National Accounts

12 Key excerpts on "National Accounts"

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  eBook - ePub

  International Money and Finance

  • Anthony J. Makin(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  This chapter also examines macroeconomic variables, which are, by dimension, prices. Such measures include the overall price level itself, which conveys, in a single number, movements in millions of individual goods and services prices throughout the economy. The other key economy-wide prices are the exchange rate and the interest rate, which are determined on the monetary side of the economy.

  The National Accounts

  An economy’s national and interNational Accounts are based on the guidelines set out in the United Nations’ System of National Accounts, which unifies related sets of macroeconomic accounts, such as national income and expenditure, intersectoral flows of funds and the external accounts. Taken as a whole, the system of National Accounts is designed to provide a detailed picture of macroeconomic activity, as well as a framework for applying economic theory.

  Economic production is the most basic fundamental measure in the National Accounts. Production results from combining labour, physical capital and natural resources with given technology to deliver goods and services, the bulk of which are sold in private markets. Definitionally, gross domestic product (GDP) is the aggregate value of the output of factories, farms, mines, and the value of the many kinds of private and public sector services produced over a given time period.

  GDP is derived after subtracting goods and services used up in the final production of goods and services. Production generates a flow of income for those factors that are combined in the process. Hence, as income, GDP is broadly classified as being either paid to labour as a factor of production (as wages and salaries) or to capital and land (known as the gross operating surplus).

  In principle, GDP can therefore equivalently be measured as the value of total output, as the value of total income received by all factors of production, or as the value of aggregate spending on final goods and services.

  In practice, therefore, there are three ways of measuring GDP

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  Social Accounting Systems

  • Louis Filler(Author)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  8. The National Accounts have also been found to be useful in the teaching of economics. Basic economic concepts and identities are grasped more easily and made clearer by following the interrelationship between the various aggregates and accounts. Prominent economists have written textbooks using the National Accounts approach as a pedagogical method for explaining and analyzing economic activity and interdependence.

  9. National Accounts could be very useful in the construction of periodical national balance sheets. Many important points of mutual interest to both systems could be brought to light.

  II Sectoring An Economy

  Before proceeding with the description, and analysis of the National Accounts system as recommended by international organizations and its comparison with those in use by some major and highly industrialized countries, some of the basic concepts and definitions underlying this system will be clarified. Such a clarification may, indeed, throw light on the concepts of the other social accounting systems it is proposed to study. The first concept to be discussed is that of sectoring an economy for a National Accounts system.

  A variety of economic activitities are performed in each society. Innumerable transactions are carried out daily in the course of these varied activities. The whole population and its various organizations and institutions are involved in these transactions. They are the transactors. All these transactions, transactors and activities must be reduced to proportions which can be intelligibly grasped and analyzed. To achieve this, transactions must be classified by definite types, activities distinguished in form, and the transactors grouped into meaningful sectors. Moreover, the classification of transactions must be attributed to specific sectors.

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  Measuring Economic Growth and Productivity

  Foundations, KLEMS Production Models, and Extensions

  • Barbara Fraumeni(Author)
  • 2019(Publication Date)
  • Academic Press

    (Publisher)

  Mankiw (2016) is particularly good in presenting the underlying theory and model and then presenting empirical evidence regarding key hypotheses. These basic models are normally presented within the National Accounts System and the identities and components in the accounts are used to explain:

  1. • Equilibrium in production and distribution in the short and long run. The equilibrium is shown to be based on firm and household micro-theory and macro-theory and implemented using the National Income and Product Accounts structure and data
  2. • The role of interest rates, prices, and exchange rates in equilibrating markets
  3. • The trade-off between inflation and unemployment
  4. • The accounting identity in an open economy that shows that the difference between aggregate demand and aggregate supply (and saving and investment) is equal to the trade deficit (e.g., the “twin deficits”)
  5. • Net National Product (GDP less depreciation, or the capital used up in production which must be replaced) as a measure of sustainable output for the nation.
  6. • The impacts of fiscal and monetary policy including the Keynesian multiplier
  7. • Understanding individual and aggregate consumer behavior
  8. • The determinants of investment by type of investments (equipment, structures, inventories, and intangible assets)
  9. • Changes over time and across business cycles in the distribution across the components of production, income, and expenditures
  10. • The impact of government deficits in the short and long run
  11. • Growth accounting and the determinants of growth over time and across countries
  12. • Inflation and output and the importance of index number theory in aggregation

  2.4. Joint evolution of theory, research, and National Accounts

  Although today's National Accounts seemed to be well-integrated with theory and well-designed to answer economic policy and other questions, their evolution has been a long process.

  2

  Political economy and National Accounts have always been concerned with political and economic policy using economic theory and data to understand key issues ranging from the gains from free trade to the sources of economic growth. However, the process has been discontinuous with theory, research, and measurement advancing at different rates, but all interacting to improve both economic theory and the accuracy and relevance of the National Accounts. For example, looking at today's textbook presentation, the accounts look like they were designed based on Keynesian models, but while Keynes played a key role as a “theoretician, compiler, supporter and user” of the evolving accounts, the basic structure of the accounts was established in the early 1900s or earlier, well before Keynes' contributions.

  3

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  National Income and Social Accounting

  • Ronald Cooper, Profesor Harold C Edey, Harold C. Edey, Professor Sir Alan T Peacock, Alan T. Peacock(Authors)
  • 2013(Publication Date)
  • Routledge

    (Publisher)

  Part I The Framework of Social Accounting Passage contains an image 1 The Nature of National Income and Social Accounting

  1. Introduction

  Before an economist can make useful general statements about economic activity, he must have some suitable description or picture of this activity. This is so whether he is called upon to advise politicians; to advise business men about the effect on one or more sections of the economy of possible changes in other sections ; or to perform the not unimportant task of helping students and others to understand more about the nature of the complex economic relationships which govern our lives in the present-day world.

  Description can take the form, on the one hand, of minute examination of individual parts of a system or, on the other, of studies of a more abstract character. Much of economics is, indeed, concerned with the description of the growth and form of particular social institutions. However, for the purpose of understanding the network of relationships which make up the economy as a whole, a more abstract approach is required. In applied economics this study is associated, among other things, with the study of national income or social accounting. (In this book, except where the context requires otherwise, we shall assume that ‘social accounting’ embraces ‘national income accounting’.) Social accounting, then, is concerned with the statistical classification of the activities of human beings and human institutions in ways which help to us understand the operation of the economy as a whole.

  The field of studies summed up by the words ‘social accounting’ embraces, however, not only the classification of economic activity, but also the application of the information thus assembled to the investigation of the operation of the economic system. Accordingly, in this volume we shall be concerned with the analytical as well as the statistical elements of the study, and thus with the connexions between (a) social accounting statistics in the narrow sense; (b) theoretical ‘models’ of the economic system which are intended to help us visualise the working of the system and as an aid to the informed guesses about the economic future which we like to call ‘predictions’ ; and (c

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  System of National Accounts, 1993

  • International Monetary Fund(Author)
  • 1993(Publication Date)
  • INTERNATIONAL MONETARY FUND

    (Publisher)

  The 1953 report recognized the importance of harmonizing international statistical standards. Specifically, it recognized that the international guidelines on economic and financial statistics and on National Accounts should be consistent and well integrated. It noted the care that had been taken in drawing up the SNA to ensure consistency with definitions and classifications used or recommended by others, notably the International Monetary Fund on international transactions and the OEEC.

  The first chapter of the 1953 report was on the development and uses of national accounting. The outstanding use of national accounting statistics had been in connection with public policy. Countries that rely mainly on monetary and fiscal measures find National Accounts useful because they provide a systematic framework for assessing the probable course of economic development and the adjustments needed in government policy. Countries, both developed and developing, that apply national budgeting—that is, the matching of supply and demand of productive resources and their finance—also can use a National Accounts framework. Different claims on the productive system can be coordinated to meet certain general requirements, such as the stability of the economic system as a whole, which cannot be taken into account if each claim is considered in isolation.

  In discussing the development of national accounting, the first chapter noted that efforts to systematize the increasing amount of economic information had led to distinct but partially related sets of statistics: national income and product, input-output, financial flows, balance sheets, and prices and quantities. It was viewed as unlikely, however, that these investigations, which had been done primarily for individual countries, would lead at that time to the construction of comprehensive accounting systems that embraced all the available statistics. Further, given the practical needs and resources, the construction of such a system was not an immediate objective for economic statisticians.7

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  Feminist Political Economy

  A Global Perspective

  • Sara Cantillon, Odile Mackett, Sara Stevano(Authors)
  • 2023(Publication Date)
  • Agenda Publishing

    (Publisher)

  Attempts at calculating National Accounts date back to at least the eighteenth century; however, these were mainly single projects, often with the objective of calculating if certain countries could afford to go to war. By the 1930s the necessity of developing a unified measure of national income or production to assist macroeconomic policymaking became evident. Led by Simon Kuznets, among others, in the United States and Richard Stone in the United Kingdom, a formula was devised that would measure the goods and services produced by an economy.

  National income is the most common measure of the economic size and growth of a country, and it is usually synonymous with expansion in real national income. National income per capita is often used as the benchmark for comparison between countries’ levels of economic development or standards of living. International comparisons are based on a purchasing power parity methodology/exchange rate that measures prices between two countries using a common basket of goods. For example, The Economist’s “Big Mac” index provides a playful example of how exchange rates based on PPP theory should move towards the rate that would equalize the price of a burger in any two countries.

  Although different countries have, at times, adopted different concepts and definitions, the most significant being gross national product (GNP) and net material product (NMP), GDP now reigns as the ubiquitous measure of national income. All countries, with the exception of North Korea, have formally adopted the System of National Accounts, which prescribes the international standards for GDP measurement.

  GDP is defined as the market value of final goods and services produced within the geographic boundaries of the nation whether it is produced by citizens, residents or migrant workers. Only goods and services with a market price and only economic activities performed in a specific area (nation state) are included in GDP calculations. GDP can be measured in three ways: through output, income or expenditure. The output method counts the sum of value created through the production of goods and services within the economy, with the sum measurement the total value of the whole economy subtracted by the cost of intermediary goods. The income method counts the total income generated by the production of goods and services within the economy, including income earned by companies, employees and self-employed individuals. This form of measurement is the middle ground between the output and the expenditure methods. Finally, the expenditure method counts the total expenditure on all finished goods and services produced within the economy (Viet 2012

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  Economic Growth and Environmental Sustainability

  The Prospects for Green Growth

  • Paul Ekins(Author)
  • 2002(Publication Date)
  • Routledge

    (Publisher)

  5: Accounting for production and the environment

  5.1 THE CASE FOR ADJUSTING THE National Accounts

  At the end of Chapter 3 it was suggested that one of the reasons why the National Accounts aggregates are a poor measure of production is because they fail to give an adequate account of uses of, and impacts on, the environment as a factor of production, or ecological capital in the terms of Figure 3.2 (p. 53). In this chapter this critique will be further developed and sug-gestions made as to how the National Accounts should be adjusted to treat ecological capital consistently in the framework of the National Accounts.

  A standard introduction to the topic has defined national accounting thus: ‘National accounting is simply a systematic way of classifying the multitude of economic activities that take place in the economy in different groups or classes that are regarded as being important for understanding the way the economy works’ (Beckerman 1968:68). Beckerman acknowledges that ‘there is an arbitrary element in many of the decisions that have to be made in drawing up a classification system for the National Accounts’, and is at pains to stress that there is nothing sacrosanct about the present way the accounts are structured:

  It must be emphasised that there is a constant evolution and change in the questions the economists are asking, in the institutional structure of the economy, and in the working hypotheses that economists use for purposes of analysing the behaviour of the economy. In accordance with these changes so it will be necessary to modify and adapt the classification system used for national accounting. It would be useless to persist with a classification system, for example, that no longer corresponded to the institutional and social categories of society, or to the latest knowledge about how the economy operated and so about which relationships were important for analytical purposes…. It is to be expected that the appropriate National Accounts classification will, as the years go by, be subject to far-reaching modifications.

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  Environmental and Natural Resource Economics

  A Contemporary Approach

  • Jonathan M. Harris, Brian Roach(Authors)
  • 2021(Publication Date)
  • Routledge

    (Publisher)

  Taking natural capital and environmental quality seriously affects the way that we evaluate measures of national income and well-being. Many economists would assert that a typical person living in a country with a high per capita average income is essentially “better off” than a person living in a country with a low per capita average income. But the overall well-being of people is dependent on many factors other than income levels, including health, education levels, social cohesion, and political participation. Most important from the point of view of environmental analysis, a country’s well-being is also a function of natural capital levels and environmental quality.

  Standard measures of gross national product (GNP) or gross domestic product (GDP) 1 measure a country’s level of marketed economic activity, which often implies how “developed” a country is. (See Appendix 10.1 for an introduction to national income accounting.) Macroeconomic analyses and international comparisons are commonly based on these measures, and they are widely recognized as important standards of economic progress.

  • gross national product (GNP) the total market value of all final goods and services produced by citizens of a particular country in a year, regardless of where such production takes place.
  • gross domestic product (GDP) the total market value of all final goods and services produced within a national border in a year.

  Yet many analysts have pointed out that these measures can give a highly misleading impression of economic and human development. To be fair, GDP was never intended to be an accurate measure of a country’s well-being. But politicians and economists often place disproportionate importance on GDP and act as if maximizing it is the primary objective of public policy. Maximizing GDP, however, can conflict with other policy goals, such as promoting social equity or protecting the environment.

  While GDP accurately reflects the monetary value of marketed goods and services, it fails to provide a broader measure of social welfare. “In spite of its apparent neutrality, GDP has come to represent a model of society, thereby influencing not only economic but also political and cultural processes.”2 Some of the common critiques of standard accounting measures such as GDP include:

  • Volunteer work is not accounted for

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  Introducing Race and Gender into Economics

  • Robin L Bartlett(Author)
  • 2002(Publication Date)
  • Routledge

    (Publisher)

  10 A critique of national accounting

  Rachel A.Nugent

  One of the least-liked sections of a principles course is when the instructor turns to discussion of national income accounting. Students unsuspectingly approach this chapter when, after being introduced to “the economic question” and the tools of supply and demand, they are developing some confidence in their ability to handle economics and its relevance to their lives. The instructor generally starts by saying, “This is boring, but necessary,” and plunges into the morass of definitions, acronyms, and exceptions that constitute a system of national income accounts. Students quickly decide economics isn’t relevant after all.

  The purpose of this chapter is to present a brief critique of the textbook approach to GDP accounting from the point of view of missing social, cultural, and environmental measures, to suggest approaches to remedy these omissions, and provide examples of classroom techniques for enhanced critical thinking about national income accounting.

  The usual goal of introducing principles students to national income accounts is to provide a common framework and vocabulary for assessing economic conditions and progress. With a more inclusive approach, this section of the course can also help students consider:

  1. Relationships between market and non-market activities.
  2. The philosophical basis for defining progress.
  3. Difficulties arising from choice of measurement techniques.
  4. The non-objectivity of numbers.
  5. The difference between a narrow economic approach and one that blends multiple perspectives.

  The pedagogical goals of looking at national income accounts in this way are to engage students in some data collection and analysis, to encourage collaboration, and to help them fit economic measurement into a broader social and scientific framework. It is a particularly useful approach for principles classes that are oriented toward development or environmental issues, and for “non-traditional economics” students from the humanities or interdisciplinary programs.

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  Principles of Economics in a Nutshell

  • Lorenzo Garbo, Dorene Isenberg, Nicholas Reksten(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  size of the economy, and such measure is provided by two fundamental concepts of national income accounting you have probably already heard of a million times:

  Gross Domestic Product (GDP)

  : market value of all the final goods/services produced in a given period of time (usually the calendar year) within national borders.

  Gross National Product (GNP)

  : market value of all the final goods/services produced in a given period of time (usually the calendar year) by domestically owned factors of production.

  Note : domestic (the “D” in GD P) is linked to the concept of borders , and thus includes production by domestic and foreign firms within the borders of the country; and national (the “N” in GN P) is linked to the concept of nationality of factors of production, and thus includes production performed only by domestic firms, independently of whether such production occurs within or outside national borders.

  Two key parts of these definitions require careful examination:

  1. Final Goods and Services
  2. Market Value

  a. Final goods and services: the concept of

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  UFS BUSINESS SCHOOL EDITION ECONOMIC INDICATORS

  • P Mohr, D Yu, S Adendorff(Authors)
  • 2020(Publication Date)
  • Van Schaik Publishers

    (Publisher)

  The SARB publishes a set of six production, distribution and accumulation accounts for South Africa. They are for:

  • Financial corporations
  • Nonfinancial corporations
  • General government
  • Households and nonprofit organisations serving households
  • The total domestic economy
  • The rest of the world

  These accounts contain a wealth of information and form the basis of the system of National Accounts. Although some of the details of the accounts differ (because of the different nature of the various sectors), the following outline of the account for the total domestic economy provides a good indication of the type of information they contain.

  Production, distribution and accumulation accounts: total domestic economy

  Output at basic prices Less: Intermediate consumption Gross value added at basic prices Plus: Taxes on products Less: Subsidies on products Gross domestic product at market prices Less: Compensation of employees Less: Taxes on production and imports Plus: Subsidies Gross operating surplus Plus: Compensation of employees Plus: Taxes on production and imports Less: Subsidies Plus: Property income received (interest, dividends, rent)

  Less: Property income paid (interest, dividends, rent)41

  Gross national income Plus: Other current transfers received Less: Other current transfers paid Gross disposable income Less: Final consumption expenditure (individual and collective) Less: Residual Gross saving Less: Consumption of fixed capital Net saving

  Apart from the information in this consolidated outline, the accounts provide useful data for the component sectors, for example, the taxes on income and wealth paid by the financial corporations, nonfinancial corporations and households (and received by government).

  Source: SARB Quarterly Bulletin.

  Saving by households (sometimes called personal saving) is equal to the difference between the disposable income of households and the final consumption expenditure by households. The household (or personal) saving rate is obtained by expressing saving by households as a ratio or percentage of the disposable income of households.

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  Applied International Economics

  • W. Charles Sawyer, Richard L. Sprinkle(Authors)
  • 2020(Publication Date)
  • Routledge

    (Publisher)

  First, the balance of payments is an important component of GDP. Changes in the various components of the balance of payments influence the performance of all economies in the short run. For businesses trying to keep track of the performance of the economies in which they do business, information on the balance of payments and its components is important. Second, over time, analyzing the balance of payments of a country will become increasingly important as international trade in goods, services, and capital flows become a larger part of GDP in most countries. As this occurs, it will have a greater impact on the short-run performance of the economy. Also, the larger international trade becomes relative to the rest of the economy, the more business opportunities there are in foreign trade relative to domestic business. Finally, a country’s interactions with the world economy can affect not only the country’s production of goods and services, but also its financial markets. Without an understanding of the balance of payments, the probability of making management errors could rise substantially. NATIONAL INCOME ACCOUNTING National income accounting refers to the calculation of GDP for a country and the subdivision of GDP into various components. Included in the various components of GDP are exports and imports. However, exports and imports cannot be treated in isolation since they are also related to the other components of GDP. Understanding these relationships will make it easier for you to interpret how economic events affect not only international trade, but also the overall economy. In the first part of this chapter, we will briefly review some of the issues to consider when calculating GDP

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