National-Income Accounting

Prepared by: Akash gupta 188Dewang chauhan 203alankar das 190

Pankaj chhokar 147shikha rai 161

1

Measuring the Economy

2

Measures of Output3

Gross Domestic Product (GDP)

4

GDP Versus GNP5

GDP per Capita6

Measurement Problems7

Value Added8

Value Added9

Value Added in Various Stages of Production

10

Stages of ProductionValue of

TransactionsValue Added

1.  Farmer grows wheat, sells it to miller $0.12 $0.12

2.  Miller converts wheat to flour, sells it to baker

0.28 0.16

3.  Baker bakes bagel, sells it to bagel store 0.60 0.32

4.  Bagel store sells bagel to consumer 0.75 0.15

Total $1.75 $0.75

Two Ways to Calculate GDP11

Real Versus Nominal GDP12

Computing Real GDP13

Computing Real GDP14

nominal GDP in year Real GDP in year

price index

tt

100 price index

100

percentage change

Net Domestic Product15

Net Domestic Product16

–NDP GDP depreciation

Net Domestic Product17

Net Domestic Product18

Net Domestic Product19

The Uses of Output20

Consumption21

Investment22

Government Spending23

Net Exports24

GDP Components25

–GDP C I G X M

Measures of Income26

Output = Income27

Wages

Productmarket

Consumer spending

Investment spending

Government spending

Net exportsProfits

Interest

Rent

The Equivalence of Expenditure and Income (In billions of dollars)

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Expenditure Income C:Consumer goods and

servicesWages and salaries $8,062

$10,057 Corporate profits 1,092 I:Investment in plant,

equipment, and inventory

Proprietors’ income 1,072 Rents 64

1,994 Interest 929 G:Government goods

and services Taxes on output and imports 1,034

2,882 Depreciation 1,832 X:Exports 1,859 Miscellaneous 46 M:Imports (2,529) Statistical discrepancy 136

GDP:Total value of output $14,265 = Total value of income $14,265

National Income29

–NDP GDP depreciation

Net Foreign Factor Income30

National Income31

NI NDP net foreign factor income

Personal Income32

PI NI indirect business taxes corporate profits

interest and misc payments

Social Security taxes

transfer payments capital income

Indirect Business Taxes33

Corporate Profits34

Payroll Taxes and Transfers35

Capital Income36

Disposable Income37

– DI personal income personal taxes

Disposable Income38

DI consumption saving

The Flow of Income39

Income and Expenditure40

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