THE FLOW-OF-FUNDS ACCOUNTS OF THE UNITED STATES
Table 14-1 covers the summary flow-of-funds accounts of the United States for the first quarter of 1959. It was published in the August 1959 issue of the Federal Reserve Bulletin, in which the Bulletin inaugurated its regular quarterly reporting of flow-of-funds data.*
Instead of the five-sector system (banking, producing, government, rest of the world, and households) that we have used in introducing the flow- of-funds accounts in Chapters 11, 12, and 13, the Federal Reserve Bulletin publishes the accounts in eleven sectors: (1) consumers and nonprofit organizations, (2) farms, (3) noncorporate business, (4) corporate business, (5) Federal government, (6) state and local governments, (7) commercial banking, (8) savings institutions, (9) insurance, (10) financial, not elsewhere covered, and (11) rest of the world.
Let us examine Table 14-1. The first item is (A) gross saving, entered in boldface type under "sources of funds" for each sector. It is divided into (B) capital consumption (i.e., depreciation) and (C) net saving, which (except for rounding discrepancies) in each case add up to (A) gross saving. Note that (B) capital consumption allowances include a large amount ($10.6 billion) in the consumer (i.e., household) sector. The fact that depreciation is taken indicates that the accounting for this sector includes purchases of durable consumer goods as investment, rather than consumption (as they are shown in the national product accounts). Thus the purchase of an automobile is not registered as dissaving (as it would be in the national product accounts); rather, it is carried as investment in consumer durable goods (F). As the automobile depreciates, the capital consumption allowance is entered in gross saving of the consumer sector.
Suppose, for example, that every year households have $500 income, $400 consumption of nondurable goods, and $100 saving, which is invested in financial assets. In year X, households buy $60 of durable goods in addition to their usual purchases. The national product accounts would____________________