National Income Accounts: GNP(cont) GNP is calculated by adding the value of expenditure on final goods and services produced 1. Consumption expenditure by domestic consumers 2. Investment: expenditure by firms on buildings equipment 3. Government purchases: expenditure by governments on goods and services 4. Current account balance (exports minus imports ) net expenditure by foreigners on domestic goods and services Copyright 2012 Pearson Education. All rights reserved 13-6
Copyright © 2012 Pearson Education. All rights reserved. 13-6 National Income Accounts: GNP (cont.) • GNP is calculated by adding the value of expenditure on final goods and services produced: 1. Consumption: expenditure by domestic consumers 2. Investment: expenditure by firms on buildings & equipment 3. Government purchases: expenditure by governments on goods and services 4. Current account balance (exports minus imports): net expenditure by foreigners on domestic goods and services
Fig. 13-1: U.S. GNP and Its Components Billions of dollars 16000 GN 14000 12000 Consumption 10000 8000 6000 4000 purchases Investment 0 Current -2000 account Source: U.S. Department of Commerce, Bureau of Economic Analysis Copyright 2012 Pearson Education. All rights reserved 13-7
Copyright © 2012 Pearson Education. All rights reserved. 13-7 Fig. 13-1: U.S. GNP and Its Components Source: U.S. Department of Commerce, Bureau of Economic Analysis
China's GNP and Its components 600,000 0.6 500,000.00 0.5 400,000.00 0.4 0.3 300,000.00 0.2 200,000.00 0.1 100,000.00 0 GNP C Copyright 2012 Pearson Education. All rights reserve
Copyright © 2012 Pearson Education. All rights reserved. China’s GNP and Its Components 4 0.00 100,000.00 200,000.00 300,000.00 400,000.00 500,000.00 600,000.00 GNP C I G NX 0 0.1 0.2 0.3 0.4 0.5 0.6 C I G NX
National Income accounts gnP is one measure of national income but a more precise measure of national income is GNP adjusted for following 1. Depreciation of physical capital results in a loss of income to capital owners, so the amount of depreciation is subtracted from gNp 2 Unilateral transfers to and from other countries can change national income payments of expatriate workers sent to their home countries, foreign aid and pension payments sent to expatriate retirees Copyright 2012 Pearson Education. All rights reserved 13-9
Copyright © 2012 Pearson Education. All rights reserved. 13-9 National Income Accounts • GNP is one measure of national income, but a more precise measure of national income is GNP adjusted for following: 1. Depreciation of physical capital results in a loss of income to capital owners, so the amount of depreciation is subtracted from GNP. 2. Unilateral transfers to and from other countries can change national income: payments of expatriate workers sent to their home countries, foreign aid and pension payments sent to expatriate retirees
National Income Accounts(cont) Another approximate measure of national income is gross domestic product(GDP: Gross domestic product measures the final value of all goods and services that are produced within a country in a given time period. GDP= GNP- payments from foreign countries for factors of production payments to foreign countries for factors of production Copyright 2012 Pearson Education. All rights reserved 13-10
Copyright © 2012 Pearson Education. All rights reserved. 13-10 National Income Accounts (cont.) • Another approximate measure of national income is gross domestic product (GDP): – Gross domestic product measures the final value of all goods and services that are produced within a country in a given time period. – GDP = GNP – payments from foreign countries for factors of production + payments to foreign countries for factors of production