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Measures of national income and output are used in Economics to estimate the value of goods and services produced in an economy. They use a system of ''' National Accounts ''' or '''national accounting''' first developed during the 1940s. Some of the more common measures are ''' Gross National Product (GNP)''', ''' Gross Domestic Product (GDP)''', ''' Gross National Income (GNI)''', ''' Net National Product (NNP)''', and ''' Net National Income (NNI)'''. Formerly in the Soviet Union and its friendly states COMECON , Net Material Product (NMI) was estimated (NNP-Services). In relation to greening the national accounts the United States Congressional Budget Office concludes "a gradual process of modifying measures of national economic performance is consistent with the history and development of the national accounts." {Link without Title} There are various ways of calculating these numbers. The expenditure approach determines aggregate demand, or Gross National Expenditure, by summing consumption, investment, government expenditure and net exports. The '''income approach''' and the closely related '''output approach''' sum wages, rents, interest, profits, nonincome charges, and net foreign factor income earned. The three methods must yield the same result because total expenditures on goods and services (GNE) must by definition equal the value of goods and services produced (GNP) which must equal total income paid to the factors that produced the goods and services (GNI). In fact, minor differences are obtained from the various methods due to changes in inventory levels. This is because goods in inventory have been produced (and therefore included in GDP), but not yet sold (and therefore not yet included in GNE). Similar timing issues can also cause a slight discrepancy between the value of goods produced (GDP) and the payments to the factors that produced the goods, particularly if inputs are purchased on credit. GROSS NATIONAL PRODUCT Gross National Product (GNP) (a close value is Gross National Income , equal to GNP + depreciation allowances) is the total value of all final Goods and Services produced by a country's factors of production and sold on the market in a given time period. For example, because Mercedes-Benz is owned by Germans, its profits from its Belgian production count towards German GNP, but because those activities take place in Belgium they count toward Belgian GDP. A UK taxpayer working in Paris would have his income count toward UK GNP but his output would be part of French GDP. Nominal GNP measures the value of output during a given year using the prices prevailing during that year. Over time, prices may rise due to Inflation , leading to an increase in nominal GNP even if the volume of goods and services produced is unchanged. GNP does not include goods produced on a subsistence level, i.e. farmers who eat their own products do not have their crops included in the GNP. Real GNP measures the value of output in two or more different years by valuing the goods and services adjusted for inflation. For example, if both the "nominal GNP" and price level doubled between 1995 and 2005, the "real GNP" would remain the same. For year over year GNP growth, "real GNP" is usually used because it gives a more accurate view of the income and output. Gross Domestic Product ( GDP ) is the total value of final goods and services produced within a country's borders in a year. GDP counts income according to where it is earned rather than who owns the factors of production. In the above example, all of the income from the (German-owned) car factory would be counted as Belgian GDP rather than German GDP. To convert from GNP to GDP you must subtract net factor income receipts from foreigners that correspond to goods and services produced abroad using factor inputs supplied by domestic sources. IN THE INCOME APPROACH
S = personal savings C = personal consumption PDI = personal disposable income TP = personal taxes paid TPP = personal transfer payments received via governments PI = personal income RE = retained earnings TC = corporate taxes TPC = corporate transfer payments from governments IG = interest on the public debt NNI = net national income TIN = indirect taxes NNP = net national product D = depreciation NATIONAL INCOME AND WELFARE GNP per person is often used as a measure of a person's Welfare . Countries with higher GNP may score highly on other measures of welfare, such as Life Expectancy . However, there are serious limitations to the usefulness of GNP as a measure of welfare:
Because of this, other measures of welfare such as the Human Development Index (HDI), Index Of Sustainable Economic Welfare (ISEW), Genuine Progress Indicator (GPI) and Sustainable National Income (SNI) are used. NATIONAL ACCOUNTING FORMULAE (EXPENDITURE APPROACH) C = Personal Consumption Expenditures I = Gross private domestic investment G = Government consumption expenditures X = Gross exports of goods and services M = Gross imports of goods and services Total = Gross Domestic Product (GDP) NR = + or - Net income from assets abroad (net income receipts) Sub Total = Gross National Product (GNP) CC = Depreciation IBT = Indirect business taxes NDP = Net Domestic Product NI = National Income PI = Personal Income DI = Disposable income Note: (X - M) is often written as "NX," which stands for "Net Exports" GDP = C + I + G + (X - M) GNP = C + I + G + (X - M) + NR GNI = C + I + G + (X - M) + NR - IBT NI = C + I + G + (X - M) + NR - IBT - CC The Flow of Income NDP = GNP - CC NI = NDP - IBT + net foreign factor income PI = NI - corporate taxes - retained earnings - social security + transfer payments + net interest DI = PI - Personal taxes UNITED STATES INCOME AND OUTPUT To give an example of the components and their size. ( {Link without Title} ) SEE ALSO
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