national income accounting
DESCRIPTION
National Income AccountingTRANSCRIPT
Gross National Product
Gross Domestic Product
National Income is a measure of the moneyvalue of the total flow of goods andservices produced in an economy over aspecified period of time. It is used as abasis in determining the capabilities of aneconomy.
National income consists of the following:
Wages or Salary- those generated by labor;
Interest- those generated by lenders of funds;
Rent- those generated by owners of real estate;
Profit- those generated by entrepreneurs;
Net Factor- income from abroad
A. Gross National Product
Meaning:
Gross National Product (GNP) is ameasure of market value of the final goodsand services produced by nationals orcitizens of a country in a particular timeperiod. This includes production within andoutside the country under consideration.
A. Gross National Product
Purpose:
GNP reflects the value of the economy’sproduction since it also includes the valueof products from the low stages ofproduction.
GNP figures show the structure ofproduction according to end use and factorcontribution.
A. Gross National Product
Exclusions from the GNP:
The products not produced by theresources of the economy as imports.
The products that can no longer be usedfor higher stages of production and,therefore, have reached the highest levelof transformation using the economy’sresources.
The time and t6he aforementioned thosenot produced by the economy within theperiod of time accounted.
.
B. Gross Domestic Product
Meaning:
Gross Domestic Product (GDP) is a
measure of the total flow and services
produced by the economy over a particular
time period. The factors of production must be
located in the domestic economy regardless of
who owns them. The owners of the factors of
production consist of citizens of the local
economy and those foreign countries.
Gross Domestic Product (GDP) Gross National Product (GNP)
Production withinthe Philippines byPhilippine nationals
Production withinthe Philippines byForeign nationals
Production within the Philippines by Philippine nationals
Production outside the Philippines by Philippine nationals
Private or Personal Consumption Expenditures -the spending by households on the following types of goods:
a) Durable Consumer Goods ex. appliances, furniture, etc.
b) Nondurable Consumer Goods ex. food, newspaper, ballpen, etc.
c) Services ex. those provided by teachers, architects,
electrician, etc.
Gross Domestic Investment-expenditures for newly producedcapital goods like machinery,equipment, tools, buildings andadditional inventors-do not include the transfers of paperassets and secondhand tangible assetsbecause these do not constituteinvestment.
Depreciation- reduction in the valueof an asset through wear and tear. It ispartly consists of the consumption ofcapital goods previously produced andshould not be reflected in the
Net National Product (NNP)- refers tothe GNP less the part of the outputneeded to replace the capital goodsworn out in producing the output andthe fine-tuned value for a moreaccurate accounting of the country’sfinal products.
To calculate for NNP:
NNP=GNP-Depreciation
Indirect Taxes- taxes which firmstreat as costs of producing a productor service and pass on (full or partial)to buyers by charging them highprices.
Ex. sales, excise and business propertytaxes, license fees and tariffs.
Subsidies- payment of funds, goodsor services by a government, businessor household for which it receives nogood or service in return.
Personal Income- earned by persons or households.
National Income (NI)- income earned by the factor owners and equals to NNP less indirect taxes.
To calculate for NI:
NI=Personal Income (PY)+Corporate
Income (CY)+ Government Income (GY)
Expenditure Approach- a way ofestimating national income which involvesthe calculation of the sum of allexpenditures on final goods.
To calculate for the GNP using the Expenditure
Approach:
GNP=C+I+G+(X-M)
Where: GNP= Gross National Product
C= Consumption (private or
personal consumption
expenditure)
I= Investment (gross domestic
capital formation)
G= Government expenditure
X= Exports
M= Imports
Income Approach
Current production is madepossible through the use of economicresources of land, labor, capital andentrepreneurship. The owners of theseresources receive earnings in the formof rent, wages and salaries, interestsand dividends, and profit. When thetotal amount of earnings of the ownersis aggregated into a single amount, theobjective of determining the nationalincome is achieved.
To calculate for the GNP using the Income Approach:
GNP=NI+(IT-S)+DA
Where: GNP= Gross National ProductNI= National IncomeIT= Indirect TaxS= SubsidiesDA= Depreciation Allowance
(Capital Consumption Allowance)
Current GNP is a value using currentprices, whereas Real GNP uses a base orconstant prices.
Real GNP is computed from Current GNPusing a price coefficient since directcomputation poses practical problems andunwieldiness.
The difference is illustrated by the
following equations:
Current GNP= PcQc
Real GNP= PbQc
Where: Pc= Current Price
Pb= Base Price
Qc= Current Volume of Goods
and Services
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