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National Income Accounting

National Income Accounting

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National Income Accounting

  1. 1.  Gross National Product  Gross Domestic Product
  2. 2. National Income is a measure of the money value of the total flow of goods and services produced in an economy over a specified period of time. It is used as a basis in determining the capabilities of an economy.
  3. 3. National income consists of the following: Wages or Salary- those generated by labor; Interest- those generated by lenders of funds; Rent- those generated by owners of real estate; Profit- those generated by entrepreneurs; Net Factor- income from abroad
  4. 4. A. Gross National Product Meaning: Gross National Product (GNP) is a measure of market value of the final goods and services produced by nationals or citizens of a country in a particular time period. This includes production within and outside the country under consideration.
  5. 5. A. Gross National Product Purpose: GNP reflects the value of the economy’s production since it also includes the value of products from the low stages of production. GNP figures show the structure of production according to end use and factor contribution.
  6. 6. A. Gross National Product Exclusions from the GNP: The products not produced by the resources of the economy as imports. The products that can no longer be used for higher stages of production and, therefore, have reached the highest level of transformation using the economy’s resources. The time and t6he aforementioned those not produced by the economy within the period of time accounted. .
  7. 7. B. Gross Domestic Product Meaning: Gross Domestic Product (GDP) is a measure of the total flow and services produced by the economy over a particular time period. The factors of production must be located in the domestic economy regardless of who owns them. The owners of the factors of production consist of citizens of the local economy and those foreign countries.
  8. 8. Production within the Philippines by Philippine nationals Production within the Philippines by Foreign nationals Production within the Philippines by Philippine nationals Production outside the Philippines by Philippine nationals Gross Domestic Product (GDP) Gross National Product (GNP)
  9. 9. Private or Personal Consumption Expenditures -the spending by households on the following types of goods: a) Durable Consumer Goods ex. appliances, furniture, etc. b) Nondurable Consumer Goods ex. food, newspaper, ballpen, etc. c) Services ex. those provided by teachers, architects, electrician, etc.
  10. 10. Gross Domestic Investment -expenditures for newly produced capital goods like machinery, equipment, tools, buildings and additional inventors -do not include the transfers of paper assets and secondhand tangible assets because these do not constitute investment. Depreciation- reduction in the value of an asset through wear and tear. It is partly consists of the consumption of capital goods previously produced and
  11. 11. Net National Product (NNP)- refers to the GNP less the part of the output needed to replace the capital goods worn out in producing the output and the fine-tuned value for a more accurate accounting of the country’s final products. To calculate for NNP: NNP=GNP-Depreciation
  12. 12. Indirect Taxes- taxes which firms treat as costs of producing a product or service and pass on (full or partial) to buyers by charging them high prices. Ex. sales, excise and business property taxes, license fees and tariffs. Subsidies- payment of funds, goods or services by a government, business or household for which it receives no good or service in return.
  13. 13. Personal Income- earned by persons or households. National Income (NI)- income earned by the factor owners and equals to NNP less indirect taxes. To calculate for NI: NI=Personal Income (PY)+Corporate Income (CY)+ Government Income (GY)
  14. 14. Expenditure Approach- a way of estimating national income which involves the calculation of the sum of all expenditures on final goods.
  15. 15. To calculate for the GNP using the Expenditure Approach: GNP=C+I+G+(X-M) Where: GNP= Gross National Product C= Consumption (private or personal consumption expenditure) I= Investment (gross domestic capital formation) G= Government expenditure X= Exports M= Imports
  16. 16. Income Approach Current production is made possible through the use of economic resources of land, labor, capital and entrepreneurship. The owners of these resources receive earnings in the form of rent, wages and salaries, interests and dividends, and profit. When the total amount of earnings of the owners is aggregated into a single amount, the objective of determining the national income is achieved.
  17. 17. To calculate for the GNP using the Income Approach: GNP=NI+(IT-S)+DA Where: GNP= Gross National Product NI= National Income IT= Indirect Tax S= Subsidies DA= Depreciation Allowance (Capital Consumption Allowance)
  18. 18. Current GNP is a value using current prices, whereas Real GNP uses a base or constant prices. Real GNP is computed from Current GNP using a price coefficient since direct computation poses practical problems and unwieldiness.
  19. 19. The difference is illustrated by the following equations: Current GNP= PcQc Real GNP= PbQc Where: Pc= Current Price Pb= Base Price Qc= Current Volume of Goods and Services
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