National Income Accounting

10 Key excerpts on "National Income Accounting"

• 

  eBook - PDF

  Economics

  A Contemporary Introduction

  • William A. McEachern(Author)
  • 2016(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  The national income accounts have limitations, but they offer a reasonably accurate picture of the economy at a point in time as well as year-to-year movements in the economy. Subsequent chapters will refer to the distinction between real and nominal values. The national income accounts are published in much greater detail than this chapter indicates. The appendix provides some flavor of the additional detail available. Summary 1. Gross domestic product, or GDP, measures the market value of all final goods and services produced during the year by re- sources located in the United States, regardless of who owns those resources. 2. The expenditure approach to GDP adds up the market value of all final goods and services produced in the economy during the year. The income approach to GDP adds up all the income generated as a result of that production. 3. Consumption’s share of GDP increased from an average of 62 percent during the 1960s to 68 percent during the most recent de- cade. Government purchases fell from 22 percent to 20 percent. Investment bounced around but averaged 15 percent of GDP during the 1960s and 16 percent during the most recent decade. Net exports averaged a surplus of 1 percent of GDP during the 1960s, but turned negative after that, meaning that imports exceeded exports, with an average deficit of 4 percent of GDP during the most recent decade. Copyright 2017 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. 464 Part 6 Fundamentals of Macroeconomics 4. The circular-flow model summarizes the flow of income and spending through the economy.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Macroeconomics

  A Contemporary Introduction

  • William A. McEachern(Author)
  • 2016(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  The national income accounts have limitations, but they offer a reasonably accurate picture of the economy at a point in time as well as year-to-year movements in the economy. Subsequent chapters will refer to the distinction between real and nominal values. The national income accounts are published in much greater detail than this chapter indicates. The appendix provides some flavor of the additional detail available. Summary 1. Gross domestic product, or GDP, measures the market value of all final goods and services produced during the year by re- sources located in the United States, regardless of who owns those resources. 2. The expenditure approach to GDP adds up the market value of all final goods and services produced in the economy during the year. The income approach to GDP adds up all the income generated as a result of that production. 3. Consumption’s share of GDP increased from an average of 62 percent during the 1960s to 68 percent during the most recent de- cade. Government purchases fell from 22 percent to 20 percent. Investment bounced around but averaged 15 percent of GDP during the 1960s and 16 percent during the most recent decade. Net exports averaged a surplus of 1 percent of GDP during the 1960s, but turned negative after that, meaning that imports exceeded exports, with an average deficit of 4 percent of GDP during the most recent decade. Copyright 2017 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. 132 Part 2 Fundamentals of Macroeconomics 4. The circular-flow model summarizes the flow of income and spending through the economy.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Applied Intermediate Macroeconomics

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

    (Publisher)

  The sum of national income and these four items is gross national income defined as the total income received by the residents of a country . In principle, gross national income should equal gross national product. In practice, there are measurement errors reflected in the statistical discrepancy . To get gross domestic product (i.e., the total production of final goods and services generated within the borders of a country), we subtract income receipts from the rest of the world – that part of the income earned abroad (e.g., profits from U.S. ownership of a foreign factory or interest on foreign bonds) – and add income payments to the rest of the world (income gener-ated from U.S. production but owned by foreigners). In other words, we work backward from GNP to GDP, where in the text we worked forward. It may be helpful to explain some puzzling terms that appear in the table. Inventory Valuation Adjustment (lines 6, 7, and 8). If a firm counts the cost of using an inventory item at its historic purchase price rather than a higher replacement cost, it will record a profit from the use by an amount unconnected to current production and, therefore, to GDP. The adjustment corrects for the discrepancy. Capital Consumption Adjustment (lines 6 and 7). The adjustment corrects for dif-ferences between depreciation allowances as reported for tax purposes and eco-nomically based measures of depreciation. Using 2009 data (billions of dollars), identity ( 2.1 ) is Y = C + I + G + ( EX − IM ) $14 , 256 = 10 , 089 + 1 , 629 + 2 , 931 + (1 , 564 − 1 , 957) . 7-28 7-29 7-33 7-43 7-41 7-42 (The numbers below the dollar values refer to the account number and line number from which the entry was drawn. For example, “7-28” means Table 3.7 , line 28.) 3.7.2 The Personal-Income-and-Outlay Account Table 3.8 is almost a rearrangement of the disposable-income identity: YD ≡ Y − T + TR ≡ C + S . (2.2) 3.7 Putting It All Together: Reading the NIPAs 103 Table 3.8.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  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

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Macroeconomics

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

    (Publisher)

  3. Other measures of output and income include gross national product (GNP), net national product (NNP), national income (NI), personal income (PI), and disposable personal income (DPI). National Income Accounts GDP ¼ consumption þ investment þ government spending þ net exports GNP ¼ GDP þ receipts of factor income from the rest of the world — payments of factor income to the rest of the world NNP ¼ GNP capital consumption allowance NI ¼ NNP statistical discrepancy PI ¼ NI income earned but not received þ income received but not earned DPI ¼ PI personal taxes disposable personal income (DPI) Personal income minus personal taxes. 5. What is the difference between nominal and real GDP? nominal GDP A measure of national output based on the current prices of goods and services. real GDP A measure of the quantity of final goods and services produced, obtained by eliminating the influence of price changes from the nominal GDP statistics. Chapter 5 National Income Accounting 93 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. Because we prefer more goods and services to higher prices, it is better to have nominal GDP rise because of higher output than because of higher prices. We want nominal GDP to increase as a result of an increase in real GDP. Consider a simple example that illustrates the difference between nominal GDP and real GDP. Suppose a hypothetical economy produces just three goods: oranges, coconuts, and pizzas. The dollar value of output in three different years is listed in Figure 7.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Environmental and Natural Resource Economics

  A Contemporary Approach

  • Jonathan M. Harris, Brian Roach(Authors)
  • 2021(Publication Date)
  • Routledge

    (Publisher)

  Chapter 10

  National Income and Environmental Accounting

  DOI: 10.4324/9781003080640-10

  Chapter 10 Focus Questions

  • How do traditional National Income Accounting measures fail to account for the environment?
  • How can national accounting measures be adjusted to better reflect the importance of natural capital and environmental quality?
  • What is the potential for alternative “green” measures of national welfare?

  10.1 Greening the National Income Accounts

  Taking natural capital and environmental quality seriously affects the way that we evaluate measures of national income and well-being. Many economists would assert that a typical person living in a country with a high per capita average income is essentially “better off” than a person living in a country with a low per capita average income. But the overall well-being of people is dependent on many factors other than income levels, including health, education levels, social cohesion, and political participation. Most important from the point of view of environmental analysis, a country’s well-being is also a function of natural capital levels and environmental quality.

  Standard measures of gross national product (GNP) or gross domestic product (GDP) 1 measure a country’s level of marketed economic activity, which often implies how “developed” a country is. (See Appendix 10.1

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Economics and the Real World

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

    (Publisher)

  It will be recalled that GNP estimates also cover subsistence out-put (including household activities — cooking, cleaning, etc.) very poorly, both in the less developed and in more developed countries. There is a vast literature on this subject that does not have to be National Income and Product Accounts 45 cited here. For our purposes we need only to remember that (a) no matter how subsistence activities are covered or omitted, the results are still unsatisfactory and at best indicate only orders of magnitude; and (b) the size and the composition of the subsistence sectors change considerably in the process of economic development of the less developed countries and in the evolution of industrialized societies. The measurement of income in the national accounts has other special problems: the income tax system provides incentives to the tax-payer to classify as much as possible of his receipts (which in-crease his command over the use of society's scarce resources) in non-taxable categories or as capital gains rather than income. Richard M. Titmuss (1962) has shown in devastating detail how in-accurate and inadequate official income statistics have been in the United Kingdom. It is unlikely that the figures in other countries are greatly superior. An important gap in the estimates is of the elusive income-in-kind received by officials and middle and upper employees of cor-porations and other organizations in countries that have a strongly progressive income tax structure. Individuals in this category often receive large portions of their income (unreported and untaxed) in the form of the use of 'company' cars, flats, hotel accommodation, yachts, travel and entertainment (restaurants, golf courses, night clubs, theatre). What this means is that income-in-kind does not figure in the national accounts as income but rather as intermediate costs of production, and GDP is accordingly underestimated. No statistical studies of corporate income-in-kind appear to exist.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  The U.S. National Income and Product Accounts

  Selected Topics

  • Murray F. Foss(Author)
  • 2007(Publication Date)
  • University of Chicago Press

    (Publisher)

  Seriously, though, it must be recognized what we are talking about. We are talking about a program of improved data gathering by the decentralized statistical agencies of the U.S. government. The purpose is to make the national income and product accounts (including flow of funds, balance of payments, etc.) even more useful and trustworthy than they already are. In somewhat different language, while the various statistical reports, say, for example, the monthly manufacturers' shipments, orders and inventory series, will be improved, what really counts even more is the contribution that these improved statistics will make to the national accounts. As the report itself notes, the committee was concerned with the statistical shortcomings of the GNP estimates. This conference should reinforce the emphasis on a fully articulated system of national accounts broadened, of course, to include flow of funds, balance of payments, etc., as the keystone for a better comprehension of a modern industriahzed economy on a national basis, and eventually on an international scale. I want to say some more about costs of data improvement, particularly the cost to the respondents. It is one thing for the committee to urge the government, which after all asked it to do just that, to add to the statistical budget. It is another thing to realize what the costs to the respondents might be. I found very little of this in the Creamer Report. I do believe that it has to be considered and strategies developed which would improve cooperation between the business community and the federal statistical agencies. The Census Bureau in recent years has begun a major effort to inform data users about what the census does, and this operation, with field representatives in major cities across the country, is bound to help bring about a better understanding of what the census tries to do and what it means for respondents. Perhaps now is the time to raise such a question about the national income accounts.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  UFS BUSINESS SCHOOL EDITION ECONOMIC INDICATORS

  • P Mohr, D Yu, S Adendorff(Authors)
  • 2020(Publication Date)
  • Van Schaik Publishers

    (Publisher)

  At the very least, an adjustment has to be made for the size of the population. In other words, GDP has to be expressed on a per capita basis before comparisons can be made (see Box 3-3 in Chapter 3). But even per capita data may be misleading because the distribution of income differs from country to country and can also change over time. Even when GDP growth is sluggish, some sections of the economy and society might be booming. For example, on 3 August 1996 The Economist reported sharp increases in the sales of luxury goods and services in Britain at a time when annual GDP growth was estimated at a mere 1,8%. Among these goods and services were luxury motorcars, expensive country houses, exotic holidays, chauffeur services, pedigree dogs and cosmetic surgery. At that stage there thus appears to have been a significant redistribution of income and wealth in Britain in favour of those at the top end of the income scale. The measurement of the distribution of income is discussed in Section 8.5. 34 2.8 GROSS NATIONAL INCOME (GNI) As explained earlier, GDP is a geographic concept – the adjective domestic indicates that the production occurred within the geographic boundaries of the country. It does not matter who produces the goods or who owns the factors of production. It could be a British, Japanese or any other firm. Nor does it matter to whom the goods are sold. They could be sold locally or exported to another country. As long as the production takes place on South African soil it forms part of South African GDP. But economists also want to know what happens to the income of all South African citizens or permanent residents of the country. To answer this question, all income earned by foreign-owned factors of production in South Africa (ie all primary income to the rest of the world) has to be subtracted from GDP. In this way the South African element of GDP can be ascertained

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  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.

  Sign up to read

  Learn more about book