National Income Accounting PDF

NATIONAL INCOME ACCOUNTING  MEASURING NATIONAL OUTPUT AND NATIONAL INCOME MEASURING NATIONAL OUTPUT AND NATIONAL INCOME NATIONAL INCOME AND PRODUCT ACCOUNTS Data collected and published by the government describing the various components. GROSS DOMESTIC P...

NATIONAL INCOME ACCOUNTING  MEASURING NATIONAL OUTPUT AND NATIONAL INCOME MEASURING NATIONAL OUTPUT AND NATIONAL INCOME NATIONAL INCOME AND PRODUCT ACCOUNTS Data collected and published by the government describing the various components. GROSS DOMESTIC PRODUCT Is the total market value of a country’s output. It is the market value of all final goods and services produced within a given period of time by factors of production located within a country.  FINAL GOODS AND SERVICES Many goods produced in the economy are not classified as final goods, but instead as intermediate goods. Intermediate goods are produced by one firm for use in further processing by another firm. For example, tires sold to automobile manufacturers are intermediate goods. The value of intermediate goods is not counted in GDP. EXCLUSION OF USED GOODS AND PAPER TRANSACTIONS GDP is concerned only with new, or current production. Old output is not counted in current GDP because it was already counted back at the time it was produced. It would be double counting to count sales of used goods in current GDP. If someone sells a used car to you, the transaction is not counted in GDP, because no new production has taken place. Similarly, a house is counted in GDP only at the time it is built, not each time it is resold. In short, GDP ignores all transactions in which money or goods change hands but in which no new goods and services are produced  EXCLUSION OF OUTPUT PRODUCED ABROAD BY DOMESTICALLY OWNED FACTORS OF PRODUCTION The three basic factors of production are land, labor and capital. The labor of Filipino citizens counts as domestically owned factor of production for the Philippines. The output produced by Filipino citizens abroad – for example, Filipino citizens working for a foreign company – is not counted in Philippine GDP because the output is not produced within the Philippines. Likewise, profits earned abroad by Philippine companies are not counted in Philippine GDP. However, the output produced by foreigners working in the Philippines is counted in Philippine GDP because the output is produced within the Philippines It is sometimes useful to have a measure of the output produced by factors of production owned by a country’s citizens regardless of where the output is produced. This measure is called Gross National Product. GROSS NATIONAL PRODUCT (GNP) The total market value of all final goods and services produced within a given period by factors of production owned by a country’s citizens, regardless of where the output is produced.  CALCULATING GDP EXPENDITURE APPROACH A method of computing GDP that measures the amount spent on all final goods during a given period. INCOME APPROACH A method of computing GDP that measures the income - wages, rents, interest, and profits – received by all factors of production in producing final goods.  Expenditure Categories Net Private Domestic Investment plus (+) Depreciation Personal Consumption Expenditures (C) Gross Private Domestic Investment (I) Government Consumption and Gross Investment (G) Net Exports (X – M) Income Categories National Income Payments of factor income to the rest of the world minus Depreciation (-) Receipts of factor income from the rest of the world Indirect taxes minus subsidies Net Factor Payments to the Rest of the World  The Expenditure Approach GDP = C + I + G + (X – M) The Income Approach GDP = National Income + Depreciation + (Indirect Taxes – Subsidies) + Net factor payments to the rest of the world  FROM GDP TO DISPOSABLE PERSONAL INCOME GDP 10,205.6 Plus: Receipts of factor income from the rest of the world +342.1 Less: Payments of factor income to the rest of the world -353.2 Equals: GNP 10,194.5 Less: Depreciation -1,351.3 Equals: Net National Product (NNP) 8,843.2 Less: Indirect taxes minus subsidies -643.3 Equals: National Income 8,199.9 Less: Corporate profits minus dividends -332.6 Less: Social insurance payments -731.2 Plus: Personal interest income received from the govt. and consumers +439.1 Plus: Transfer payments +1,148.7 Equals: Personal Income 8,723.9 Less: Personal Taxes -1,306.2 Equals: disposable Personal Income 7,417.7 Tax, Undistributed Corporate Profits, Dividends Corporate Profits  LIMITATION OF THE GDP CONCEPT THE UNDERGROUND ECONOMY illegal economic activities (not recorded)  END Thank you!!