National Income Accounting
National Income AccountingBy Mr. Gayares
Open-up!Read Kung Pinoy si NoahWhat are the problems encountered
by Noah in building the ark?How does it reflect the current problem
of our country?Do you agree with the story? Why?
What is National Income AccountingIt is the process of
determining the economic activities of a particular country within
a yearis the measurement of indicators of national output/income;
.e.g. GDP, GNPAssumption:
Growth versus DevelopmentEconomic growth may be one aspect of
economic development but is not the sameEconomic growth:A measure
of the value of output of goods and services within a time
periodEconomic Development:A measure of the welfare of humans in a
society
Circular flow diagramsummarizes the transactions between the
different economic agents
agents: households, firms (business), government, and foreigners
(rest of the world)
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MARKETS FOR FACTORS OF PRODUCTIONMARKETS FOR GOODS AND
SERVICESFIRMSHOUSEHOLDSGood and services boughtGood and services
soldRevenue (=GDP)Spending (=GDP)Inputs for ProductionLand, labor
and capitalWages, rent, interest and profit (=GDP)Flow of goods
& servicesFlow of money: pesosIncome (=GDP)THE CIRCULAR FLOW
DIAGRAM
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What must be accounted?Need to account for :Government purchases
of goods and services.Government payments for factor services
(wages, rent, interest). Transfer payments between different
agents.Firms and households pay taxes to government. Taxes paid on
income, property, goods and services.Transactions with the foreign
sector.
How to measure National Income?Gross National Product- is
defined as the market value of the final goods and services
produced in a given yearAn immediate indicator of a countrys
growth/progress or level of development
What is market value?Goods and services are expressed by the
expenditures spent ton themExample: 100,000 loaves of bread were
bought in a given year at 30 pesos per loaf so the market value is:
_____________To compute GNP, the price of each good and services
are multipliedwith quantities produced and add them.
What do we mean by final goods?Goods are valued according to the
last production process they have undergone.Final goods - goods and
services that are not purchased for the purpose of producing other
goods and services or for resale Eg. Rice (final) and palay or
unhusked rice (intermediate product)
Including intermediate goods and final goods will result in
double counting.
Is it final?Computer softwareCarTableCement and
gravelCelphoneSecond hand appliancesLCD
GNP vs. GDPGross National Product-value of goods and services
produced by citizens (nationality)Gross Domestic Product- value of
goods and services produced within the countrys border
To sum it up...GawaNgPinoyGawaDito saPinas
GNP or GDP?American firm in cubaoA filipino teacher in in USA
Korean hotspring resort in lagunaA factory owned by Mr. Cruz in
Quezon CityJose, a call center agent in SingaporeA Filipina writer
based in France
Approaches in Measuring National OutputThe Expenditure
approachComponents:C- consumption expendituresI- Investment
expendituresG- government expendituresX-M- net exportNFIA-income
abroadSD-Statistical discrepancy
Approaches in measuring National OutputIncome
approachComponents:PI- Profits and dividendsGI- Government
incomeCI- corporate incomeIT- indirect taxesMinus S- subsidiesD-
depreciation
Approaches in measuring National OutputIndustrial
Originagriculture, fisheries and industry+ industry+ services= GDP
by industrial originGDP + NFIA= GNP
