macroeconomics national income accounting

7/26/2019 Macroeconomics National Income Accounting

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Sophian Sout,

Politeknik Mukah

[email protected]


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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.


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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


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I n t r oduc t i on


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


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I n t r oduc t i on


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


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I n t r oduc t i on


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)+/-



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I n t r oduc t i on


Item RM


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


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I n t r oduc t i on


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


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I n t r oduc t i on


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


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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


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ITEMS RM (Million)

Depreciation 850

Transfer Payment 1000

Social Security Contribution 200

Retained earnings 100Corporate tax 800


GNP fc 65850

Ques t i on 1 -2

:: Calculate the National Income, Personal Income & Disposable Personal Income


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ITEMS RM (Million)

Depreciation 1000





GNP fc 71000

Ques t i on 1 -3



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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


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:: 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


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:: 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


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Example


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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


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


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Calculate:

(a)National Income (NNP fc)

(b)Personal Income(c)Disposable Personal Income


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ITEMS RM (MILLION)

Private consumption 215876

Public investment 55161


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


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ITEMS RM (MILLION)

National Income 494662

Social security contribution (800)


Undistributed company profit (1260)

Company income tax (900)

Personal Income 495702

Personal income tax (750)

Disposable Income 494952


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PRACTISE[02]


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ITEMS RM (Million)

Wages and sales 500

Income from rent, dividend and interest 100

Profit 200

Corporate tax 80Depreciation 50


Net factor income abroad 400

:: Calculate the National Income

Ques t i on 2 -1


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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


Electricity, gas and water 700Banking and tourism 3000

Rent 200


Ques t i on 2 -2


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ITEMS RM (Million)

Personal taxes 40

Social security contributions 15


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



Ques t i on 2 -3


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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



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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



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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



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ITEMS RM (Million)

Depreciation 5000





GNPfc 351200

Ques t i on 2 -5



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ITEMS RM (Million)

Depreciation 10

Corporate income taxes 40

Export 10

Government purchase 100Import 20




Personal taxes 40


Social security contribution 15

Transfer payment 22


Ques t i on 2 -7


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ITEMS RM (Million)



Government purchase 100

Net Export: 10 - 20 (10)GDPmp 345


GNPmp 370

Indirect business tax (20)

Subsidy 0

GNPfc 350

Depreciation (10)

National Income 340


An swer Q :2 -7 ( a )


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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


An swer Q :2 -7 ( b )


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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


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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


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PRACTISE[02]


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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


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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


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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


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:: 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


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PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING


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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



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Calculation of National IncomeComparison of National Income between countries


Concepts of national income

Different treatments of items

Pattern of income distribution

Unpaid productive activities

General Price Levels

Working Hours

Foreign exchange rate



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Calculation of National IncomeComparison of National Income between countries


General Price LevelQuality of goods and services

Population composition and total population

Pattern of income distribution

FACTORS AFFECTING NATIONAL INCOME


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Internal

External

Quality and quantity of factors of population

Level of technical knowledge and usage of modern technology

Level of specialization

Political stability



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InternalExternal

Foreign investment

Terms of trade

Receiving assistance

USAGE OF NATIONAL INCOME DATA


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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



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Economic planning





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Economic planning





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Economic planning





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Economic planning




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Finish Chapter 2


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macroeconomics national income accounting

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