National Income Accounting: I = investments (private sects.

/ business) not reflect a purchase by the

Measuring economic growth X = exports government, rather a movement of
income” they captured in “C” when
M = imports the payment is spent.
“If we don’t make students accountable (X – M) = exports – imports (Nx= net
for their bad behavior or poor academic exports) Net Export
performance, they will never value their
education” Exports (X) represent gross exports. GDP
Household, or consumer, sector. “Single
“Education as a right comes with the largest sector” with 75.6% of the GDP in captures the amount a country produces,
duty on the part of the students to study 2023. (durable, non-durable goods and including goods and services produced for
well to meet academic standards of the services). other nations’ consumption, therefore
school” exports are added.

The Business Sector – purchases capital Imports (M) represent gross imports.
National income accounting goods that is machinery and equipment, Imports are subtracted since imported
- system used to track the flow of money constituting real investment. goods will be included in the terms G, I, or
and goods within the economy - Business investment in equipment C, and must be deducted to avoid counting
- think of it as a comprehensive “balance but does not include exchanges of foreign supply as domestic.
sheet” for a country exiting assets.
- it helps us understand the overall health of - Spending by households (not govt.) Sometimes, net exports is simply written as
the economy, identifying trends, and inform on new houses is also included in NX, but is the same thing as X-M.
economic policy decisions. investment
- It’s important to note that buying
financial products is classed as
Transfer payments – payment made for
Commonly used measure in NIA “saving”, as opposed to investment.
which no current or future goods or services
1. Expenditure Approach are required in return.
2. Income Approach The Government Sector – it purchases 1. Social security benefits
3. Output Approach goods and services that it can function and 2. unemployment insurance or benefits
provide its services. 3. welfare payments
- Includes salaries of public servants, 4. State pensions
GDP Expenditure Approach formula purchase of weapons for the military, 5. civil service benefits
and any investment expenditure by a 6. public health services
Y = C + G + I + (X-M)
government. 7. student grants
Y = GDP/ National Income - Since GDP is a measure of 8. subsidies for education and trainings
C = Consumer/household spending productivity, “transfer payments
made by the government are not
G = government expenditures
counted because these payments do
Foreign Sector – foreigners purchase a 4. non-market activities
certain amount of our products and 5. illegal goods
Sales Taxes
services; we call these exports. of course,
we also purchase from their countries; what Consumer taxes imposed by the
we buy from the rest of the world is our GDP income approach government on sales of goods and services.
imports.
Total National Income Depreciation
Final goods and services
-the sum of all wages, rent, interest, and Cost allocated to a tangible asset over its
“The problem of double counting” profits useful life.
Final goods – goods or services at their Sales Taxes Net Foreign Income Factor
furthest stage of production at the end of a
year. -consumer taxes imposed by the The difference between the total income
government on sales of goods and services that a country’s citizens and companies
Statisticians who calculate GDP must avoid generated in foreign countries, versus the
the mistake of double counting in which Depreciation
total income foreign citizens and companies
output is counted more than once as it -cost allocated to a tangible asset over its generate in the domestic countries.
travels through the stages of production. useful life
intermediate goods which are goods that
are used in the production of other goods Output Approach
are excluded from GDP calculations count Net Foreign Factor Income
The output approach is also called “net
as the value of final goods and services in product” or “value added” method. It
-difference between total income that a
the chain of production focuses on finding the total output of a
country’s citizens and companies generated
Intermediate goods that have not yet been in foreign countries, versus the total income nation by directly finding the total value of all
used in final goods and services. foreign citizens and companies generate in goods and services a nation produces.
the domestic countries.
Raw materials that have been produced, Formula = Σ (value added in each industry)
but not yet used in the production in Σ = This symbol means sum of we're adding
intermediate or final goods. up the value added for each industry in the
economy.
value added in each industry this is the
Income approach formula core calculation it represents the
Items not included in GDP contribution of each industry to the overall
Total National Income + Sales Taxes +
Depreciation + Net Foreign Factors production process.
1. intermediate goods that have been
turns into final goods and services Income Formula: GDP (gross domestic product) at
(e.g. tires on a new truck) market price = value of output in an
Where TNI = sum of all wages, rent,
2. used goods economy in the particular year –
interest, profits
3. transfer payments intermediate consumption at factor cost =
GDP at market price – depreciation + NFIA
(net factor income from abroad) – net
indirect taxes.

Nominal GDP - measures the value of

goods and services produced in an
economy at the current market prices.
it is influenced by both changes in the
quantity of goods and services
produced and changes in price
Real GDP - measures the value of
goods and services produced in an
economy using constant (base year)
prices. This means that real GDP
adjust for inflation
giving you a clearer picture of how
much the economy is actually
producing.
GDP deflator a price index that
measures the overall price level of
goods and services produced in an
economy it is calculated as follows:
GDP deflator = nominal GDP / real
GDP * 100
Base year: the base year for the GDP
deflator is set to 100. This means that
in the base year, nominal GDP and real
GDP are equal
Inflation a GDP deflator greater than
100 indicates that prices have risen
since base year (inflation) a GDP
deflator less than 100 indicates that
prices have fallen since the base here
deflation