Published on: Mar 3, 2016
Transcripts - National income(gnp)
National Income Accounting By Mr. Gayares
Open-up!• Read “Kung Pinoy si Noah”• What are the problems encountered by Noah in building the ark?• How does it reflect the current problem of our country?• Do you agree with the story? Why?
What is National Income Accounting• It is the process of determining the economic activities of a particular country within a year• is the measurement of indicators of national output/income; .e.g. GDP, GNP• Assumption:
Growth versus Development• Economic growth may be one aspect of economic development but is not the same• Economic growth: – A measure of the value of output of goods and services within a time period• Economic Development: – A measure of the welfare of humans in a society
Circular flow diagram• summarizes the transactions between the different economic agents• agents: households, firms (business), government, and foreigners (rest of the world)
Revenue Spending (=GDP) (=GDP) MARKETS FOR GOODS AND Good and SERVICES Good and services sold services boughtFIRMS HOUSEHOLDS Land, labor Inputs for and capital Production MARKETS FOR FACTORS OF PRODUCTION Income (=GDP) Wages, rent, int erest and profit (=GDP) Flow of goods & services Flow of money: pesos THE CIRCULAR FLOW DIAGRAM
What must be accounted?• Need to account for : a. Government purchases of goods and services. b. Government payments for factor services (wages, rent, interest). c. Transfer payments between different agents. d. Firms and households pay taxes to government. e. Taxes paid on income, property, goods and services. f. Transactions with the foreign sector.
How to measure National Income?• Gross National Product- is defined as the market value of the final goods and services produced in a given year• An immediate indicator of a country’s growth/progress or level of development
What is market value?• Goods and services are expressed by the expenditures spent ton them• Example: 100,000 loaves of bread were bought in a given year at 30 pesos per loaf so the market value is: _____________• To compute GNP, the price of each good and services are multipliedwith quantities produced and add them.
What do we mean by final goods?• Goods are valued according to the last production process they have undergone.• Final goods - goods and services that are not purchased for the purpose of producing other goods and services or for resale – Eg. Rice (final) and palay or unhusked rice (intermediate product)• Including intermediate goods and final goods will result in “double counting”.
Is it final?• Computer software• Car• Table• Cement and gravel• Celphone• Second hand appliances• LCD
GNP vs. GDP• Gross National Product-value of goods and services produced by citizens (nationality)• Gross Domestic Product- value of goods and services produced within the country’s border
To sum it up...Gawa Gawa Ng Dito saPinoy Pinas
GNP or GDP?• American firm in cubao• A filipino teacher in in US• A Korean hotspring resort in laguna• A factory owned by Mr. Cruz in Quezon City• Jose, a call center agent in Singapore• A Filipina writer based in France
Approaches in Measuring National Output• The Expenditure approach• Components:• C- consumption expenditures• I- Investment expenditures• G- government expenditures• X-M- net export• NFIA-income abroad• SD-Statistical discrepancy
Approaches in measuring National Output• Income approach• Components:• PI- Profits and dividends• GI- Government income• CI- corporate income• IT- indirect taxes• Minus S- subsidies• D- depreciation
Approaches in measuring National Output• Industrial Origin• agriculture, fisheries and industry+ industry+ services= GDP by industrial origin• GDP + NFIA= GNP