GDP and National Income

1. Session 7-1: GDP and National Income
Page 1
Thai Economy in the Global Context

2. Session 7-1: GDP and National Income
Page 2
Thai Economy in the Global
Context
Session 7-1: GDP and National Income
Book Chapter 23
Measuring a Nation’s Income
PowerPoint Slide prepared by:
Andreea CHIRITESCU
Eastern Illinois University

3. Session 7-1: GDP and National Income
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• GDP (Gross Domestic Product) (ผลิตภัณฑ์มวลรวมภายในประเทศ
เบื้องต้น): market value of all final goods and services produced
in a nation (border), during a period of time (a year).
• GNP (Gross National Product) (ผลิตภัณฑ์มวลรวมประชาชาติ
เบื้องต้น): market value of all final goods and services produced
by resident’s resources of a particular nation (nationality), no
matter where they are located, during a period of time (a year).
• GNP = GDP + F
F = net factor income from abroad (รายได้สุทธิจากต่างประเทศ)
GDP vs GNP

4. Session 7-1: GDP and National Income
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• Gross domestic product (GDP)
• Market value of all final goods and services
• Produced within a country
• In a given period of time
• “GDP is the market value…”
• Market prices - reflect the value of the goods
The Measurement of GDP

5. Session 7-1: GDP and National Income
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• “… of all…”
• All items produced in the economy
• And sold legally in markets
• Excludes most items
• Produced and sold illicitly
• Produced and consumed at home
The Measurement of GDP

6. Session 7-1: GDP and National Income
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• “… final…”
• Value of intermediate goods is already included in the
prices of the final goods
• “… goods and services…”
• Tangible goods & intangible services
• “… produced…”
• Goods and services currently produced
The Measurement of GDP

7. Session 7-1: GDP and National Income
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Final goods
Finished goods and services produced for the ultimate user.
Intermediate goods
Goods and services used as inputs for production of final
goods
The Measurement of GDP

8. Session 7-1: GDP and National Income
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• "Gross" means that depreciation of capital stock is not
subtracted out of GDP. If net investment (which is gross
investment minus depreciation) is substituted for gross
investment in the equation above, then the formula for Net
National Product (NNP) [or, Net Domestic Product (NDP)]
is obtained.
• NNP (ผลิตภัณฑ์ประชาชาติสุทธิ)= GNP – depreciation
• NDP (ผลิตภัณฑ์ภายในประเทศสุทธิ) = GDP - depreciation
NNP vs NDP

9. Session 7-1: GDP and National Income
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• National Income (NI) (รายได้ประชาชาติสุทธิ): total net value (at
factor cost) of final goods and services produced by
resident’s resources of a particular nation (nationality) over a
specified period of time (a year)
• NI represents the sum of wages, profits, rents, interest, and
pension payments to residents of the nation.
• National Income (NI) = Net National Product (NNP) –
Net Indirect Business Taxes (Indirect Taxes – Government
Subsidies) (ภาษีทางอ้อม)
• Or in other words,
National Income (NI) = NNP at factor cost (ผลิตภัณฑ์ประชาชาติ
สุทธิ ณ ระดับราคาปัจจัยการผลิต)
NNP vs NDP

10. Session 7-1: GDP and National Income
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• Personal Income (PI) (รายได้ส่วนบุคค) = National Income (NI)
- Social contributions (เงินสมทบค่าประกันสังคม)
- Corporate Income Taxes (ภาษีรายได้ของบริษัท)
- Undistributed Corporate Profits (กาไรที่ยังไม่ได้จัดสรรของบริษัท)
+ Government Transfer Payments (เงินช่วยเหลือ หรือเงินโอนจาก
รัฐบาล)
+ Interest Paid by Government (ดอกเบี้ยจ่ายโดยรัฐบาล)
+ Interest Paid by Consumers (ดอกเบี้ยจ่ายโดยผู้บริโภค)
+ Business Transfer Payments (เงินช่วยเหลือ หรือเงินโอนจากธุรกิจ)
• Disposable Income (DI) (รายได้ที่สามารถนาไปจับจ่ายใช ้สอยได้) =
Personal Income (PI) (รายได้ส่วนบุคคล)
- Personal Income Tax (ภาษีรายได้ส่วนบุคคล)
- Interest Paid by Consumers (ดอกเบี้ยผู้บริโภคจ่าย)
PI vs DI

11. Session 7-1: GDP and National Income
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Three approaches
1. Income approach
2. Production approach
3. Expenditure approach
GDP accounting identity
Income = Expenditure = Production
The Measurement of GDP

12. Session 7-1: GDP and National Income
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Households buy goods
and services from
firms, and firms use
their revenue from
sales to pay wages to
workers, rent to
landowners, and profit
to firm owners. GDP
equals the total
amount spent by
households in the
market for goods and
services. It also equals
the total wages, rent,
and profit paid by firms
in the markets for the
factors of production.
The Circular-Flow Diagram

13. Session 7-1: GDP and National Income
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GDP = Wages and Salaries (ค่าจ้าง เงินเดือน)
+ Rents (ค่าเช่า)
+ Interests (ดอกเบี้ย หรือ ผลตอบแทนในการใช ้ทุน)
+ Profits (กาไร)
+ Depreciations (ค่าเสื่อมราคา)
+ Indirect Business Taxes (ภาษีทางอ้อม)
Income approach

14. Session 7-1: GDP and National Income
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• GDP =Sum of value added in every stage of production
• Value added (VA) =
value of output – value of intermediate input
Production approach

15. Session 7-1: GDP and National Income
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Buying Price
(per kg)
Selling Price
(per kg)
Value Added
Raw Pineapple - 100 100
Canned
Pineapple 100 200 100
Exported Canned
Pineapple 200 400 200
Sum of all value added = 400
Example of Value added

16. Session 7-1: GDP and National Income
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เกษตรกรรม
8%
อุตสาหกรรม
35%
การบริการ
57%
Agricuiture
Industry
Service
เกษตรกรรม
การล่าสัตว์
และป่ าไม้
92%
การ
ประมง
8%
Agricuiture and forestry Fishing
Manufactur
e, 77%
Mining
7%
Utilities
9%
Constrction
7%
Manufacture Mining
Utilities Constrction
29%
10%
13%
13%
11%
10%
7%
4%
3%
0%
Trading
Hotel&Res
Transport
Financial
Real estate
Public Admin
Education
Health&Social
Other social
Private HH
ผลิตภัณฑ์มวลรวมภายในประเทศ 3 ส่วนสาคัญ
ปี 2561
เกษตรกรรม อุตสาหกรรม การบริการ

17. Session 7-1: GDP and National Income
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• The method that measures GDP by adding all the spending
for final goods and services
• GDP = C + I + G + (X - M)
• Consumption (C)
• Investment (I): physical capital + change in inventory
• Government expenditure (G)
• Net Export (X - M)
• Export (X), Import (M)
Expenditure approach

18. Session 7-1: GDP and National Income
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2536 53% 11% 40% -4%
2537 53% 11% 40% -5%
2538 54% 11% 42% -7%
2539 53% 12% 42% -6%
2540 52% 12% 34% 1%
2541 49% 13% 22% 16%
2542 53% 14% 21% 12%
2543 56% 14% 22% 9%
2544 57% 14% 23% 6%
2545 58% 13% 22% 6%
2546 57% 13% 23% 6%
2547 57% 13% 25% 5%
2548 59% 14% 28% -1%
2549 56% 14% 27% 3%
2550 53% 14% 25% 8%
2551 56% 15% 27% 2%
2552 51% 16% 23% 10%
2553 54% 16% 24% 6%
2554 55% 16% 26% 2%
2555 55% 17% 27% 1%
2556 55% 17% 26% 3%
2557 52% 17% 25% 7%
2558 48% 17% 24% 11%
2559 46% 17% 23% 14%
2560 48% 16% 23% 14%
2561 51% 16% 23% 10%
C G I X-M
53% 53% 54% 53% 52% 49% 53% 56% 57% 58% 57% 57% 59% 56% 53% 56%
51% 54% 55% 55% 55% 52% 48% 46% 48% 51%
11% 11% 11% 12% 12%
13%
14%
14% 14% 13% 13% 13%
14%
14%
14%
15%
16%
16% 16% 17% 17%
17%
17% 17% 16%
16%
40% 40% 42% 42%
34%
22%
21%
22% 23% 22% 23% 25%
28%
27%
25%
27%
23%
24%
26% 27% 26%
25%
24%
23% 23%
23%
-4% -5% -7% -6%
1%
16% 12% 9% 6% 6% 6% 5%
-1%
3%
8%
2%
10% 6% 2% 1% 3% 7%
11% 14% 14% 10%
-20%
0%
20%
40%
60%
80%
100%
120%
2536
2537
2538
2539
2540
2541
2542
2543
2544
2545
2546
2547
2548
2549
2550
2551
2552
2553
2554
2555
2556
2557
2558
2559
2560
2561
Consumption Government spending Investment Export-Import
Share of Thai GDP

19. Session 7-1: GDP and National Income
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1.2 Structure of Thailand’s GDP

20. Session 7-1: GDP and National Income
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1.02 Structure of GDP – Expenditure

21. Session 7-1: GDP and National Income
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• GDP per capita = average GDP per person
NI per capita = average NI per person
• GDP p.c. = GDP / Population
• NI p.c. = NI / Population
Per capita

22. Session 7-1: GDP and National Income
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23. Session 7-1: GDP and National Income
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24. Session 7-1: GDP and National Income
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4.1 Thailand’s per capita income

25. Session 7-1: GDP and National Income
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• Total spending rises from one year to the next
• Economy - producing a larger output of goods and
services
• And/or goods and services are being sold at higher prices
• Nominal GDP
• Production of goods and services
• Valued at current prices
Real versus Nominal GDP

26. Session 7-1: GDP and National Income
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Real GDP
• Production of goods and services
• Valued at constant prices
• Designate one year as base year
• Not affected by changes in prices
For the base year
• Nominal GDP = Real GDP
Real versus Nominal GDP

27. Session 7-1: GDP and National Income
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This table shows
how to calculate
real GDP, nominal
GDP, and the GDP
deflator for a
hypothetical
economy that
produces only hot
dogs and
hamburgers.
Real versus Nominal GDP

28. Session 7-1: GDP and National Income
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The GDP deflator
• Ratio of nominal GDP to real GDP times 100
• Is 100 for the base year
• Measures the current level of prices relative to the level
of prices in the base year
• Can be used to take inflation out of nominal GDP
(“deflate” nominal GDP)
Real versus Nominal GDP

29. Session 7-1: GDP and National Income
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1
1
( )
GDP growth =
Real GDP growth = Nominal GDP growth - Inflation (measured by GDP deflator)
T T
T
GDP GDP
GDP



Growth (yoy) [year over year] = growth over a year
Growth (qoq) [quarter over quarter] = growth over a quarter
Growth

30. Session 7-1: GDP and National Income
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obs Nominal GDP
GDP Deflator
Real GDP
1997
Q
1 1
,159
.12 149
.23 776
.76
1997
Q
2 1
,168
.77 151
.73 770
.32
1997
Q
3 1
,181
.74 154
.70 763
.88
1997
Q
4 1
,230
.62 161
.17 763
.58
1998
Q
1 1
,211
.96 168
.81 717
.94
1998
Q
2 1
,118
.30 169
.21 660
.90
1998
Q
3 1
,112
.60 169
.23 657
.46
1998
Q
4 1
,185
.58 167
.68 707
.06
1999
Q
1 1
,162
.11 161
.70 718
.67
1999
Q
2 1
,095
.68 161
.50 678
.42
1999
Q
3 1
,144
.42 161
.46 708
.79
1999
Q
4 1
,213
.18 161
.05 753
.29
2000
Q
1 1
,218
.71 161
.03 756
.82
2000
Q
2 1
,188
.75 164
.76 721
.51
2000
Q
3 1
,210
.67 165
.96 729
.48
2000
Q
4 1
,282
.20 164
.99 777
.15
2001
Q
1 1
,274
.30 165
.34 770
.70
2001
Q
2 1
,249
.86 169
.99 735
.25
2001
Q
3 ? ? ?
Nominal GDP (1997 Q1)
Real GDP (1997 Q1) 100
GDP Deflator (1997 Q1)
1159.12
100 776.7
149.23
Real GDP growth (1998 Q1 yoy)
(717.94 776.76)
= 7.57%
776.76
Real GDP growth (1998 Q1 qoq)
(717.94 763.58)
=
76
 
  

 

5.98%
3.58
GDP 1997 = 776.76 770.32 763.88 763.58 3,074.54
GDP 1998 = 717.94 660.90 657.46 797.06 2,833.36
(2,833.36 3,074.54)
Regal GDP growth 1998 100 7.84%
3,074.54
 
   
   

   

31. Session 7-1: GDP and National Income
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32. Session 7-1: GDP and National Income
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9.2
8.7
8
8.1
5.7
-2.8
-7.6
4.6 4.5
3.4
6.1
7.2
6.3
4.2
5 5.4
1.7
-0.7
7.5
0.8
7.2
2.7
1
3 3.3
3.9
4.6
2544
2547
2551
2554
2556
2540
GDP Growth (%)

33. Session 7-1: GDP and National Income
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Source: NESDB

34. Session 7-1: GDP and National Income
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2.1 Growth in Thailand’s real per capita income

35. Session 7-1: GDP and National Income
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• Rich countries - higher GDP per person
• Better
• Life expectancy
• Literacy
• Internet usage
• Poor countries - lower GDP per person
• Worse
• Life expectancy
• Literacy
• Internet usage
International differences: GDP & quality of life

36. Session 7-1: GDP and National Income
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The table shows GDP per person and three other measures of the quality of life for twelve major
countries.
GDP and the Quality of Life

37. Session 7-1: GDP and National Income
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1.1 Size of the Thai economy

38. Session 7-1: GDP and National Income
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Indonesia
1,005,268
Thailand
490,120
Malaysia
347,290
Singapore3
46,621
Philippines
331,678
Vietnam
241,434
Myanmar
71,543
Cambodia2
4,141
Laos
18,230
Brunei
14,695
1 2 3 4 5
6 7 8 9 10
Southeast Asia’s GDP Nominal millions of USD
2018

39. Session 7-1: GDP and National Income
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• GDP – not a perfect measure of well-being
• Doesn’t include
• Leisure
• Value of almost all activity that takes place outside
markets
• Quality of the environment
• Nothing about distribution of income
GDP

40. Session 7-1: GDP and National Income
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2.02 Share of income by group