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Encyclopedia > Measures of national income and output

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Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. They use a system of national accounts or national accounting first developed during the 1940s. Some of the more common measures are Gross National Product (GNP), Gross Domestic Product (GDP), Gross National Income (GNI), Net National Product (NNP), and Net National Income (NNI). Formerly in the Soviet Union and its friendly states COMECON, Net Material Product (NMI) was estimated (NNP-Services). In relation to greening the national accounts the United States Congressional Budget Office concludes "a gradual process of modifying measures of national economic performance is consistent with the history and development of the national accounts."[1] GNP is an abbreviation for the Gross National Product GNP+ is an abbreviation for the Global Network of People living with HIV/AIDS GnP is an abbreviation for Ground n Pound, a ground fighting tactic. ... GVA is an abbreviation for Gross Value Added. ... Face-to-face trading interactions on the New York Stock Exchange trading floor Economics is the social science that studies the production, distribution, and consumption of valuable goods and services. ... Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. ... IMF 2005 figures of total GDP of nominal compared to PPP. Absolute, not adjusted for population. ... Net National Product (NNP) is the total market value of all final goods and services produced by citizens of an economy during a given period of time (Gross National Product or GNP) minus depreciation. ... Net National Income (NNI) is an economics term used in National income accounting. ... A Soviet poster reading COMECON: Unity of Goals, Unity of Action The Council for Mutual Economic Assistance (COMECON / Comecon / CMEA / CEMA), 1949 – 1991, was an economic organization of communist states and a kind of Eastern Bloc equivalent to—but more inclusive than—the European Economic Community. ...


There are at least two or three different ways of calculating these numbers. The expenditure approach determines aggregate demand, or Gross National Expenditure, by summing consumption, investment, government expenditure and net exports. On the other hand, the income approach and the closely related output approach can be seen as the summation of wages, rents, interest, profits, nonincome charges, and net foreign factor income earned. The three methods must yield the same results because the total expenditures on goods and services (GNE) must by definition be equal to the value of the goods and services produced (GNP) which must be equal to the total income paid to the factors that produced these goods and services (GNI).


In actual fact, there will be minor differences in the results obtained from the various methods due to changes in inventory levels. This is because goods in inventory have been produced (and therefore included in GDP), but not yet sold (and therefore not yet included in GNE). Similar timing issues can also cause a slight discrepancy between the value of goods produced (GDP) and the payments to the factors that produced the goods, particularly if inputs are purchased on credit.

Contents

Gross National Product

Gross National Product (GNP) is the total value of all final goods and services produced by a country's factors of production and sold on the market in a given time period. For example, the profits from a Mercedes-Benz factory in the USA would count towards German GNP. Good (accounting) - Wikipedia /**/ @import /skins-1. ... Services are: plural of service Tertiary sector of industry IRC services Web services the name of a first-class cricket team in India This is a disambiguation page — a navigational aid which lists other pages that might otherwise share the same title. ... This page is about the Mercedes-Benz brand of automobiles and trucks from the DaimlerChrysler automobile manufacturer. ...


Nominal GNP measures the value of output during a given year using the prices prevailing during that year. Over time, the general level of prices rise due to inflation, leading to an increase in nominal GNP even if the volume of goods and services produced is unchanged.


Real GNP measures the value of output in two or more different years by valuing the goods and services adjusted for inflation. For example, if both the "nominal GNP" and price level doubled between 1995 and 2005, the "real GNP" would remain the same. For year over year GNP growth, "real GNP" is usually used as it gives a more accurate view of the economy. It also has nothing to do with the population.


Gross Domestic Product

Gross Domestic Product (GDP) is the total value of final goods and services produced within a country's borders in a year. GDP counts income according to where it is earned rather than who owns the factors of production. In the above example, all of the income from the car factory would be counted as US GDP rather than German GDP. To convert from GNP to GDP you must subtract factor income receipts from foreigners that correspond to goods and services produced abroad using factor inputs supplied by domestic sources. To convert from GDP to GNP you must add factor input payments to foreigners that correspond to goods and services produced in the domestic country using the factor inputs supplied by foreigners.


Gross Value Added

The Gross value added is:

A tax (also known as a duty) is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (e. ... In economics, a subsidy is generally a monetary grant given by a government to lower the price faced by producers or consumers of a good, generally because it is considered to be in the public interest. ...

In the Income Approach

  • Net National Product (NNP) is GNP minus depreciation
  • Net National Income (NNI) is NNP minus indirect taxes
  • Personal Income (PI) is NNI minus retained earnings, corporate taxes but it includes transfer payments, and interest on the public debt
  • Personal Disposable Income (PDI) is PI minus personal taxes.

S = personal savings
C = personal consumption
PDI = personal disposable income
TP = personal taxes paid
TPP = personal transfer payments received from governments
PI = personal income
RE = retained earnings
TC = corporate taxes
TPC = corporate transfer payments from governments
IG = interest on the public debt
NNI = net national income
TIN = indirect taxes
NNP = net national product
D = depreciation


National income and welfare

GNP per person is often used as a measure of people's welfare. Countries with higher GNP often score highly on other measures of welfare, such as life expectancy. However, there are serious limitations to the usefulness of GNP as a measure of welfare: World map of life expectancy, 2005 Life expectancy is a statistical measure defined as the expected (mean) survival of human beings based upon a number of criteria such as gender and geographic location. ...

  • Measures of GNP typically exclude unpaid economic activity, most importantly domestic work such as childcare. This can lead to distortions; for example, a paid childminder's income will contribute to GNP, whereas an unpaid mother's time spent caring for her children will not, even though they are both carrying out the same economic activity.
  • GNP takes no account of the inputs used to produce the output. For example, if everyone worked for twice the number of hours, then GNP might roughly double, but this does not necessarily mean that workers are better off as they would have less leisure time. Similarly, the impact of economic activity on the environment is not directly taken into account in calculating GNP.
  • Comparison of GNP from one country to another may be distorted by movements in exchange rates. Measuring national income at purchasing power parity can help to overcome this problem at the risk of overvaluing basic goods and services like for example subsistence farming.
  • GNP does not take into account many factors that may be important to quality of life, such as the quality of the environment (as distinct from the input value) and security from crime. This can lead to distortions - for example, spending on cleaning up an oil spill is included in GNP, but the negative impact of the spill on well-being (e.g. loss of clean beaches) is not taken into account.
  • GNP is the mean wealth rather than median wealth. Countries with a skewed income distribution may have a relatively high per-capita GNP while the majority of its citizens have a relatively low level of income, due to concentration of wealth in the hands of a small fraction of the population. See Gini coefficient.

Because of this, other measures of welfare such as the Human Development Index (HDI), Index of Sustainable Economic Welfare (ISEW), Genuine Progress Indicator (GPI) and Sustainable National Income (SNI) have been suggested. Purchasing power parity (PPP) is in economics the method of using the long-run equilibrium exchange rate of two currencies to equalize the currencies purchasing power. ... Graphical representation of the Gini coefficient The Gini coefficient is a measure of inequality of a distribution, defined as the ratio of area between the Lorenz curve of the distribution and, to the area under the uniform distribution. ... The Index of Sustainable Economic Welfare is an economic indicator intended to replace the Gross domestic product. ... The Genuine Progress Indicator (GPI) is a concept in green economics and welfare economics that has been suggested as a replacement metric for gross domestic product (GDP) as a metric of economic growth. ... Definition See the entry in wikinfo. ...


National accounting formulas (expenditure approach)

C = Personal consumption expenditures
I = Gross private domestic investment
G = Government consumption expenditures
X = Gross exports of goods and services
M = Gross imports of goods and services
Total = Gross Domestic Product (GDP)


NR = + or - Net income from assets abroad (net income receipts)
Sub Total = Gross National Income (GNP)


CC = Depreciation
IBT = Indirect business taxes
NDP = Net Domestic Product
NI = National Income
PI = Personal Income
DI = Disposable income


Note: (X - M) is often written as "NX," which stands for "Net Exports"


GDP = C + I + G + (X - M)
GNP = C + I + G + (X - M) + NR
NI = C + I + G + (X - M) + NR - CC - IBT


The Flow of Income
GDP - depreciation = NDP
NDP - IBT + net foreign factor income = NI
NI - corporate taxes - retained earnings - social security + transfer payments + net interest = PI
PI - personal taxes = DI


United States income and output

To give an example of the components and their size. ([2])

National income and output (Billions of dollars)
Period Ending 2003
Gross national product 11,059.3
Net U.S. income receipts from rest of the world 55.2
    U.S. income receipts 329.1
    U.S. income payments 273.9
Gross domestic product 11,004.1
Private consumption of fixed capital 1,135.9
Government consumption of fixed capital 218.1
Statistical discrepancy 25.6
National Income 9,679.7

IMF 2005 figures of total GDP of nominal compared to PPP. Absolute, not adjusted for population. ... This article needs to be cleaned up to conform to a higher standard of quality. ... Measures of national income and output are used in economics to estimate the value of goods and services produced in an economy. ...

See also

The United Nations System of National Accounts is an international standard system of social accounts, first published in 1953. ... Gross Output is an economic concept used in national accounts such as the United Nations System of National Accounts (UNSNA) and the US National Income and Product Accounts (NIPA). ... IMF 2005 figures of total GDP of nominal compared to PPP. Absolute, not adjusted for population. ... Net output is an accounting concept used in national accounts such as the United Nations System of National Accounts (UNSNA) and the NIPAs, and sometimes in corporate or government accounts. ... Intermediate consumption is an economic concept used in national accounts, such as the United Nations System of National Accounts (UNSNA) and the US National Income and Product Accounts (NIPA). ... Compensation of employees (CE) is a statistical term used in national accounts, Balance of Payments statistics and sometimes in corporate accounts as well. ... Capital formation is a term used in national accounts statistics and macroeconomics. ... Wealth from the old English word weal, which means well-being or welfare. The term was originally an adjective to describe the possession of such qualities. ... The European System of Accounts (often abbreviated as ESA) is the system of national accounts and regional accounts used by members of the European Union. ...

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