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National Income Accounting (Differences between macroeconomics and…
National Income Accounting
Differences between macroeconomics and microeconomics
Macroeconomics
deals with human behaviour which relates to the entire economy
Microeconomics
deals with human behaviour and choices they relates to relatively small units
Gross Domestic Product - GDP
defines as the total
market value
of final goods and services produce within a nation during a given period of time
Intermediate Goods
Inputs to be resold and used
further stages of production
Final Goods
Purchased for final use
and ready for consumption. Its not for resale or further processing or manufacturing
GDP measurement
Income Method
Adding up all the incomes earned in the
production of final goods and services
National Income
Rental Incomes
The use of
land and other rented inputs
Net Interest
Interest earned on bank deposits
Proprietor's Income
Incomes earned by
self- employed individuals and the owner of unincorporated business
. Own Business
National Income = Compensation + Proprietor's + Rental + Net + Corporate
Compensation of employees
Payment for labour services
eg. Salaries, Commission
Corporate Profits
Some are paid in the
forms of dividends, and some are retained by undistributed profits and corporate taxes.
Expenditure Method
Investment
Residential Investment
spending on the construction of new houses
Inventory Investmnet
Includes purchases by business that is added to their inventories
Fixed Investment
spending on capital goods
Factories, Machinery tools
Governmnet
Expenditure by government for a
currently produced
goods and services both domestically and Internationally.
Welfare payments are excluded.
Consumption
Non - durable
goods which are immediately comsumed
Food, Clothes
Services
Intangible goods
Education services, Health services
Durable
longer lived consumer goods
Cars, Television
Net Export
Some goods and services are produced are exported and some are imported, thus to arrive
at total expenditure on domestically produced output
, exports should be added, and imports should be subtracted
Full Equation
GDP (mp) = C+I+G+ ( X - M)
Output Method
Relationship between Gross Domestic Product, Gross National Product and National Income