Household Flow-of-Funds Equations.

The article discusses flow-of-funds equations at the level of household financial management. The linear expenditure system (LES) model is used here as a method for working around difficulties in using empirical research to investigate household spending and income. It is found that LES can be found using expected utility function on the condition that the gamma distribution is linked to the rate of return. The article concludes that the LES model, the cros-section analysis, and the time-series analysis were able to yield accurate estimates of the economic aspects of households.