Macroeconomic indicators in the system of national accounts. Topic 2 презентация

1. System of National Accounts (SNA).
System of National Accounts (SNA) – is the internationally agreed standard set of recommendations on how to compile measures of economic activity.
The SNA describes a coherent, consistent and integrated set of macroeconomic accounts in the context of a set of internationally agreed concepts, definitions, classifications and accounting rules.

1. System of National Accounts (SNA).
It can be distinguished:
consolidated national accounts – are accounts drawn up to reflect the affairs of a group of entities. For example, a ministry or holding company with many different operating agencies or subsidiary companies may prepare consolidated accounts reflecting the affairs of the organisation as a whole, as well as accounts for each operating agency/subsidiary.
national accounts by sector – refers to the whole economy (a country, the European Union (EU)) as a sector. All institutional units operating within an economy can be assigned to a particular institutional sector.

1. System of National Accounts (SNA).
The main methodological principles of the SNA:
Reflection of economic cycle in three aspects - production, distribution and end use.
Grouping of economic units into sectors: entrepreneurial, general government, households and non-profit sector serving households.
Separation of the movement of products and resources and the movement of income.
Separation of intermediate and final products.
Distinction of incomes and expenses for current (carried out continuously), and capital (one-time expances).

2. Gross domestic product (GDP) and methods of its measurement
GDP measures the market value of final goods and services produced in the economic territory of the country for a certain period of time (as a rule, a year).
The term "gross" in the defined GDP means that when calculating it, the consumption of fixed capital (depreciation) is taken into account.

2. Gross domestic product (GDP) and methods of its measurement
Principles of GDP calculation:
Principle of income and expenditure equality – Income of one firm is an expenditure of another firm, in such a way they always should be equal.
Principle of non-consideration of income from non-production operations –
Nonproduction transactions are of two types:
purely financial transactions (Public transfer payments -the social security payments, welfare payments ; Private transfer payments - cash gifts given at Christmas time. ; Stock market transactions - The buying and selling of stocks (and bonds))
secondhand sales.

2. Gross domestic product (GDP) and methods of its measurement
Principles of GDP calculation:
The principle of inclusion in the assessment of income not only market and explicit, but also non-market and implicit income – We should assess the best usage of capital available.
Principle of value added calculation – We can avoid multiple counting by measuring and cumulating only the value added at each stage.
Value added is the market value of a firm’s output less the value of the inputs the firm has bought from others.

2. Gross domestic product (GDP) and methods of its measurement
Methods of calculating GDP:
1. The method of output (by expenditure) - is calculated as the amount of expenses of macro-economic entities for the purchase of goods and services in a given year.
GDP exp = C + Ig + G + Xn

2. Gross domestic product (GDP) and methods of its measurement
1. C - consumption expenditures by households (only short-term)
2. Investment costs - Gross Private Domestic Investment (Ig)
Net investment = gross investment - depreciation
3. Government Purchases (G)
These expenditures have two components:
(1) expenditures for goods and services that government consumes in providing public services and
(2) expenditures for publicly owned capital such as schools and highways, which have long lifetimes.
4. Net Exports (Xn ) = exports (X) - imports (M).

2. Gross domestic product (GDP) and methods of its measurement
2. The earnings or allocations method (income method) - calculated as the sum of cash income received from production during the year.
GDP inc = W+r+i+P+t+A
Compensation of Employees (Wages) - wages and salaries by business and government to their employees.
Rents (r)consist of the income received by the households and businesses that supply property resources.
Interest (i) consists of the money paid by private businesses to the suppliers of loans used to purchase capital.
“Profits”(P) is broken into two accounts: proprietors’ income, which consists of the net income of sole proprietorships, partnerships, and other unincorporated businesses; and corporate profits. Corporate profits are the earnings of corporations.

2. Gross domestic product (GDP) and methods of its measurement
National income accountants subdivide corporate profits into three categories:
• Corporate income taxes These taxes are levied on corporations’ profits. They flow to the government.
• Dividends These are the part of after-tax profits that corporations choose to pay out, or distribute, to their stockholders. They thus flow to households—the ultimate owners of all corporations.
• Undistributed corporate profits Any after-tax profits that are not distributed to shareholders are saved, or retained, by corporations to be invested later in new plants and equipment.

2. Gross domestic product (GDP) and methods of its measurement
Taxes on Production and Imports - general sales taxes, excise taxes, business property taxes, license fees, and customs duties.
A – amortization or Depreciation of capital

2. Gross domestic product (GDP) and methods of its measurement

2. Gross domestic product (GDP) and methods of its measurement
3. The production method (value added) - is calculated as the sum of value added created at all stages of the production of goods and services during the year.
GDP= gross output – material expenditures +taxes on products – subsidies (net taxes)

2. Gross domestic product (GDP) and methods of its measurement
OTHER GDP INDICATORS:
Gross domestic product is the basis for calculating other equally important indicators of national production.
They include:
- Gross National Income (GNI)
- Gross National Disposable Income (GNDI)
- Net domestic product (NDP)
- Net national income (NNI)

2. Gross domestic product (GDP) and methods of its measurement
DISTINCTION BETWEEN GDP AND GNI INDICATORS
1) Qualitative: GDP measures the flow of final goods and services produced by residents of the country;
GNI measures the flow of primary incomes received by residents of the country.
2) Quantitative: GNI = GDP + Balance of net factor income from abroad (NFI).
The balance of net incomes received from abroad is the difference between the incomes of residents of this country received from abroad and the income of non-residents paid abroad from this country.

2. Gross domestic product (GDP) and methods of its measurement
GNI – is the total of all sources of private income (employee compensation, rents, interest, proprietors’ income, and corporate profits) plus government revenue from taxes on production and imports.
Gross national disposable income may be derived from gross national income by adding all current net transfers and net taxes.
GNDI = GNI+ Net transfers from abroad (NTR)+net taxes (NT)

2. Gross domestic product (GDP) and methods of its measurement
Indicators of the domestic product and the national product can be calculated on a gross and on a net basis.
GDP and GNI less capital consumption are NDP (net domestic product) and NNI (net national income).
NDP = GDP - consumption of fixed capital (depreciation)
NNI = GNI - fixed capital (depreciation)

3. Definition of final, intermediate products and value added in the calculation of GDP
When measuring GDP it is important to avoid multiple counting - a situation where the same operation can be taken into account twice. For this purpose in the SNA there are the following concepts:
intermediate goods are goods and services purchased for the purpose of further production, processing or resale;
final goods - goods and services purchased for the purpose of final consumption, not for further processing or resale;

3. Definition of final, intermediate products and value added in the calculation of GDP
added value of the enterprise is the cost of the products manufactured by the company less the cost of intermediate goods and services that were acquired by the enterprise and used in the production process.
Added value = gross output - intermediate consumption

3. Definition of final, intermediate products and value added in the calculation of GDP
Intermediate consumption is the cost of consumed goods and consumed market services during this period for the production of other goods and services.
Intermediate consumption includes the following elements: material expenses; payment for intangible services; travel expenses; other elements of intermediate consumption.

4.Nominal and real GDP. Deflator GDP, prices index
To find out the dynamics of the general level of prices in the economy, the Paasche index is used. The Paasche index, calculated for a set of goods and services included in the country's GDP, is called a GDP deflator.

4.Nominal and real GDP. Deflator GDP, prices index
GDP deflator – measure of the level of prices of all new, domestically produced, final goods and services in an economy.
The GDP deflator is used to determine the difference between nominal and real GDP.
A GDP based on the prices that prevailed when the output was produced is called unadjusted GDP, or nominal GDP.
A GDP that has been deflated or inflated to reflect changes in the price level is called adjusted GDP, or real GDP.