DEFINITION of 'Surplus Spending Unit'

A surplus spending unit is an economic unit with income that is greater than or equal to expenditures on consumption over the course of a period. A surplus spending unit earns more than it spends on its basic needs and therefore has money left over to invest into the economy through the form of purchasing goods, investing or lending. A surplus spending unit can be a household, business, or any other entity that makes more than it spends for the purpose of sustaining itself.

The opposite of a surplus spending unit is a deficit spending unit, which spends more than it makes and has to borrow from surplus units to sustain itself. Once an entity is a surplus or deficit spending unit, it does not have to maintain that status forever. A deficit spending unit can become a surplus spending unit if it begins to generate additional income, covers its basic expenses, and pays off all of its own deficits from an earlier period.

BREAKING DOWN 'Surplus Spending Unit'

A surplus spending unit earns more than it spends. Surplus spenders can be individuals, sectors, countries or even a whole economy. When a surplus spending unit is an entire country, it can benefit the global economy by investing in and lending to deficit spending countries.

In the U.S., households usually represent a surplus spending unit, as many households earn large portions of disposable income. Most households earn more income than necessary to purchase food, shelter and other basic necessities. As a result, they are able to purchase additional consumer products, hold money in banks, or invest in the stock market. These purchases of consumer goods by households constitute a large portion of the U.S. economy, as approximately 70% of the U.S. Gross Domestic Product (GDP), every year is powered by consumer spending. Money that is held in banks by households forms the basis for loans that can be made to other households that look to borrow money.

RELATED TERMS
  1. Budget Surplus

    A budget surplus is a situation in which income exceeds expenditures. ...
  2. Benchmark Surplus

    Benchmark surplus refers to the amount of surplus from an additional ...
  3. Current Account Surplus

    A current account surplus is a positive current account balance, ...
  4. Surplus Lines Insurance

    Surplus lines insurance protects against a financial risk that ...
  5. Adjusted Surplus

    Adjusted surplus is one indication of an insurance company's ...
  6. White List States

    White List States are those that permit the addition of specialized ...
Related Articles
  1. Investing

    Understanding Consumer Surplus

    Consumer surplus is an economic measure of consumer satisfaction, which is calculated by analyzing the difference between what consumers are willing to pay for a good or service, relative to ...
  2. Insights

    Germany, Not China, Is the U.S.'s Big Trade Threat

    While Trump is focused on China and Mexico, Germany is likely a bigger threat to American exporters.
  3. Investing

    Germany Achieves Another Record Trade Surplus

    Germany has posted yet another record trade surplus while the rest of the eurozone struggles from weak demand and deflationary pressures.
  4. Insights

    Exploring the Current Account in the Balance of Payments

    Learn how a country's current account balance reflects the country's economic health.
  5. Insights

    The Pros & Cons of a Trade Deficit

    Is a trade deficit, also known as a current account deficit, beneficial or detrimental to a country's economy?
  6. Personal Finance

    Debt Versus Deficit: Understanding the Differences

    Gain an understanding how deficit differs from debt, and how they are related.
  7. Investing

    What's the Balance of Trade?

    The balance of trade is the difference between the value of all the goods and services a country exports and the goods and services it imports.
  8. Insights

    The Current State of the U.S. Debt

    Discover the current state of U.S. national debt, whether it's increasing or decreasing, and what is projected for the next 10 years.
  9. Personal Finance

    How to Align Your Spending and Values

    Spending money is okay when it is aligned with what you value.
  10. Investing

    Why Money Flow From Japan Matters to the U.S. Equity Market

    Discover why Japanese savers and investors may have a lot to say about the future of the U.S. equity market, and why the trade deficit is responsible.
RELATED FAQS
  1. What is the difference between consumer surplus and economic surplus?

    Learn the difference between consumer surplus and economic surplus, how the concepts are related and the important theoretical ... Read Answer >>
  2. What is the role of deficit spending in fiscal policy?

    Read about the role deficit spending can play in a government's fiscal policy, and learn why economists are torn about the ... Read Answer >>
  3. How does fiscal policy impact the budget deficit?

    Fiscal policy refers to any uses of the government budget to affect the economy including government spending and levied ... Read Answer >>
  4. What impact does the balance of trade have on GDP calculations?

    Read about the impact of the balance of trade on a nation's gross domestic product, and why the figures involved in each ... Read Answer >>
  5. What is the difference between a current account deficit and a trade deficit?

    Learn the meanings of the macroeconomic terms "current account deficit" and "trade deficit," and understand the differences ... Read Answer >>
  6. Which countries run the largest budget deficits?

    Discover the countries with the largest budget deficits and what it means. Deficits are influenced by the economy and also ... Read Answer >>
Trading Center