Question

Distiniguish clearly between a household's initial asset position and the change in that position. If a household has negative saving, is that household necessarily a borrower in the sense of having a negative position in bonds?

Answer 1

The initial household assets mean all assets, including the household property, such as homestead land, forest land occupied by the household, the house, any other moveable and immovable property. These household properties may change over time in a positive and negative way. If the household saving occurs, then the household assets increase. This increase in household assets may be called as capital formation. On the other hand, if the household does not save, i.e. Saving occurs in a negative way, then the assets may be decreased. This decrease may be called as erosion in household assets. Thus the household's asset position depends on the saving behaviour of the household.

On the basis of above observation, it has cleared that if a household has negative saving, the household necessarily a borrower in the sense of having negative saving position in bonds. This is because negative saving behaviour leads to reduction in existing assets, as a household needs to maintain their livelihood.