7/26/2019 Macroeconomics National Income Accounting
1/62
Sophian Sout,
Politeknik Mukah
7/26/2019 Macroeconomics National Income Accounting
2/62
7/26/2019 Macroeconomics National Income Accounting
3/62
I n t r oduc t i on
:: the Definition of National Income Accounting
refer to the final products/ goods and services produced by a
country for a specific period of time, such as a year
the aggregate income of the country earned by its nationals
through the production of goods and services for a certain period
of time
the total value of final goods and services producedby thenationals of a country for a particular period of time.
7/26/2019 Macroeconomics National Income Accounting
4/62
7/26/2019 Macroeconomics National Income Accounting
5/62
I n t r oduc t i on
:: the calculation [01]
Item RM
GDP at m a r k e t p r i c e
Net factor income payment from abroad (NFIPA)Net factor income received from abroad (FIRA)
Net factor income paid abroad (FIPA)
+/-
GNP at m a r k e t p r i c e
7/26/2019 Macroeconomics National Income Accounting
6/62
7/26/2019 Macroeconomics National Income Accounting
7/62
I n t r oduc t i on
:: the calculation [02]
Item RM
GNP at m a r k e t p r i c e
Indirect tax / direct tax / Tax on expenditure -
Subsidies +
GNP at f a c t o r c o s t
7/26/2019 Macroeconomics National Income Accounting
8/62
7/26/2019 Macroeconomics National Income Accounting
9/62
I n t r oduc t i on
:: the calculation [03]
Item RM
GDP at m a r k e t p r i c e
Indirect tax / direct tax / Tax on expenditure -
Subsidies +
GDP at f a c t o r c o s t
7/26/2019 Macroeconomics National Income Accounting
10/62
7/26/2019 Macroeconomics National Income Accounting
11/62
I n t r oduc t i on
:: the calculation [04]
Item RM
GDP at f a c t o r c o s t
Net factor income payment from abroad (NFIPA)Net factor income received from abroad (FIRA)
Net factor income paid abroad (FIPA)+/-
GNP at f a c t o r c o s t
7/26/2019 Macroeconomics National Income Accounting
12/62
7/26/2019 Macroeconomics National Income Accounting
13/62
I n t r oduc t i on
:: the calculation [05]
Item RM
GNP at f a c t o r c o s t
Depreciation / capital consumption -
NNP at f a c t o r c o s t / N AT I O N A L I N C O M E
7/26/2019 Macroeconomics National Income Accounting
14/62
7/26/2019 Macroeconomics National Income Accounting
15/62
I n t r oduc t i on
:: the calculation [06]
Item RM
NATIONA L I NCO ME [NNPat f a c t o r c o s t ]
Transfer payment +
Interest in consumer loan +
Interest on government loan +
Employee Provisional Fund (EPF)
Corporate profit taxes / Corporate income taxes
Undistributed corporate profit
P E R S O N A L I N C O M E
7/26/2019 Macroeconomics National Income Accounting
16/62
7/26/2019 Macroeconomics National Income Accounting
17/62
I n t r oduc t i on
:: the calculation [07]
Item RM
P E R S O N A L I N C O M E
Personal Income Taxes
D I S P O S A B LE P E R S O N A L I N C O M E
7/26/2019 Macroeconomics National Income Accounting
18/62
ITEMS RM (Million)
NNP fc 28930
Interest on consumer loan 1600
Interest on government loan 2100
Import taxes 1700Dividend 730
Transfer payment 1050
EPF 1750
Personal income tax 6900
Undistributed corporate profit 1900
Corporate tax 5700
Saving 9900
Tithe 200
Socso 1500
:: Calculate Personal Income & Disposable Personal Income
Ques t i on 1 -1
7/26/2019 Macroeconomics National Income Accounting
19/62
ITEMS RM (Million)
Depreciation 850
Transfer Payment 1000
Social Security Contribution 200
Retained earnings 100Corporate tax 800
Personal income tax 400
GNP fc 65850
Ques t i on 1 -2
:: Calculate the National Income, Personal Income & Disposable Personal Income
7/26/2019 Macroeconomics National Income Accounting
20/62
ITEMS RM (Million)
Depreciation 1000
Transfer Payment 1000
Social Security Contribution 200
Retained earnings 100Corporate tax 800
Personal income tax 400
GNP fc 71000
Ques t i on 1 -3
:: Calculate the National Income, Personal Income & Disposable Personal Income
7/26/2019 Macroeconomics National Income Accounting
21/62
7/26/2019 Macroeconomics National Income Accounting
22/62
Ca l cu l a t i on App roach
:: Expenditure ApproachItem RM
Personal consumption / Household Expenditure / Personal Expenses (C) +
Investment (I) +
Government Spending / Government Expenditure +
Net Export (exportimport) +
*Changes in Stock +
GDPin m a r k e t p r i c e
7/26/2019 Macroeconomics National Income Accounting
23/62
Ca l cu l a t i on App roach
:: Production ApproachItem RM
Agriculture, forestry, and fishing +
Mining and quarrying +
Manufacturing +Construction +
Electricity, gas, and water +
Transportation, storage, and communication +
Commerce, retail, hotel and restaurant +Finance, insurance, and real estate +
Government services +
Other services +
GDPin m a r k e t p r i c e
7/26/2019 Macroeconomics National Income Accounting
24/62
Ca l cu l a t i on App roach
:: Income ApproachItem RM
Wages and salaries +
Rent +
Companies profit +
+ Undistributed company profit
+ Dividend
+ Corporate income taxes
Private enterprise earning +
Net interest +
NNP at f a c t o r c o s t / N ATI O N A L I N C O M E
7/26/2019 Macroeconomics National Income Accounting
25/62
Example
7/26/2019 Macroeconomics National Income Accounting
26/62
ITEMS RM (MILLION)
Personal income taxes 750Indirect taxes 10000
Factor income received from abroad 21470
Private investment 43769
Social security contribution 800
Export 609133Public investment 55161
Subsidies 12000
Transfer payment 4000
Factor income paid abroad 20470
Private consumption 215876Undistributed company profit 1260
Import 492928
Changes in stock 1059
Company income tax 900
Depreciation 5000Government spending 64592
Examp l e 2 -1
7/26/2019 Macroeconomics National Income Accounting
27/62
Calculate:
(a)National Income (NNP fc)
(b)Personal Income(c)Disposable Personal Income
7/26/2019 Macroeconomics National Income Accounting
28/62
ITEMS RM (MILLION)
Private consumption 215876
Public investment 55161
Private investment 43769
Government spending 64592
Changes in stock 1059
Net Export : 609133 - 492928 116205
GDP mp 496662
Indirect taxes (10000)
Subsidies 12000
GDP fc 498662
NFIRA: 21470 - 20470 1000
GNP fc 499662
Depreciation (5000)
National Income 494662
7/26/2019 Macroeconomics National Income Accounting
29/62
ITEMS RM (MILLION)
National Income 494662
Social security contribution (800)
Transfer payment 4000
Undistributed company profit (1260)
Company income tax (900)
Personal Income 495702
Personal income tax (750)
Disposable Income 494952
7/26/2019 Macroeconomics National Income Accounting
30/62
PRACTISE[02]
7/26/2019 Macroeconomics National Income Accounting
31/62
ITEMS RM (Million)
Wages and sales 500
Income from rent, dividend and interest 100
Profit 200
Corporate tax 80Depreciation 50
Private investment 1000
Net factor income abroad 400
:: Calculate the National Income
Ques t i on 2 -1
7/26/2019 Macroeconomics National Income Accounting
32/62
ITEMS RM (Million)
Government services 1000
Net factor income from abroad 250
Exports 1500
Mining and Quarrying 1800Manufacturing 1500
Indirect business tax 400
Depreciation 100
Subsidies 150
Private investment 5000
Electricity, gas and water 700Banking and tourism 3000
Rent 200
:: Calculate the National Income
Ques t i on 2 -2
7/26/2019 Macroeconomics National Income Accounting
33/62
ITEMS RM (Million)
Personal taxes 40
Social security contributions 15
Indirect business tax 20
Corporate income taxes 40Transfer payment 22
Exports 10
Government purchases goods and services 100
Personal consumption expenditure 250
Import 20
Net factor income from abroad 25Capital consumption 10
Private investment 5
:: Calculate the National Income
Ques t i on 2 -3
7/26/2019 Macroeconomics National Income Accounting
34/62
ITEMS RM (Million)
Construction 22000
Manufacturing 15000
Agriculture 12000
Mining and gas 7000
Banking and insurance 13500
Wholesale and retail 9500
Other services 4000
Taxes on expenditure 650
Factor payment abroad 7800
Capital consumption 360Factor payment from abroad 6600
Ques t i on 2 -4
:: Calculate the National Income
7/26/2019 Macroeconomics National Income Accounting
35/62
ITEMS RM (Million)
Household expenditure 44.5
Depreciation 7.6
Rent 5.6
Gross investment 15.1
Export 18.7
Government expenditure 17.7
Imports 16.1
Net factors income from abroad - 0.5Subsidy 2.2
Private corporation income 10.7
Company profits 12.5
Indirect taxes 12
Ques t i on 2 -5
:: Calculate the National Income
7/26/2019 Macroeconomics National Income Accounting
36/62
ITEMS RM (Million)
Household expenditure 44.5
Gross investment 15.1
Government expenditure 17.7
Net Export: 18.7 - 16.1 2.6
GDPmp 79.9
Subsidy 2.2
Indirect taxes (12)
GDPfc 70.1Net factors income from abroad (0.5)
GNPfc 69.6
Depreciation (7.6)
National Income (NNPfc) 62
An swer Q : 2 - 5
:: Calculate the National Income
7/26/2019 Macroeconomics National Income Accounting
37/62
ITEMS RM (Million)
Depreciation 5000
Transfer Payment 4000
Social Security Contribution 800
Retained earnings 100Corporate tax 7000
Personal income tax 800
GNPfc 351200
Ques t i on 2 -5
:: Calculate the National Income, Personal Income & Disposable Personal Income
7/26/2019 Macroeconomics National Income Accounting
38/62
7/26/2019 Macroeconomics National Income Accounting
39/62
ITEMS RM (Million)
Depreciation 10
Corporate income taxes 40
Export 10
Government purchase 100Import 20
Indirect business tax 20
Net factor income from abroad 25
Personal consumption expenditure 250
Personal taxes 40
Private investment 5
Social security contribution 15
Transfer payment 22
:: Calculate the National Income, Personal Income & Disposable Personal Income
Ques t i on 2 -7
7/26/2019 Macroeconomics National Income Accounting
40/62
ITEMS RM (Million)
Personal consumption expenditure 250
Private investment 5
Government purchase 100
Net Export: 10 - 20 (10)GDPmp 345
Net factor income from abroad 25
GNPmp 370
Indirect business tax (20)
Subsidy 0
GNPfc 350
Depreciation (10)
National Income 340
:: Calculate the National Income, Personal Income & Disposable Personal Income
An swer Q :2 -7 ( a )
7/26/2019 Macroeconomics National Income Accounting
41/62
ITEMS RM (Million)
National Income 340
Corporate income taxes (40)
Social security contribution (15)
Transfer payment 22Personal Income 307
Personal taxes (40)
Disposable Income 267
:: Calculate the National Income, Personal Income & Disposable Personal Income
An swer Q :2 -7 ( b )
7/26/2019 Macroeconomics National Income Accounting
42/62
7/26/2019 Macroeconomics National Income Accounting
43/62
Real Income
Real income or real Gross National Product (GNP) is GNP measured on a fixed
price or base year.
Nominal GNPmeasured in current price
Can convert the nominal GNP to Real GNP by using a GNP deflator
GNP deflator: obtained by comparing the base year index
with the current year price index
GNP deflator =Current year price index
Base year price index
To find the Real Income or real GNP, the following formula can be used:
Real GNP = X Nominal GNP
=
Base year price index
Current year price index
Nominal GNP
GNP deflator
Rea l I ncome
7/26/2019 Macroeconomics National Income Accounting
44/62
Per Capita Income
Per Capita Income refers to the average income per head of population.Per Capita Incomeas index of change in the standard of living of a country
Per Capita Income =National Income
Total Population
Growth Rate
The economic growth rate of a country can be measured as a gross domestic
product (GDP) or gross national product (GNP) based on real income.
Growth Rate percentage change in the quantity of good and services
produced from one year to another.
Growth Rate = X 100Real GNP this yearReal GNP last year
Real GNP last year
* This formula can also be used to calculate Real GDP
Per Cap i t a I ncome & G row th Ra t e
7/26/2019 Macroeconomics National Income Accounting
45/62
PRACTISE[02]
7/26/2019 Macroeconomics National Income Accounting
46/62
The National Income for country X for the year 2013 is84000 millionwith 30 million of population.
:: Calculate per capita income for country X
Ques t i on 3 -1
7/26/2019 Macroeconomics National Income Accounting
47/62
The National Income for country ABC for the year 2012 is78500 millionwith 20 million of population.
:: Calculate per capita income for country X
Ques t i on 3 -2
7/26/2019 Macroeconomics National Income Accounting
48/62
The real per capita income for the years 2012 and 2013 areRM4268and RM4375 respectively.
:: Calculate the growth rate of the economy between 2012 and
2013.
Ques t i on 3 -3
7/26/2019 Macroeconomics National Income Accounting
49/62
:: Calculate the average growth rate of the contribution of themanufacturing sector to Malaysians GDP between 2005 \
and 2008
Ques t i on 3 -4
Year Contribution to GDP bythe industrial sector
(RM million)
2005 24307
2006 26859
2007 30324
2008 34458
7/26/2019 Macroeconomics National Income Accounting
50/62
PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING
7/26/2019 Macroeconomics National Income Accounting
51/62
PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING
Calculation of National Income
Comparison of National Income between countries
Comparison of National Income between time periods
Double counting
Accuracy of information
Unpaid activities
Transfer Payment
Activities that are illegal but productive
Depreciation
PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING
7/26/2019 Macroeconomics National Income Accounting
52/62
PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING
Calculation of National IncomeComparison of National Income between countries
Comparison of National Income between time periods
Concepts of national income
Different treatments of items
Pattern of income distribution
Unpaid productive activities
General Price Levels
Working Hours
Foreign exchange rate
PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING
7/26/2019 Macroeconomics National Income Accounting
53/62
PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING
Calculation of National IncomeComparison of National Income between countries
Comparison of National Income between time periods
General Price LevelQuality of goods and services
Population composition and total population
Pattern of income distribution
FACTORS AFFECTING NATIONAL INCOME
7/26/2019 Macroeconomics National Income Accounting
54/62
FACTORS AFFECTING NATIONAL INCOME
Internal
External
Quality and quantity of factors of population
Level of technical knowledge and usage of modern technology
Level of specialization
Political stability
FACTORS AFFECTING NATIONAL INCOME
7/26/2019 Macroeconomics National Income Accounting
55/62
FACTORS AFFECTING NATIONAL INCOME
InternalExternal
Foreign investment
Terms of trade
Receiving assistance
USAGE OF NATIONAL INCOME DATA
7/26/2019 Macroeconomics National Income Accounting
56/62
USAGE OF NATIONAL INCOME DATA
Measure countrys rate of economic growth
Measure total contribution of economic sectors to total national production
Economic planning
Measure countrys general standard of living
Show or indicate the success or failure of government policies
USAGE OF NATIONAL INCOME DATA
7/26/2019 Macroeconomics National Income Accounting
57/62
USAGE OF NATIONAL INCOME DATA
Measure countrys rate of economic growth
Measure total contribution of economic sectors to total national production
Economic planning
Measure countrys general standard of living
Show or indicate the success or failure of government policies
USAGE OF NATIONAL INCOME DATA
7/26/2019 Macroeconomics National Income Accounting
58/62
USAGE OF NATIONAL INCOME DATA
Measure countrys rate of economic growth
Measure total contribution of economic sectors to total national production
Economic planning
Measure countrys general standard of living
Show or indicate the success or failure of government policies
USAGE OF NATIONAL INCOME DATA
7/26/2019 Macroeconomics National Income Accounting
59/62
USAGE OF NATIONAL INCOME DATA
Measure countrys rate of economic growth
Measure total contribution of economic sectors to total national production
Economic planning
Measure countrys general standard of living
Show or indicate the success or failure of government policies
USAGE OF NATIONAL INCOME DATA
7/26/2019 Macroeconomics National Income Accounting
60/62
USAGE OF NATIONAL INCOME DATA
Measure countrys rate of economic growth
Measure total contribution of economic sectors to total national production
Economic planning
Measure countrys general standard of living
Show or indicate the success or failure of government policies
7/26/2019 Macroeconomics National Income Accounting
61/62
Finish Chapter 2
7/26/2019 Macroeconomics National Income Accounting
62/62