Measurement of National Income
Measurement of National Income
• Like the accounts of a business national income accounts have two sides: a product side and an income side. • On the product side production and sales are measured. • The income side measures the distribution of the proceeds from sales.
• On the product side there are two widely reported measures of overall production: • Gross domestic product (GDP) and gross national product (GNP) • GDP and GNP differ in their treatment of international transactions. • GNP includes earnings of Bangladeshi corporations overseas and Bangladeshi residents working overseas: GDP doesnot.
• Conversely, GDP includes earnings from current production in Bangladesh that accrue to foreign residents or foreign owned firms: GNP excludes those items. • For example, profits earned in Bangladesh by a foreign owned firm would be included in GDP but not in GNP. • The difference between GDP and GNP is large for a country such as Pakistan and Bangladesh with a large number of residents working overseas than foreign residents working in Bangladesh
• On the income side of national accounts, the central measure is national income which will be discussed later.
Definition of GDP
• GDP is a measure of all currently produced final goods and services evaluated at market price. • A number of aspects of this definition require clarification. • Currently produced: GDP includes only currently produced goods and services and includes only goods and services produced during a given period such as er quarter and per year.
• Such market transaction as exchanges of previously produced houses, cars or factories do not enter into GDP. • Exchanges of assets such as stocks and bonds are examples of other market transactions that do not directly involve current production of goods and services and therefore not in GDP.
• Final goods and services: Only the production of final goods and services enters GDP. Goods that are used in the production of other goods
• Like the accounts of a business national income accounts have two sides: a product side and an income side. • On the product side production and sales are measured. • The income side measures the distribution of the proceeds from sales.
• On the product side there are two widely reported measures of overall production: • Gross domestic product (GDP) and gross national product (GNP) • GDP and GNP differ in their treatment of international transactions. • GNP includes earnings of Bangladeshi corporations overseas and Bangladeshi residents working overseas: GDP doesnot.
• Conversely, GDP includes earnings from current production in Bangladesh that accrue to foreign residents or foreign owned firms: GNP excludes those items. • For example, profits earned in Bangladesh by a foreign owned firm would be included in GDP but not in GNP. • The difference between GDP and GNP is large for a country such as Pakistan and Bangladesh with a large number of residents working overseas than foreign residents working in Bangladesh
• On the income side of national accounts, the central measure is national income which will be discussed later.
Definition of GDP
• GDP is a measure of all currently produced final goods and services evaluated at market price. • A number of aspects of this definition require clarification. • Currently produced: GDP includes only currently produced goods and services and includes only goods and services produced during a given period such as er quarter and per year.
• Such market transaction as exchanges of previously produced houses, cars or factories do not enter into GDP. • Exchanges of assets such as stocks and bonds are examples of other market transactions that do not directly involve current production of goods and services and therefore not in GDP.
• Final goods and services: Only the production of final goods and services enters GDP. Goods that are used in the production of other goods