Questions:

1. Based on this evidence, has financial position of the average household improved during this period of time? Explain your answer.

2. What do you think the average household balance sheet looks like today? Explain your answers,

THE BALANCE SHEET OF AN "AVERAGE" AMERICAN HOUSEHOLD Balance sheets are not unique to corporations Every entity For example, in 2009, James Kwak posted his calculations of including state and local governments, nonprofit agencles the average household balance sheet on his popular website The Baseline Scenario (baselinescenaria.com), which provides We can learn a lot about a household's financial weil interesting commentary on a variety of curment economic and being by looking at its balance sheet. While obviously every financial issues. The underlying data for his calculations came household is different, economists can use availabie data from the Federal Reserve Board's Survey of Consumer Finances. to estimate the balance sheet of an average American Here s a summary of Kwak's caiculations for 2004, 2007, and individual households has a balance sheet. and 2009 2009 Income 47,500 47300 S 47,300 Bank accounts Retirement savings 17.900 14,600 125,400 5 160,600 19,000 14.400 23.900 Primary residence Total assets Mortgage on 84800 11,800 $88,700 12,800 88,700 12,800 primary residence Installment loans Credit cards Total lablitles Net worth 5 103,900 87.300 Note: See Kwak's posting on The Baseline Scenario for more details about the methods that he used in his calculations While his calculations were only meant to give a broad sharp decline in the housing market reduced the value picture of recent trends, they produce some interesting o the average home and the sharp decline in the stock market reduced the value of the average amount of findings: redrement savings The largest asset of the average household is its primary While not broken down on a per-household level, updated information on aggregate household finances is on the Federal Reserve website. For example, numbers released in December 2012 indicate that aggregate house- .Perhaps somewhat surprisingly, average household debt hoid balance sheets have strengthened somewhat since levels have not increased dramatically in recent years. 2009. These lmprovements reflect that many households residence The average American household does not have a large amount of savings in place for retirement Average household net worth increased slightly from have made progress in reducing their debt level. Household 2004 to 2007, but declined sharply from 2007 to 2009. levels of net worth have also improved because of the large The decline in net worth was due to two reasons: The run-up in the stock market during this time period. Source: James Kwak "Tracking the Household Balance Sheet" The Baseline Scenario ( February 15, 2009