NIPA MethodologyNIPA Methodology

National Income Accounting and National Income Accounting and the Flow of Fundsthe Flow of Funds

National income accounting aims to answer two National income accounting aims to answer two fundamental questions:fundamental questions: What is the size and composition of the US economy?What is the size and composition of the US economy? How was this output produced and distributed?How was this output produced and distributed?

National Income Accounting and National Income Accounting and the Flow of Fundsthe Flow of Funds

National income accounting aims to answer two National income accounting aims to answer two fundamental questions:fundamental questions: What is the size and composition of the US economy?What is the size and composition of the US economy? How was this output produced and distributed?How was this output produced and distributed?

These questions are answered in three quarterly reports.These questions are answered in three quarterly reports. NIPA (National Income and Product Accounts) - BEANIPA (National Income and Product Accounts) - BEA Capital Finance Account (Flow of Funds) – Federal ReserveCapital Finance Account (Flow of Funds) – Federal Reserve Input/Output Accounts - BEAInput/Output Accounts - BEA

The Business SectorThe Business Sector

Businesses have three common Businesses have three common accounting statements for financial accounting statements for financial reportingreportingBalance SheetBalance SheetStatement of Income and Retained EarningsStatement of Income and Retained EarningsStatement of Change in Financial PositionStatement of Change in Financial Position

With a little manipulation, we can With a little manipulation, we can transform these into economic accounting transform these into economic accounting reportsreports

The Balance SheetThe Balance Sheet

The Basic underlying identity of a firm’s The Basic underlying identity of a firm’s balance sheet is balance sheet is Assets = Liabilities + Stockholder EquityAssets = Liabilities + Stockholder Equity

The Balance SheetThe Balance Sheet

AssetsAssetsCurrent Assets

Financial AssetsCash & EquivalentAccounts Receivable

Inventories

SecuritiesFixed Assets

Plant & Equipmentless accumulated depreciation

LiabilitiesLiabilitiesCurrent Liabilities

LoansAccounts Payable

Bonds

Stockholders Equity

Example: Microsoft (in Millions)Example: Microsoft (in Millions)

AssetsAssetsCurrent Assets: $12,274

Financial Assets: $11,634

Cash & Equivalent: $6,438

Accounts Receivable: $5,196

Inventories: $640

Securities:Fixed Assets: $2,223

Plant & Equipment: $6,078less accumulated depreciation: $3,855

Other: $65,074

Total Assets: $79,571

LiabilitiesLiabilities

Current Liabilities: $1,573LoansAccounts Payable: $1,573

Bonds:

Other: $16,978

Stockholders Equity $61,020

Total Liabilities: $79,571

The Balance SheetThe Balance Sheet

The Basic underlying identity of a firm’s The Basic underlying identity of a firm’s balance sheet is balance sheet is Assets = Liabilities + Stockholder EquityAssets = Liabilities + Stockholder Equity

The Balance sheet gives a nice overview, The Balance sheet gives a nice overview, but doesn’t really indicate how income was but doesn’t really indicate how income was generated or who received paymentsgenerated or who received payments

Statement of Income/Retained EarningsStatement of Income/Retained Earnings

The Basic underlying identity in this The Basic underlying identity in this statement isstatement isNet Income = Revenues - CostsNet Income = Revenues - Costs

Statement of Income/Retained EarningsStatement of Income/Retained Earnings

SalesSales

lessless Costs of Goods & Costs of Goods & Services SoldServices Sold

Materials/ServicesMaterials/ServicesWages & SalariesWages & SalariesDepreciationDepreciationIndirect Business TaxesIndirect Business TaxesBeginning InventoryBeginning Inventorylessless Ending Inventory Ending Inventory

Equals Operating IncomeEquals Operating Income

Operating IncomeOperating IncomePlusPlus Interest/Dividends Received:Interest/Dividends Received:

LessLess Interest PaidInterest PaidPlusPlus Net Gains on Sale of Net Gains on Sale of Assets/SecuritiesAssets/Securities

Equals Net Income Before Equals Net Income Before TaxTax: : LessLess Corporate TaxCorporate Tax

Equals Net Income After Equals Net Income After Tax: Tax: LessLess Dividends PaidDividends Paid

Equals Retained Earnings:Equals Retained Earnings:

Example: Microsoft (In Millions)Example: Microsoft (In Millions)

Sales: Sales: $32,187

lessless Costs of Goods & Services Costs of Goods & Services Sold: Sold: $18,970

Materials/Services Materials/Services $4,247Wages & Salaries Wages & Salaries $13,284Depreciation: Depreciation: $1,439Indirect Business TaxesIndirect Business TaxesBeginning InventoryBeginning Inventorylessless Ending Inventory Ending Inventory

Equals Operating Income: Equals Operating Income: $13,217

Operating Income: Operating Income: $13,217Other Income: Other Income: $1,509

PlusPlus Interest/Dividends Received: Interest/Dividends Received:

LessLess Interest Paid Interest Paid

Plus Net Gains on Sale of Net Gains on Sale of Assets/Securities:Assets/Securities:

Equals Net Income Before TaxEquals Net Income Before Tax: : $14,726

LessLess Corporate Tax: Corporate Tax: $4,733

Equals Net Income After Tax: Equals Net Income After Tax: $9,993LessLess Dividends Paid: Dividends Paid: $857

Addition to Retained Earnings: Addition to Retained Earnings: $9,136

Statement of Cash FlowsStatement of Cash Flows

The basic underlying identity in this The basic underlying identity in this statement isstatement isChange in Working Capital = Change in Current Change in Working Capital = Change in Current

Assets – Change in Current LiabilitiesAssets – Change in Current Liabilities

Statement of Cash FlowsStatement of Cash Flows

Change in Working CapitalChange in Working Capital

Change in Current AssetsChange in Current Assets

Cash & EquivalentCash & EquivalentAccounts ReceivableAccounts ReceivableInventoriesInventories

Less Change in Current Change in Current LiabilitiesLiabilities

LoansLoansAccounts PayableAccounts Payable

Additions to Working CapitalAdditions to Working CapitalProvided by OperationsProvided by Operations

Net Income (After Tax)Net Income (After Tax)DepreciationDepreciation

Less Less Gains on Sales of AssetsGains on Sales of AssetsOther SourcesOther Sources

Sale of Fixed Assets:Sale of Fixed Assets:Sale of Securities:Sale of Securities:Stock/Bond Issues:Stock/Bond Issues:

LessLess Reductions in Working Reductions in Working CapitalCapital

Dividends PaidDividends PaidPurchases of Fixed AssetsPurchases of Fixed AssetsPurchase of SecuritiesPurchase of SecuritiesRetirement of Stocks/BondsRetirement of Stocks/Bonds

Example: Microsoft (in Millions)Example: Microsoft (in Millions)Change in Working Capital: Change in Working Capital: $2,788

Change in Current Assets:Change in Current Assets:

Cash & Equivalent: Cash & Equivalent: $3,422Accounts Receivable: Accounts Receivable: - $187

Inventories:Inventories:Other: Other: - $412

Less Change in Current: Change in Current:LiabilitiesLiabilities

Loans:Loans:Accounts Payable:Accounts Payable:Other: Other: $35

Equals Additions to Working: Equals Additions to Working: $101,706CapitalCapital

Provided by Operations: Provided by Operations: $15,224Net Income (After Tax): Net Income (After Tax): $9,993Depreciation: Depreciation: $1,439Other: Other: $3,731 Effect of Exchange Rate: Effect of Exchange Rate: $61

Less Less Gains on Sales of Gains on Sales of Assets/Securities: Assets/Securities: Other Sources: Other Sources: $86, 482

Sale of Fixed Assets:Sale of Fixed Assets:Sale of Securities: Sale of Securities: $84,362Stock/Bond Issues: Stock/Bond Issues: $2,120

LessLess Reductions in Working: Reductions in Working: $98,918CapitalCapital

Dividends PaidDividends Paid: : $857Purchases of Fixed Assets: Purchases of Fixed Assets: $1,954Purchase of Securities: Purchase of Securities: $89,621Retirement of Stock: Retirement of Stock: $6,486

Deriving the Production AccountDeriving the Production Account

SalesSales

lessless Costs of Goods & Services Costs of Goods & Services SoldSold

Materials/ServicesMaterials/ServicesWages & SalariesWages & SalariesDepreciationDepreciationIndirect Business TaxesIndirect Business TaxesBeginning InventoryBeginning Inventoryless Ending Inventory Ending Inventory

Equals Operating IncomeEquals Operating Income

Equals Operating IncomeEquals Operating IncomePlusPlus Interest/Dividends Received: Interest/Dividends Received:

LessLess Interest Paid Interest Paid

PlusPlus Gains on Sale of Gains on Sale of Assets/SecuritiesAssets/Securities

Equals Net Income Before Tax: Less Corporate Tax

Equals Net Income After Tax: Less Dividends Paid

Equals Retained Earnings

Deriving the Production AccountDeriving the Production Account

1)1) Eliminate Taxes and dividends paid. These Eliminate Taxes and dividends paid. These will show up in the will show up in the Appropriations AccountAppropriations Account

Deriving the Production AccountDeriving the Production Account

Sales

lessless Costs of Goods & Costs of Goods & Services SoldServices Sold

Materials/ServicesWages & SalariesDepreciationIndirect Business TaxesBeginning Inventoryless Ending Inventory

Equals Operating Equals Operating IncomeIncome

Equals Operating IncomePlus Interest/Dividends Received:

Less Interest Paid

Plus Gains on Sale of Assets/Securities

Equals Net Income Before Tax

Deriving the Production AccountDeriving the Production Account

1)1) Eliminate Taxes and dividends paid. These Eliminate Taxes and dividends paid. These will show up in the will show up in the Appropriations AccountAppropriations Account

2)2) Arrange items by “source” (on the right) and Arrange items by “source” (on the right) and “use” (on the left)“use” (on the left)

Deriving the Production AccountDeriving the Production Account

UseMaterials/Services

Wages & Salaries

Depreciation

Indirect Business Taxes

Beginning Inventory

less Ending Inventory

Interest Paid

Net Income Before Tax

SourceSales

Interest Received

Dividends Received

Gains on Sale of Assets/Securities

Deriving the Production AccountDeriving the Production Account

1)1) Eliminate Taxes and dividends paid. These Eliminate Taxes and dividends paid. These will show up in the will show up in the Appropriations AccountAppropriations Account

2)2) Arrange items by “source” (on the right) and Arrange items by “source” (on the right) and “use” (on the left)“use” (on the left)

3)3) Subtract “Interest/Dividends received” and gain Subtract “Interest/Dividends received” and gain on sale of assets from both sideson sale of assets from both sides

Deriving the Production AccountDeriving the Production Account

UseMaterials/Services

Wages & Salaries

Depreciation

Indirect Business Taxes

Beginning Inventory

less Ending Inventory

Interest Paid - Interest Received

Net Income Before Tax

- Dividends Received

- Gains on Sale of Assets/Securities

SourceSales

Deriving the Production AccountDeriving the Production Account

1)1) Eliminate Taxes and dividends paid. These Eliminate Taxes and dividends paid. These will show up in the will show up in the Appropriations AccountAppropriations Account

2)2) Arrange items by “source” (on the right) and Arrange items by “source” (on the right) and “use” (on the left)“use” (on the left)

3)3) Subtract “Interest/Dividends received” and gain Subtract “Interest/Dividends received” and gain on sale of assets from both sideson sale of assets from both sides

4)4) Profits = Net Income – Dividends Received – Profits = Net Income – Dividends Received – Gains on Asset SalesGains on Asset Sales

Deriving the Production AccountDeriving the Production Account

UseMaterials/Services

Wages & Salaries

Depreciation

Indirect Business Taxes

Beginning Inventory

less Ending Inventory

Interest Paid - Interest Received

Profits

SourceSales

Deriving the Production AccountDeriving the Production Account

1)1) Eliminate Taxes and dividends paid. These Eliminate Taxes and dividends paid. These will show up in the will show up in the Appropriations AccountAppropriations Account

2)2) Arrange items by “source” (on the right) and Arrange items by “source” (on the right) and “use” (on the left)“use” (on the left)

3)3) Subtract “Interest/Dividends received” and gain Subtract “Interest/Dividends received” and gain on sale of assets from both sideson sale of assets from both sides

4)4) Profits = Net Income – Dividends Received – Profits = Net Income – Dividends Received – Gains on Asset Sales Gains on Asset Sales

5)5) Subtract “Purchased Materials/Services” and Subtract “Purchased Materials/Services” and inventories from both sidesinventories from both sides

Deriving the Production AccountDeriving the Production Account

UseWages & Salaries

Depreciation

Indirect Business Taxes

Interest Paid - Interest Received

Profits

SourceSales

less Materials/Services

Ending Inventory

less Beginning Inventory

Deriving the Production AccountDeriving the Production Account

1)1) Eliminate Taxes and dividends paid. These will show Eliminate Taxes and dividends paid. These will show up in the up in the Appropriations AccountAppropriations Account

2)2) Arrange items by “source” (on the right) and “use” (on Arrange items by “source” (on the right) and “use” (on the left)the left)

3)3) Subtract “Interest/Dividends received” and gain on sale Subtract “Interest/Dividends received” and gain on sale of assets from both sidesof assets from both sides

4)4) Profits = Net Income – Dividends Received – Gains on Profits = Net Income – Dividends Received – Gains on Asset SalesAsset Sales

5)5) Subtract “Purchased Materials/Services” and Subtract “Purchased Materials/Services” and inventories from both sidesinventories from both sides

6)6) Gross output = Sales – consumed materials + change Gross output = Sales – consumed materials + change in inventoriesin inventories

Microsoft’s Production AccountMicrosoft’s Production Account

UseWages & Salaries: $13,284

Depreciation: $1,439

Indirect Business Taxes

Interest Paid - Interest Received

Profits: $14,726

Net Income:- Dividends Received:- Gain on Sale of Assets

Income: $29,449

SourceSales: $32,187Other: $1,509

less Materials/Services: $4,247

Change in Inventories

Gross Output: $29,449

Deriving the Appropriations AccountDeriving the Appropriations Account

Sales

less Costs of Goods & Services Sold

Materials/ServicesWages & SalariesDepreciationIndirect Business TaxesBeginning Inventoryless Ending Inventory

Equals Operating Income

Equals Operating IncomePlus Interest/Dividends Received:

Less Interest Paid

Plus Gains on Sale of Assets/Securities

Equals Net Income Before Tax: Less Corporate Tax

Equals Net Income After Tax: Less Dividends Paid

Equals Retained Earnings

Deriving the Appropriations AccountDeriving the Appropriations Account

1)1) Now will use what was left over after the Now will use what was left over after the derivation of the production account. As derivation of the production account. As before, arrange things by “source” (RHS) and before, arrange things by “source” (RHS) and “Use” (LHS)“Use” (LHS)

Deriving the Appropriations AccountDeriving the Appropriations Account

UseCorporate Tax

Dividends Paid

Addition to Retained Earnings

SourceEquals Net Income Before Tax

Deriving the Appropriations AccountDeriving the Appropriations Account

1)1) Now will use what was left over after the Now will use what was left over after the derivation of the production account. As derivation of the production account. As before, arrange things by “source” (RHS) and before, arrange things by “source” (RHS) and “Use” (LHS)“Use” (LHS)

2)2) Now, so our terminology matches, we need to Now, so our terminology matches, we need to convert “Income” to “Profits”convert “Income” to “Profits”

Deriving the Appropriations AccountDeriving the Appropriations Account

UseCorporate Tax

Dividends Paid

Addition to Retained Earnings

- Dividends Received

- Gains on Sale of Assets/Securities

SourceEquals Net Income Before Tax

- Dividends Received

- Gains on Sale of Assets/Securities

Deriving the Appropriations AccountDeriving the Appropriations Account

UseCorporate Tax

Dividends Paid - Dividends Received

Addition to Retained Earnings

- Gains on Sale of Assets/Securities

SourceEquals Net Income Before Tax

- Dividends Received

- Gains on Sale of Assets/Securities

Deriving the Appropriations AccountDeriving the Appropriations Account

1)1) Now will use what was left over after the Now will use what was left over after the derivation of the production account. As derivation of the production account. As before, arrange things by “source” (RHS) and before, arrange things by “source” (RHS) and “Use” (LHS)“Use” (LHS)

2)2) Now, so our terminology matches, we need to Now, so our terminology matches, we need to convert “Income” to “Profits”convert “Income” to “Profits”

3)3) Undistributed Profits = Additions to Retained Undistributed Profits = Additions to Retained Earnings – Gains from asset salesEarnings – Gains from asset sales

Deriving the Appropriations AccountDeriving the Appropriations Account

UseCorporate Tax

Dividends Paid - Dividends Received

Undistributed Profits

SourceProfit

Microsoft’s Appropriations AccountMicrosoft’s Appropriations Account

UseCorporate Tax: $4,733

Dividends Paid - Dividends Received: $857

Undistributed Profits: $9,136

SourceProfit: $14,725

Deriving Savings/Investment Deriving Savings/Investment AccountAccount

Change in Working CapitalChange in Working Capital

Change in Current AssetsChange in Current Assets

Cash & EquivalentCash & EquivalentAccounts ReceivableAccounts ReceivableInventoriesInventories

Less Change in Current Change in Current LiabilitiesLiabilities

LoansLoansAccounts PayableAccounts Payable

Additions to Working CapitalAdditions to Working CapitalProvided by OperationsProvided by Operations

Net Income (After Tax)Net Income (After Tax)DepreciationDepreciation

Less Less Gains on Sales of Fixed Gains on Sales of Fixed Assets & SecuritiesAssets & SecuritiesOther SourcesOther Sources

Sale of Fixed Assets:Sale of Fixed Assets:Sale of Securities:Sale of Securities:Stock/Bond Issues:Stock/Bond Issues:

LessLess Reductions in Working Capital Reductions in Working CapitalDividends PaidDividends PaidPurchases of Fixed AssetsPurchases of Fixed AssetsPurchase of SecuritiesPurchase of SecuritiesRetirement of Stocks/BondsRetirement of Stocks/Bonds

Deriving Savings/Investment Deriving Savings/Investment AccountAccount

Rearrange Cash Flow Statement so that Change in Rearrange Cash Flow Statement so that Change in assets (use) is on the left and change in liabilities assets (use) is on the left and change in liabilities (source) is on the right(source) is on the right

Deriving Savings/Investment Deriving Savings/Investment AccountAccount

Change in Current AssetsChange in Current AssetsCash & EquivalentCash & Equivalent

Accounts ReceivableAccounts ReceivableInventoriesInventories

Change in SecuritiesChange in Securities Purchases of SecuritiesPurchases of Securities

LessLess Sales of Securities: Sales of Securities: Plus Gains on Securities

Change in Fixed AssetsChange in Fixed Assets Purchases of Fixed AssetsPurchases of Fixed Assets

LessLess Sales of Fixed Sales of Fixed Assets:Assets:

Plus Gains on Assets

Less Depreciation

Change in LiabilitiesChange in LiabilitiesLoansLoansAccounts PayableAccounts PayableBond Issues – RetirementsBond Issues – Retirements

Stock Issues Stock Issues

LessLess Stock Retirements Stock Retirements

Addition to Retained Earnings:Addition to Retained Earnings:Net Income (After Tax)Net Income (After Tax)Less Dividends Paid Dividends Paid

Deriving Savings/Investment Deriving Savings/Investment AccountAccount

1)1) Rearrange Cash Flow Statement so that Change in Rearrange Cash Flow Statement so that Change in assets (use) is on the left and change in liabilities assets (use) is on the left and change in liabilities (source) is on the right(source) is on the right

2)2) Add Depreciation to both sides and subtract gains from Add Depreciation to both sides and subtract gains from

sale of assets and securities from both sidessale of assets and securities from both sides

Deriving Savings/Investment Deriving Savings/Investment AccountAccount

Change in Current AssetsChange in Current AssetsCash & EquivalentCash & Equivalent

Accounts ReceivableAccounts ReceivableInventoriesInventories

Change in SecuritiesChange in Securities Purchases of SecuritiesPurchases of Securities

LessLess Sales of Securities: Sales of Securities:

Change in Fixed AssetsChange in Fixed Assets Purchases of Fixed AssetsPurchases of Fixed Assets

LessLess Sales of Fixed Sales of Fixed Assets:Assets:

Change in LiabilitiesChange in LiabilitiesLoansLoansAccounts PayableAccounts Payable

Bond Issues – RetirementsBond Issues – Retirements

Stock Issues Stock Issues

LessLess Stock Retirements Stock Retirements

Addition to Retained Earnings:Net Income (After Tax)Less Dividends Paid

Less Gains on Securities/Assets

Plus Depreciation

Deriving Savings/Investment Deriving Savings/Investment AccountAccount

1)1) Rearrange Cash Flow Statement so that Change in Rearrange Cash Flow Statement so that Change in assets (use) is on the left and change in liabilities assets (use) is on the left and change in liabilities (source) is on the right(source) is on the right

2)2) Add Depreciation to both sides and subtract gains from Add Depreciation to both sides and subtract gains from sale of assets and securities from both sides sale of assets and securities from both sides

3)3) Recall, Undistributed Profits = Additions to Retained Recall, Undistributed Profits = Additions to Retained Earnings – Gains from asset salesEarnings – Gains from asset sales

4)4) Finally, subtract change in Liabilities from both sides Finally, subtract change in Liabilities from both sides and regroupand regroup

Deriving Savings/Investment Deriving Savings/Investment AccountAccount

Change in Fixed AssetsChange in Fixed AssetsPurchases of Fixed Assets - Sales Purchases of Fixed Assets - Sales

of of Fixed AssetsFixed Assets

Change in InventoriesChange in Inventories

Change in Current AssetsCash & EquivalentAccounts Receivable

Change in Securities Purchases of Securities - Sales of Securities:

Less Change in LiabilitiesLess Change in LiabilitiesLoansLoansAccounts PayableAccounts Payable

Bond Issues – RetirementsBond Issues – RetirementsStock Issues - Stock RetirementsStock Issues - Stock Retirements

Undistributed Profits

Plus Depreciation

Deriving Savings/Investment Deriving Savings/Investment AccountAccount

1)1) Rearrange Cash Flow Statement so that Change in Rearrange Cash Flow Statement so that Change in assets (use) is on the left and change in liabilities assets (use) is on the left and change in liabilities (source) is on the right(source) is on the right

2)2) Add Depreciation to both sides and subtract gains from Add Depreciation to both sides and subtract gains from sale of assets and securities from both sides sale of assets and securities from both sides

3)3) Recall, Undistributed Profits = Additions to Retained Recall, Undistributed Profits = Additions to Retained Earnings – Gains from asset salesEarnings – Gains from asset sales

4)4) Finally, subtract change in Liabilities from both sides Finally, subtract change in Liabilities from both sides and regroupand regroup

5)5) Net Acquisition of Financial Assets = Change in Net Acquisition of Financial Assets = Change in Current Assets + Change in SecuritiesCurrent Assets + Change in Securities

Deriving Savings/Investment Deriving Savings/Investment AccountAccount

Change in Fixed AssetsChange in Fixed Assets

Purchases of Fixed Assets - Sales Purchases of Fixed Assets - Sales of Fixed Assetsof Fixed Assets

Change in InventoriesChange in Inventories

Net Acquisition of Financial Assets

Less Change in LiabilitiesLess Change in Liabilities

LoansLoans

Accounts PayableAccounts Payable

Bond Issues – RetirementsBond Issues – Retirements

Stock Issues - Stock RetirementsStock Issues - Stock Retirements

Undistributed Profits

Plus Depreciation

Microsoft’s Savings/Investment Microsoft’s Savings/Investment AccountAccount

Change in Fixed Assets: $1,954Purchases of Fixed Assets - Sales of Fixed Assets

Change in Inventories:Net Acquisition of Financial Assets:

Purchases – Sales of Stock: $5,259Cash & Equivalent: $3,422Accounts Receivable: -$187 Other: -$412

Less Change in Liabilities:LoansAccounts Payable:Bond Issues – Retirements: Stock Issues - Retirements: -$4,366Other: $35

Gross Investment: Gross Investment: $14,367

Undistributed Profits: $9,136

Plus Depreciation: $1,439

Effect of Exchange Rate Change: $61Other: $3731

Gross Savings: $14,367

Microsoft SummaryMicrosoft Summary

MicrosoftProduction Account

Uses Source

Wages & Salaries: $13,284Capital Consumption Allowance: $1,439Profits: $13,217

Sales: $32,187Change in Inventories Less Materials/Services: $4,247

Charges Against Output: $27,940 Gross Business Output: $27,940

Microsoft SummaryMicrosoft Summary

MicrosoftAppropriation Account

Uses Source

Corporate Tax: $4,733Net Dividends Paid: -$652Undistributed Profits: $9,136

Profits: $13,217

Distribution of Profits: $13,217 Profits: $13,217

Microsoft SummaryMicrosoft Summary

MicrosoftSavings/Investment

Uses Source

Change in Fixed Assets: $1,954Net Acquisition of Financial Assets: $8,082Less Change in Liabilities: -$4331

Undistributed Profits: $9,136

Plus Depreciation: $1,439

Exchange Rate Change: $61Other: $3731

Gross Investment: $14,367 Gross Savings: $14,367

Other SectorsOther Sectors

In addition to the business sector, there will be In addition to the business sector, there will be corresponding accounts forcorresponding accounts for Household & Non ProfitsHousehold & Non Profits GovernmentGovernment Foreign (BOP Accounts)Foreign (BOP Accounts)

These individual tables can then be consolidated These individual tables can then be consolidated into a national account by adding across sectors into a national account by adding across sectors and making the appropriate cancellationsand making the appropriate cancellations Taxes Paid = Receipts By GovernmentTaxes Paid = Receipts By Government Transfers Paid = Transfers ReceivedTransfers Paid = Transfers Received

NIPA AccountsNIPA Accounts The NIPA account is a configuration that includesThe NIPA account is a configuration that includes

NIP (National Income and Product): Consolidated NIP (National Income and Product): Consolidated Product account and the Business appropriations Product account and the Business appropriations accountaccount

Personal Income and Outlays: Household Personal Income and Outlays: Household Appropriation AccountAppropriation Account

Government Receipts and Expenditures: Government Government Receipts and Expenditures: Government Appropriations AccountAppropriations Account

Foreign Transactions: Foreign Appropriations and Foreign Transactions: Foreign Appropriations and Savings/Investment AccountsSavings/Investment Accounts

Gross Saving/Investment: Domestic Portion of Gross Saving/Investment: Domestic Portion of Consolidated Saving/Investment AccountsConsolidated Saving/Investment Accounts

Capital Finance (Flow of Funds)Capital Finance (Flow of Funds)

The Flow of Funds is a detailed look at the The Flow of Funds is a detailed look at the savings/investment accountssavings/investment accounts ““Changes in Liabilities” are subtracted from both sides Changes in Liabilities” are subtracted from both sides

do that the Left hand side of the chart is “Sources of do that the Left hand side of the chart is “Sources of Funds” and the RHS is “Uses of Funds”Funds” and the RHS is “Uses of Funds”

The Data is disaggregated by asset type (Deposits, The Data is disaggregated by asset type (Deposits, Loans, Securities, Trade Credit) and by Sector Loans, Securities, Trade Credit) and by Sector (Business, Financial, Household, Government, and (Business, Financial, Household, Government, and Foreign)Foreign)

Input/Output AccountsInput/Output Accounts

The Input/Output Tables illustrate the The Input/Output Tables illustrate the flows of goods and services across flows of goods and services across sectors of the economysectors of the economyThe national production accounts are The national production accounts are

disaggregated across industries and disaggregated across industries and commodity.commodity.

GDP 2004Q2 (Billions)GDP 2004Q2 (Billions)

Category Amount (B) % of Total Growth

Consumption $8,146.2 70% 4.0%

Investment $1,891.2 16% 12%

Government $2,172.9 18% 6%

Net Exports -561.0 -4% ----

GDP $11,649.3 100% 6.0%

Output Equals IncomeOutput Equals Income

GDP ($11,649.3)GDP ($11,649.3)

+ + Net Factor Payments ($73.5)Net Factor Payments ($73.5)

GNP ($11,722.8)GNP ($11,722.8)

Output Equals IncomeOutput Equals Income

GDP ($11,649.3)GDP ($11,649.3)

+ + Net Factor Payments ($73.5)Net Factor Payments ($73.5)

GNP ($11,722.8)GNP ($11,722.8)- Depreciation ($1,370.1)Depreciation ($1,370.1)

Net National Product ($10,352.7)Net National Product ($10,352.7)

Output Equals IncomeOutput Equals Income

GDP ($11,649.3)GDP ($11,649.3)

+ + Net Factor Payments ($73.5)Net Factor Payments ($73.5)

GNP ($11,722.8)GNP ($11,722.8)- Depreciation ($1,370.1)Depreciation ($1,370.1)

Net National Product ($10,352.7)Net National Product ($10,352.7)- Indirect Taxes ($834.4)Indirect Taxes ($834.4)

National Income ($9518.3)National Income ($9518.3)

National Income 2004Q2National Income 2004Q2

Category Amount(B) % of Total Growth

Wages $6,600.6 69% 5%

Proprietor’s Income

$902.8 9% 14%

Rental Income $173.8 2% 2%

Corporate Profits

$1294.2 14% 36%

Interest $546.9 6% -4%

National Income

$9518.3 100% 6%

Personal Income/Outlays 2004Q2Personal Income/Outlays 2004Q2

Category Amount(B) % of Total

Personal Income

$9614.8 100%

Taxes $1030.3 10%

Consumption $8146.2 85%

Interest $296.3 3%

Personal Savings

142.0 2%

Savings/Investment 2004Q2Savings/Investment 2004Q2

Category Amount(B) % of Total

Gross Investment

$1631.3 100%

Depreciation $1355.0 85%

Private Saving $142.0 9%

Undistributed Profits

$506.7 31%

Government -$372.4 -25%

Borrowing by Sector 2004Q1Borrowing by Sector 2004Q1Category Amount(B) % of Total

Total $2801.3 100%

Financial Sector $805.7 28%

Federal Government $466.0 17%

State & Local Government $149.7 5%

Non-Financial Business $303.3 11%

Household $1008.2 37%

Foreign $68.4 2%