Gross Domestic Product etc - 20

Expenditure Approach GDP (continued from previous post)

2.41 Saving: Saving is the balancing item in the use of income
account. Saving represents that part of disposable income that is not spent
on final consumption goods and services. It may be positive or negative
depending on whether disposable income exceeds final consumption
expenditure, or vice versa. Assuming that saving is positive, the unspent
income must be used to acquire assets or reduce liabilities. In so far as
unspent income is not used deliberately to acquire various financial or nonfinancial
assets, or to reduce liabilities, it must materialize as an increase in
cash, itself a financial asset. If saving is negative, some financial or nonfinancial
assets must have been liquidated, cash balances run down or some
liabilities increased. Thus, saving provides the link between the current
accounts of the System and the subsequent accumulation accounts. If saving
is zero, i.e., if final consumption expenditure equals disposable income, the
institutional unit is not obliged to liquidate any assets or change any of its
liabilities. Therefore, disposable income can, therefore, be interpreted as the
maximum amount that an institutional unit can afford to spend on final
consumption goods and services in the accounting period without having to
reduce its cash, liquidate other assets or increase its liabilities. Non-financial
and financial corporations have no final consumption expenditure or actual
final consumption. Their net saving is equal to their net disposable.
[Reproduced from CSO Publication][To be concluded]