National Income

11 Key excerpts on "National Income"

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  eBook - ePub

  Human Well-Being and Economic Goals

  • Frank Ackerman, David Kiron, Neva R. Goodwin, Jonathan Harris, Kevin Gallagher, Frank Ackerman, David Kiron, Neva R. Goodwin, Jonathan Harris, Kevin Gallagher(Authors)
  • 2013(Publication Date)
  • Island Press

    (Publisher)

  [National Income] is essentially an appraisal of the final net product of the business and public economies of the country, two of the three important social institutions that contribute to the production of economic goods; and excludes completely the product of the third—the family. [10]

  [The use of market criteria] swells National Income with items that represent what many citizens condemn as a misuse of energy and the inadequacies of the existing social structure. It includes dreadnoughts, bombing planes, poison gas, and patent medicines because they are rated economic goods in our country today. [20]

  Calculation of National Income has never been a matter of objective observation alone but has always involved observation embedded in a matrix of theoretical analysis, value judgments, and ultimately somewhat arbitrary definitions, often driven by expediency and data availability. In this classic work, Kuznets presents the first systematic definition and calculation of U.S. National Income and discusses the countless ambiguities and judgments (many more than appear in this summary) that arise in the process.

  “National Income may be defined as the net value of all economic goods produced by the nation.” [3] This definition involves four ambiguous terms: “net value,” “economic goods,” “produced,” and “nation.” While there are core areas of agreement on the meaning of each term, there are also peripheral areas of disagreement, where subjective elements inevitably enter the definition of what is to be measured. Thus National Income is necessarily an appraisal of the economic system, not a colorless statement of fact. Denial of any role for judgment would turn National Income accounting into a useless summary of all transactions, many of them obviously unproductive or involving double-counting of productive activity.

  Economic Goods

  All economic goods may be sources of satisfaction; but the converse is not true, since many satisfactions come from personal activities that are conventionally excluded from economic analysis. No definition of the boundary between economic and noneconomic activities can be applicable to all times and places, but for “mature economies” in the 20th century we may define economic goods as those that “usually appear on the market.” [7] However, even this is not free of ambiguity because of the treatment of goods that are usually, but not always, marketed.

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  Foundations of Macroeconomics

  Its Theory and Policy

  • Frederick S. Brooman(Author)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  e.g., transportation) , plus the value of any increase (or minus any decrease) in inventories that occurs during the period. Out of the sum remaining, the firm must pay wages and salaries, rent for land and buildings, interest on borrowed money, and remuneration (such as fees to surveyors) for any other services it receives. What remains after these payments have been made is profit. So the whole of the “value added” by the firm becomes income of one kind or another. The same principle must apply to all economic entities, whether firms, households, or the government; and therefore the total of “values added” in the whole economy – the National Product – must be equal to the total of incomes paid in return for the services of labor and property – the National Income.

  Because of some of the special activities of business and government, the fundamental identity of Income and Product is slightly more complex than the description in the previous paragraph might indicate. According to the official Department of Commerce definition, National Income is the aggregate earnings of labor and property from current production of goods and services; i.e., it is the total factor cost of the commodities produced by the economy. But because of the necessity of covering certain “nonfactor charges” associated with productive activity, not all of Gross National Product is available to be paid to the owners of factors of production. The first of these charges is the “capital consumption allowance” or depreciation; this portion of the returns from production is devoted to the maintenance of the economy’s stock of capital and thus is not paid out as factor incomes. When this item has been deducted, the remainder represents the net receipts from productive activity, or Net National Product, as shown in Table 2.3 .18

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  Understanding Growth and Poverty

  Theory, Policy, and Empirics

  • Raj Nallari, Breda Griffith(Authors)
  • 2011(Publication Date)
  • World Bank

    (Publisher)

  Second, GDP includes depreciation. Because GDP is a domestic concept—one that refers to the production of, and income arising from, goods and services by firms based in the country and by foreign firms operating in the country—it does not cover the economy’s overall income from all sources. To get at the rest of the economy’s income, we must investigate gross National Income (GNI) and gross national product (GNP). GNI and gross national disposable income. GNI includes income gener- ated abroad and paid to residents but excludes income generated domes- tically and paid to nonresidents. The difference between the two is termed “net factor income” (Y f ). Examples of factor incomes are (a) capital income, which includes dividends on direct investment and interest on external borrowing or lending; (b) labor income of migrant and seasonal workers; and (c) service income on land, building rentals, and royalties. GNI = GDP + Y f (2.5) where Y f refers to net factor income from abroad. But net income from abroad need not be related to factors of produc- tion. Private transfers of income may arise from workers’ remittances; public transfers may arise from government grants. Allowing for net current transfers—the difference between transfers received by the resi- dents of a country and transfers made to nonresidents—we arrive at the concept of gross national disposable income (GNDI): GNDI = GNI + TR f (2.6) where TR f is net current transfers received from abroad. Savings. The total income available to residents for use in final consump- tion or savings is GNDI, as noted above: GNDI = C + S (2.7) where C = spending on final goods and services by government and households, S = gross national savings. 38 Understanding Growth and Poverty When final consumption is subtracted from GNDI, we are left with gross national savings: GNDI – C = S. (2.8) Gross national product. GNI deals with income, GDP with produc- tion and income.

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  Applied Intermediate Macroeconomics

  • Kevin D. Hoover(Author)
  • 2011(Publication Date)
  • Cambridge University Press

    (Publisher)

  The sum of wages and salaries (compensation of employees), proprietors’ income, profits, and interest is known as National Income (sometimes called NET National Income AT FACTOR COST ). It is more or less what people have to spend. National Income falls significantly short of total revenues. Revenues may be directed in four other ways: Business Transfer Payments . These include corporate gifts (such as BP’s spon-sorship of broadcasts by the Chicago Symphony Orchestra), personal injury pay-ments, and taxes paid to foreign governments. Taxes on Production and Imports Less Subsidies . These include any taxes that can be treated as a business expense and incorporated into the price of the product (such as sales taxes or property taxes). Corporate income taxes are not included. This item must be adjusted for government subsidies (essentially a negative tax). Table 3.7. National Income and Product Account for 2008 Line Income Line Product 29 Personal consumption expenditures 10,089 30 Durable goods 1,035 31 Nondurable goods 2,220 32 Services 6,834 33 Gross private domestic investment 1,629 34 Fixed investment 1,750 35 Nonresidential 1,389 36 Structures 480 37 Equipment and software 909 38 Residential 361 39 Change in inventories − 121 40 Net exports of goods and services − 392 41 Exports 1,564 42 Imports 1,957 43 Government consumption expenditures and gross investment 2,931 44 Federal 1,145 45 National defense 779 46 Nondefense 366 47 State and local 1,786 1 Compensation of employees 7,792 2 Wages and salaries 6,289 3 Supplements to wages and salaries 1,502 4 Employer contribution to pensions and insurance 1,044 5 Employer contributions for social insurance 458 6 Proprietors’ income with inventory valuation and 1,041 capital consumption adjustment 7 Rental income of persons with inventory valuation and capital consumption adjustment .

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  Workbook in Introductory Economics

  • Colin Harbury(Author)
  • 2014(Publication Date)
  • Pergamon

    (Publisher)

  The National Income is measured in money terms. Though related to, it is not the same as the STANDARD OF LIVING and the two may diverge if, among other things, there is a change in the total population, in the prices or quality of goods and services, or in the distribution of income, either between persons or between consumption and other components of output. The determination of the National Income and other macroeconomic aggregates, especially the general levels of prices and employment, is a controversial area in economics. The two main schools of thought are known as KEYNESIAN and MONETARIST and the differences between them are discussed in the final chapter (see p.129). The approach here emphasizes the determination of real income (basically Keynesian), while monetary influences are dealt with in the next chapter. The starting-point of the theory makes use of the notion of AGGREGATE DEMAND. It is easy to show its importance. Incomes are received as a direct and immediate consequence of someone's expenditure. The butcher earns an income because people spend money buying his goods, so does the baker, the candlestick-maker, and so on. Our concern is, therefore, with aggregate expenditure and its determin-ants in order to arrive at an understanding of the conditions under which the National Income can be said to be at an equilibrium level. The simplest model used to outline the theory of income (Y) determination assumes a closed economy without government. The two components of aggregate demand are CONSUMPTION (C) and INVESTMENT (I). Consumption refers to expenditure by persons (or households) on goods and services which satisfy immediate needs. The total amount of consumption in a period is influenced by a number of social, psychological and institutional factors, such as the availability of credit, the assortment of goods available and innate thriftiness.

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  Principles of Economics in a Nutshell

  • Lorenzo Garbo, Dorene Isenberg, Nicholas Reksten(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  size of the economy, and such measure is provided by two fundamental concepts of National Income accounting you have probably already heard of a million times:

  Gross Domestic Product (GDP)

  : market value of all the final goods/services produced in a given period of time (usually the calendar year) within national borders.

  Gross National Product (GNP)

  : market value of all the final goods/services produced in a given period of time (usually the calendar year) by domestically owned factors of production.

  Note : domestic (the “D” in GD P) is linked to the concept of borders , and thus includes production by domestic and foreign firms within the borders of the country; and national (the “N” in GN P) is linked to the concept of nationality of factors of production, and thus includes production performed only by domestic firms, independently of whether such production occurs within or outside national borders.

  Two key parts of these definitions require careful examination:

  1. Final Goods and Services
  2. Market Value

  a. Final goods and services: the concept of

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  Economics

  • William Boyes, Michael Melvin(Authors)
  • 2015(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  Source: Bureau of Economic Analysis, third quarter 2013; www.bea.gov personal income (PI) National Income plus income currently received but not earned, minus income currently earned but not received. transfer payment Income transferred by the government from a citizen who is earning income to another citizen. 92 Chapter 5 National Income Accounting Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. needs rather than paid out to stockholders. Another is social security (FICA) taxes, which are deducted from workers’ paychecks. 5-1b-5 Disposable Personal Income Disposable personal income (DPI) equals per-sonal income minus personal taxes—income taxes, excise and real estate taxes on personal property, and other personal taxes. DPI is the income that individuals have at their disposal for spending or saving. The sum of consumption spending plus saving must equal dispos-able personal income. 5-2 Nominal and Real Measures The GDP is the market value of all final goods and services produced within a country in a year. Value is measured in money terms, so the U.S. GDP is reported in dollars, the German GDP in euro, the Mexican GDP in pesos, and so on. Market value is the product of two elements: the money price and the quantity produced. 5-2a Nominal and Real GDP Nominal GDP measures output in terms of its current dollar value. Real GDP is adjusted for changing price levels. In 1980, the U.S. GDP was $2,790 billion; in 2013, it was $16,857 billion— an increase of 504 percent.

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  Public Sector Economics

  Made Simple

  • D. I. Trotman-Dickenson(Author)
  • 2014(Publication Date)
  • Made Simple

    (Publisher)

  Multiple Causes Trade cycles cannot be attributed to a single cause. Most present day econ-omists accept a combination of internal and external theories as an expla-nation of the trade cycle but differ in emphasis and on policies to counter-act the fluctuations. Keynesian economists favour fiscal policy to manage the economy. Professor Milton Friedman's study in the Monetary History of the United States 1867-J960 showed a relationship between the supply of money, price level and economic activity. This relationship still appears to exist and not only in the USA, with the result that in recent years governments of major countries have been shifting emphasis from fiscal to monetary policy in an attempt to stabilise their economies and to secure economic growth. National Income 33 Summary 1 The National Income of a country is the aggregate of the income of its citi-zens. This total equals total expenditure and each in turn equals total output— after adjustments for foreign transactions and government transfer payments and taxation. 2 There are three ways of calculating National Income: the income method, the expenditure method, and output method. 3 National Income can be expressed at (a) current market prices, (b) constant prices (in real terms), that is those prevailing in the base year with which subsequent years are compared, to avoid distortions due to changes in the value of money (e.g. inflation). Per capita National Income is the total National Income divided by the number of people in a country. This gives National Income per head of the popula-tion. 4 Governments use National Income data for the purpose of managing of national economies and as a measuring rod for international commitments. 5 International comparison of economic welfare (the standard of living) on the basis of National Income is difficult and can lead to misleading conclusions without a thorough knowledge of the economies that are being compared.

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  Time and the Macroeconomic Analysis of Income

  • Alvaro Cencini(Author)
  • 2013(Publication Date)
  • Bloomsbury Academic

    (Publisher)

  1 The Definition of National Income PART I: INCOME AS A FLOW OF EXPENDITURES 1. Stocks and flows Time, 'the great independent variable of human experience', has been introduced into economic analysis by way of a dis-tinction between aggregates which are timeless concepts and aggregates which have a positive time dimension. Stocks and flows are the terms which, most conveniently, describe these concepts. 'When we speak of a certain quantity of wealth we may refer either to a quantity existing at a particular instant of time, or to a quantity produced, consumed, exchanged or transported during a period of time. The first quantity is a 'stock (or fund)) of wealth; the second quantity is a flow( (or stream) of wealth.' 1 A good picture of this distinction is given by Lerner. The relationship between the stock and the flow is illustrated in Figure 1.1. The stock of water in the tank at any point of time is measured on the scale that tells by the height of the water how many cubic feet are in the tank. The flow of water out of the tank is measured by means of the meter which tells you how many cubic feet have passed through the meter in the Fig. 1.1. 2 THE DEFINITION OF National Income period that has elapsed since the last time the meter was read. The stock refers to a point in time and is measured simply as so many cubic feet. The flow refers to a period and is measured not as so many cubic feet, but as so many cubic feet per hour or per month or other period. 2 This analysis, until now never rejected by any economist, establishes the functional relation between time and a certain number of economic variables. Thereafter, every economic concept has been classified according to whether it can be expressed as a function of time or not. The traditional definition of income. Definitions of income and capital are the clearest example of the implications inherent in this approach. The distinction between a fund and a flow has many applications in economic science.

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  Economic and Social Survey of Asia and the Far East 1950

  • United Nations Economic and Social Commission for Asia and the Pacific(Author)
  • 1950(Publication Date)
  • United Nations Publications

    (Publisher)

  N A T IO N A L INC OM E 117 National Income BY DISTRIBUTIVE SHARES Estimates of the National Income by distributive shares, i.e., classified by wages and salaries, entrepreneurial incomes, profits of corporations, rent and interest, are a valuable source of information for the study of problems of the under-developed countries. For example, the figures may be helpful in studying the problems of financing economic development, such as ascer-taining and appraising the various sources of domestic saving. Compared with similar statistics for the highly developed countries, they may reveal important differences in economic and social structure. Intertemporal com-parisons may indicate if and in what direction changes in the distribution of the National Income are taking place. Unfortunately, for many of the under-developed countries the breakdown of the National Income by wages and salaries, entrepreneurial incomes, etc., is not available. Because of lack of basic economic and financial statistics it is usually not possible to estimate the National Income by consistent methods, e.g., by evaluating the net product of each industry, or by computing the income payments to the factors of production. The available figures are usually based on a mixed method of estimation, i.e., certain elements of the National Income may be based on the net value added method, whereas other elements may be compiled on the basis of the incomes paid out, or by other methods. Adjust-ments may be necessary to avoid duplication or to fill remaining gaps. It is obvious that figures arrived at in this way, though useful for many pur-poses, cannot be used to show the breakdown by all industries, or the shares of the factors of production in the total.

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  Economics and the Real World

  • Andrew M. Kamarck(Author)
  • 2016(Publication Date)
  • University of Pennsylvania Press Anniversary Collection

    (Publisher)

  58 National Income and Product Accounts being under a set of narrow unrealistic assumptions (the economy is closed, all production takes one period with no carry-over, all consumers are identical and incomes are equal, technology is given with increasing marginal cost throughout, there is perfect compe-tition among all consumers and producers). In these impossible conditions, prices equal marginal utilities and marginal costs (the price-line that represents the value of production at market prices touches the production-possibility curve and the collective indiffer-ence curve at the same point) (Hicks, 1981, particularly Essay 9). However, once these assumptions are modified, as of course they must be in reality, the national accounts become very imperfect proxies for welfare. The higher the per capita GNP of an industrialized country, the more it may include items that do not contribute to individual welfare. In the business sector of the economy, it is recognized that some goods are intermediate commodities. That is, some com-modities are inputs for the final commodities produced and are not a part of final output; e.g. flour produced for the making of bread, which is the final commodity. But some consumer expenditures are also for inputs or intermediate goods and services even though pre-sent national accounting conventions treat them as final output. Kuznets, a founder of national accounting, has pointed out that as the result of economic growth the pattern of life imposed on groups in the population, as a condition of participation in the economy, imposes costs on them that they must meet; e.g. costs of commuting. Consumer expenditures on these costs should therefore be excluded from gross output. Kuznets estimates that in the United States in the 1950s excluding such items would have reduced GNP as conventionally measured by over 20 per cent (Kuznets, 1966, p. 227).

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