Economic Paper
Econ 102
Measuring domestic output and national income
Submitted by:
Submitted to:
1.) Define the ff:
National Income Accounting – National income accounting is used to determine the level of economic activity of a country. Two methods are used and the results reconciled: the expenditure approach sums what has been purchased during the year and the income approach sums what has been earned during the year.
GROSS DOMESTIC PRODUCT – The gross domestic product is the sum of all the final goods and services produced by the residents of a country in one year. Summing the production of residents (rather than nationals as in GNP) gives often a more accurate picture of the level of activity in a country. The difference between GDP and GNP is net unilateral transfers and factor income of foreigners.
GROSS NATIONAL PRODUCT – The gross national product is the sum total of all final goods and services produced by the people of one country in one year. The GNP is a flow concept. It can be calculated with either the expenditure approach or the income approach. The GNP excludes intermediate goods, second hand sales as well as financial transactions. The GNP is a money amount and must be adjusted for changes in the value of money.
VALUE ADDED – GNP can be calculated by adding up all the value added from the intermediate goods (the result is exactly the same). Countries with tax systems based on value added taxes prefer this method.
Public Transfer Payments – Relationship between public transfer payment and safety net is that safety net is the rationale used for public transfer payment.
Private Transfer Payments – Payment by citizens without reciprocation, i.e. donating to charity or a relief fund.
PERSONAL CONSUMPTION EXPENDITURE – Personal consumption expenditure is what households buy (except houses). It is made of durables (cars, appliances), nondurables (clothing, food) and services (haircuts, doctor visits, airline tickets). A convention is made on
Measuring domestic output and national income
Submitted by:
Submitted to:
1.) Define the ff:
National Income Accounting – National income accounting is used to determine the level of economic activity of a country. Two methods are used and the results reconciled: the expenditure approach sums what has been purchased during the year and the income approach sums what has been earned during the year.
GROSS DOMESTIC PRODUCT – The gross domestic product is the sum of all the final goods and services produced by the residents of a country in one year. Summing the production of residents (rather than nationals as in GNP) gives often a more accurate picture of the level of activity in a country. The difference between GDP and GNP is net unilateral transfers and factor income of foreigners.
GROSS NATIONAL PRODUCT – The gross national product is the sum total of all final goods and services produced by the people of one country in one year. The GNP is a flow concept. It can be calculated with either the expenditure approach or the income approach. The GNP excludes intermediate goods, second hand sales as well as financial transactions. The GNP is a money amount and must be adjusted for changes in the value of money.
VALUE ADDED – GNP can be calculated by adding up all the value added from the intermediate goods (the result is exactly the same). Countries with tax systems based on value added taxes prefer this method.
Public Transfer Payments – Relationship between public transfer payment and safety net is that safety net is the rationale used for public transfer payment.
Private Transfer Payments – Payment by citizens without reciprocation, i.e. donating to charity or a relief fund.
PERSONAL CONSUMPTION EXPENDITURE – Personal consumption expenditure is what households buy (except houses). It is made of durables (cars, appliances), nondurables (clothing, food) and services (haircuts, doctor visits, airline tickets). A convention is made on