National Savings

- Modified: Feb 7th, 2024

In addition to the main national accounts, the BEA also keeps track of stats about savings derived from GDP components and the like.

Private Disposable Income

How much income does the private sector have available to spend?

\[Y_d = \textcolor{#6c71c4}{Y} + \textcolor{#268bd2}{NFP} + \textcolor{#dc322f}{TR} + \textcolor{#859900}{INT} - \textcolor{#b58900}{T}\]

Private Disposable Income = Output + Net factor payments + Net transfers from the government to private individuals + Interest on government debt held by individuals - Taxes.

A few notes:

GDP (labelled Y above) is the output that is produced in a country, physically within its borders. GNP is the output from residents of a country. $GNP = \textcolor{#6c71c4}{Y} + \textcolor{#268bd2}{NFP}$. Net factor payments can be thought of as the adjustment between GDP and GNP.
Privately held debt doesn’t show up in the above equation, nor do most transfers between individuals, because if I give you money that’s less disposable income for me but the same amount more for you.

Private Sector Saving

The income that households had available, but which they did not spend. Private Disposable Income, minus Consumption

\[S_p = Y_d - C\]

In the equation above, any disposable income not spent on final consumption goods counts as “savings”. On an individual level, buying used goods counts as savings by the above definition, but selling used goods counts as “negative savings”, and so such transactions cancel out in aggregate.

Government Savings

All the money the government collects, minus the money that they spend.

\[S_g = \textcolor{#b58900}{T} - \textcolor{#2aa198}{G} - \textcolor{#dc322f}{TR} - \textcolor{#859900}{INT}\]

Government Savings = Taxes - Government Expenditures - Net transfers from the government to private individuals - Interest on government debt held by individuals .

The government deficit is simply the negative of government savings.

\[\text{Government Deficit} = \textcolor{#2aa198}{G} + \textcolor{#dc322f}{TR} + \textcolor{#859900}{INT} - \textcolor{#b58900}{T}\]

If $\textcolor{#b58900}{T} > (\textcolor{#2aa198}{G} + \textcolor{#dc322f}{TR} + \textcolor{#859900}{INT})$, then government savings is positive, and we say the government has a budget surplus.
If $\textcolor{#b58900}{T} < (\textcolor{#2aa198}{G} + \textcolor{#dc322f}{TR} + \textcolor{#859900}{INT})$, then government savings is negative, we say the government has a budget deficit, and the value of this deficit is the difference between .