National Accounting System
GDP : Gross domestic Product
is the market value of all final goods and
services produced by a ...
GNP
Gross National Product : market value of all final
goods and services produced by normal
residents of a country in a y...
Methods
• Value added or production method
• Income method
• Expenditure method
Value added method
The economy is divided into different industrial
sectors. Then the net value added at factor
cost(NVAFC...
Income Method
National income is obtained by summing up the
incomes of all individuals of a country.
Productive enterprise...
Expenditure Method
Arrives at national income by adding up all
Expenditures made on goods and services.
Income is either s...
GDP Calculations
GDP = C + I + G + NX
C : Value of final consumer goods (durable and
non durable) and services consumed by...
Important Identities
Y = C + I + G + NX ;
YD : Disposable Income
YD = Y – TA + TR
TA : Total taxes
TR : Transfer Payments ...
Contd.
YD + TA - TR = C + I + G + NX ;
C + S + TA - TR = C + I + G + NX ;
S – I = (G + TR – TA) + NX ;
S – I = Budget defi...
Limitations of National income accounting
• Some production not included in GDP. Ignores
“do it yourself”.
• Ignores the u...
Contd.
• Leisure, quality of life not included
• Quality improvement in product not included
• Quality of environment, neg...
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Nas

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Nas

  1. 1. National Accounting System GDP : Gross domestic Product is the market value of all final goods and services produced by a nation in a given period • Real GDP • Nominal GDP • GDP deflator
  2. 2. GNP Gross National Product : market value of all final goods and services produced by normal residents of a country in a year GNP = GDP + Net factor income from abroad Net factor Income from abroad = Factor income from abroad – factor income to abroad GNI = GNP
  3. 3. Methods • Value added or production method • Income method • Expenditure method
  4. 4. Value added method The economy is divided into different industrial sectors. Then the net value added at factor cost(NVAFC) by each enterprise is estimated NDPFC = ∑ NVAFC NI or NNPFC = NDPFC + Net factor income from abroad
  5. 5. Income Method National income is obtained by summing up the incomes of all individuals of a country. Productive enterprises are identified and then classified into various industries NDPFC = W + I + R + Profits + Mixed Income NNPFC = NDPFC + Net factor income from abroad
  6. 6. Expenditure Method Arrives at national income by adding up all Expenditures made on goods and services. Income is either spent on consumer goods or on capital goods. GDPMP = C + I + G + (X – M) NDPMP = GDPMP - Depreciation NDPFC = NDPMP – net indirect taxes NNPFC = NDPFC + Net income from abroad
  7. 7. GDP Calculations GDP = C + I + G + NX C : Value of final consumer goods (durable and non durable) and services consumed by the individuals and households I : Value of new capital goods produced and addition to the inventories of goods G : Value of purchases of goods and services by the government NX : (X –M); value of Exports – value of imports
  8. 8. Important Identities Y = C + I + G + NX ; YD : Disposable Income YD = Y – TA + TR TA : Total taxes TR : Transfer Payments e.g. old age pension, social security benefits, interest on public debt etc YD = C + S
  9. 9. Contd. YD + TA - TR = C + I + G + NX ; C + S + TA - TR = C + I + G + NX ; S – I = (G + TR – TA) + NX ; S – I = Budget deficit + Trade surplus ; G + TR : Total government expenditure TA : Government revenue
  10. 10. Limitations of National income accounting • Some production not included in GDP. Ignores “do it yourself”. • Ignores the underground / unreported / illegal activities • Income must be imputed or estimated because market exchange does not occur e.g. imputed rental income, food produced and consumed by farm families
  11. 11. Contd. • Leisure, quality of life not included • Quality improvement in product not included • Quality of environment, negative externalities e.g. pollution not included • Ignores depletion of natural resources

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