national aggregates
Post on 16-Apr-2017
8.686 Views
Preview:
TRANSCRIPT
Measurement of Macroeconomic Aggregates
Introduction
Concepts like GDP, GNP and national income are significant from the view of the macro economy of the country. They provide valuable information about the information of the economy’s health.
• GNP is the sum of all final goods and services produced by the factors of production – land, labor, capital, and entrepreneurship – of a country during a certain period of time
05/03/23 2
• If all such goods are valued as a price paid to all the factors of production, it is known as GNP at Factor cost. Factors of production earn income in the form of wages, salaries, rent, interest and profits etc. GNP is a flow concept.
• GDP, on the other hand, is the total market value of all final goods and services produced during a given period within the boundaries of the country, whether by domestic or foreign-supplied resources.
05/03/23 3
Session Outline
• Concept of value addition• National product aggregates• Relationship between Gross & Net; MP & FC;
and National & Domestic Concepts• Real and nominal GNP• Price indices and types
05/03/23 4
Concept of Value Addition
Stage: 1 Stage: 2 Stage: 3 Stage: 4 Stage: 5Value added by
Farmer = Rs.0.6
Value added by Miller = Rs.1.30
Value added by Baker = Rs.1.80
Value added by Retailer =
Rs.0.20
Final value of Baked
Bread = Rs.3.90
Value of storing and handling
by retailer
Value of storing Value of storing and handling and handling
by retailerby retailer
Value of baking operation
Value of baking operation
Value of baking Value of baking operationoperation
Value of milling wheat into
flour
Value of milling wheat into
flour
Value of milling wheat into
flour
Value of milling Value of milling wheat into wheat into
flourflour
Value of wheat from farmer
Value of wheat from farmer
Value of wheat from farmer
Value of wheat from farmer
Value of wheat Value of wheat from farmerfrom farmer
Value added in different stages of bread production05/03/23 5
National Aggregates
1. Gross Domestic Product (GDP) a) at market price (MP)b) at factor cost (FC)
2. Gross National Product (GNP) a) at market price (MP)b) at factor cost (FC)
3. Net Domestic Product (NDP) a) at market price (MP)b) at factor cost (FC)
4. Net National Product (NNP) a) at market price (MP)b) at factor cost (FC)
05/03/23 6
Relationship between Gross & Net; MP & FC; and National & Domestic Concepts
05/03/23 7
Gross = Net + Depreciation
Market Prices = Factor Cost + [Indirect Taxes – Subsidies]
National = Domestic + Net Factor Income from Abroad
Real and Nominal GNP
Real GNP (Current Year)
=
Nominal GNP (current year) x GNP deflator
(base year)
GNP deflator (current year)
05/03/23 8
Price Indices
• Consumer Price Index (CPI)• Wholesale Price Index (WPI)• GDP deflator
05/03/23 9
10
Measurement of National Income
• Output (Value Added) Method• Expenditure Method• Income Method
11
Output (Value Added) ApproachThe Output (Value Added) Method
The agricultural and extractive industriesPlus Manufacturing industries
Plus Services and construction
Equals Gross Domestic Product at Factor Cost
Plus Net factor income from abroad ( = income received from abroad – income paid abroad)
Equals Gross National Product at Factor Cost
Less Capital consumption or depreciation
Equals Net National Product at Factor Cost or National Income
12
Expenditure Method1. Consumption (C)
2. Gross private domestic investment (Ig) [i.e. Net private domestic investment + depreciation]
3. Government purchases (G)
4. Net exports (NX)
Gross domestic product (GDP) at Market Prices
13
Income Method1. Compensation of employees2. Rents3. Interest4. Proprietors’ income5. Corporate income taxes6. Dividends7. Undistributed corporate profits8. Depreciation
Gross National Product (GNP) at Factor Cost9. Add: Indirect taxes10. Less: Subsidies
Gross National Product (GNP) at Market Price11. Less: Net income earned abroad
Gross Domestic Product (GDP) at Market Price
14
Expenditure Method Income MethodConsumption © Income from employment
Add: Government Spending (G) Add: Income from self-employment
Add: Gross Investment (Ig) Add:
Gross profits of companies (= Dividend + Corporate income tax + Undistributed corporate profits)
Add: Exports (E) Add: Interest
Less: Imports (M) Add: Rent
Gross National Product (GNP) at Factor Cost
Add: Indirect taxes
Less: Subsidies
Gross National Product (GNP) at Market Price
Less: Net factor income from abroad
Gross Domestic Product (GDP) at Market Price
Gross Domestic Product (GDP) at Market Price
15
Gross Domestic Product (GDP) at Market PriceLess: Indirect taxesAdd: Subsidies
Gross Domestic Product (GDP) at Factor CostAdd: Net factor income from abroad
Gross National Product (GNP) at Factor CostDepreciation
Net National Product (NNP) at Factor Cost (= National Income)Less: (Corporate income tax + Social security contributions)
Add: Transfer paymentsPersonal Income
Less: Personal taxes
Disposable Income
16
• Non-market production• Imputed values• Underground economy• Leisure and human cost• Double counting
Difficulties in Measuring the National Income
17
Uses of National Income Statistics
• An instrument of economic planning and review
• A means of indicating changes in a country’s standard of living
• A means of comparing the economic performance of different countries
• An indicator to appraise the changes in the economic growth of a country
18
Other Measures of National Income
• National Income (NNPFC) [income earned]
• Personal Income (PI) [income received]• Disposable Personal Income• Personal Savings
top related