
-73.8
The Difference between Federal Outlays and
Federal Receipts, 1960 to 2001 (Billions of
Dollars) (continued)
Fiscal Year
Receipts
1981
$599.3
1982
617.8
1983
600.6
1984
666.5
1985
734.1
1986
769.1
1987
854.1
1988
909.0
1989
990.7
1990
1,031.3
1991
1,054.3
1992
1,198.5
1993
1,275.1
1994
1,374.4
1995
1,463.2
1996
1,587.6
1997
1,723.4
1998
1,721.8
1999
1,827.5
2000
2,025.0
2001
2,136.9
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Surplus or
Outlays
$678.2
745.8
808.4
851.8
946.4
990.3
1,003.9
1,064.1
1,143.2
1,252.7
1,323.8
1,479.4
1,525.8
1,561.4
1,637.1
1,698.1
1,752.2
1,652.5
1,703.0
1,788.0
1,856.2
Deficit (2)
$-79.0
-128.0
-207.8
-185.4
-212.3
-221.2
-149.8
-155.2
-152.5
-221.4
-269.5
-280.9
-250.7
-186.7
-174.4
-110.4
-28.8
69.2
124.4
236.9
280.7
Federal Outlays and Receipts as a Percentage
of GDP, Fiscal Year 1960 to 2001
24
Percent
22
Outlays
20
18
Receipts
16
0
1960
1965
1970
1975
1980
Year
SOURCE: Economic Report of the President, February 1996, page 368 and http://www.stls.frb.org/fred/.
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1985
1990
1995
2001
Exports and Imports Relative to
GDP, 1960 to 2001
18.0
15.0
12.0
9.0
6.0
3.0
0
1960
1965
1970
The shaded periods represent
recessions
1975
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1980
Year
1985
1990
1995
*Through 1st Quarter.
SOURCE: http://www.stls.frb.org/fred/.
2001*
Capital Flows Relative to GDP,
1960 to 2001
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
-3.0
-3.5
-4.0
-4.5
-5.0
-5.5
-6.0
1960
1965
1970
1975
1980
1985
1990
1995
Year
The shaded periods represent recessions
SOURCE: http://www.stls.frb.org/fred/.
Copyright © 2003 by South-Western/Thomson Learning. All rights reserved.
*Through 1st quarter only.
2001*