THE NATIONAL INCOME

ACCOUNTING
Camata, Nicole
Lacanilao, Stephanie
Macabinguel, Rochelle
Oña, Bryan
Quiñones, Eula
Villacruel, Karen
Viray, Alexandra
 GNP VERSUS
GDP: EXPLAINED
Bryan Oña
Gross Domestic Product Gross National Product

● Country´s ● Dependent
Stability ● National Output
● Regional Output ● Based on
● Based on Citizenship
Location
 THE NOMINAL or
CURRENT GDP
VERSUS REAL GDP
Rochelle Macabinguel
Nominal GDP- The aggregate market value of
the economic output produced in a given
period, within the boundaries of the country.

Real GDP- refers to the value of economic

output produced in a given period, adjusted
according to the changes in the general price
level.
Formula: Nominal GDP = Price x quantity
Nominal GDP
Year Quantity . Price Nominal GDP

2001 170 10 1700

2002 150 25 3750
2003 140 35 4900
2004 135 40 5400
2005 120 55 6600
  

Real GDP
Year Price index Nominal GDP Real GDP
2001 100 1700 1700
2002 250 3750 1500
2003 350 4900 1,400
2004 400 5400 1,350
2005 550 6600 1,200
The GDP deflator is a price index that
measures inflation or deflation in an
economy by calculating a ratio of
nominal GDP to real GDP.
 
 THE NATIONAL
INCOME ACCOUNT
Stephanie Lacanilao
Karen Villacruel
National Income Accounting
- set of principles and methods used to
measure the income and production of a
country.
- a bookkeeping system that a government
uses to measure the level of the country’s
economic activity in a given period of time.
- measures the economy’s overall performance
- Include data regarding:
➢ total revenues earned by domestic
corporations
➢ wages paid to foreign and domestic workers
➢ amount spent on sales and income taxes by
corporations and individuals residing in the
country.
This accounting enables economists,
policy makers, and statisticians to:
• Assess the health of an economy, the level of economic activity,
and the forecasted growth and development during a particular
time period.
• Track the long-run course of the economy to see whether it has
grown, been constant, or declined.
• Using national income accounting gives us a look at how the
economy is performing and where money is being earned and
spent.
• Formulate policies that will safeguard and improve the
economy's health.
3 Important Methods for Measuring
National Income
I. Product Method or Value-added approach
II. Income Method
III. Expenditure Method
I. Product Method – national income is
measured as a flow of goods and services.

II. Income Method – national income is measured

as a flow of factor Incomes.

III. Expenditure Method – national income is

measured as a flow of expenditure.
THREE APPROACHES
of GDP ACCOUNTING
Alexandra Viray
THE EXPENDITURE APPROACH

➢The expenditure approach attempts to

calculate GDP by evaluating the sum of all
final good and services purchased in an
economy. 
 Equation:GDP= C + I + G + (X − M)
• C = Personal Consumption Expenditures
• I = Investment
• G = Government Expenditures and
Investment
• X = Net Exports 
• M = Net Imports
 C = Personal Consumption
Expenditures

➢This consists of all goods and service

purchased by households. This is broken
down even farther into services, 
nondurable goods, and durable goods.    
 I = Investment
➢ Investments are considered purchases in
assets that are expected to provide a value
over time.

▪ Formula:
Total Investment (I) = Fixed Investment +
Inventory Investment + Residential
Investment
 G = Government Expenditures

➢This accounts for the total expenditures on

new goods and services by the local,
state, and federal government. Transfer
payments are not included in government
purchases, but rather find their way to
consumption or investment.
 X = Net Exports - M = Net Imports
➢If (X - M) is positive, then X > M resulting
in a trade surplus If (X - M) is negative,
then X < M resulting in a trade deficit If (X
- M) is zero, then X=M results in a 
trade balance 
 THE INCOME APPROACH
➢ The income approach equates the total output of a
nation to the total factor income received by residents or
citizens of the nation.

➢ GDP=National Income+Depreciation+(Indirect taxes-

Subsidies)+Net Factor payments to the rest of the world
• National Income
a) Compensation of Employees (wages,
salaries etc)
b) Proprietor’s Income (Unincorporated
business income)
c) Rental Income (Property owner income)
d) Corporate Profits (From corporate
business)
e) Net Interest (paid interest by business)
• Depreciation

• Indirect Taxes

• Subsidies

• Net Factor Payments to the Rest of the World

THE VALUE ADDED APPROACH
• GDP is calculated using the output
approach by summing the value of sales
of goods and adjusting (subtracting) for
the purchase of intermediate goods to
produce the goods sold.
THE INCOME
APPROACH
Nicole Camata
 • THE INCOME APPROACH
• INCOME APPROACH
-Define as the sum of all factor
payments received by the owners of
productive services.
• Various Components of NI
▪ Compensation of Employees (Wages &
Salaries)
▪ Income from Unincorporated Enterprises
(Proprietor’s Income)
▪ Income from Property (Rental Income)
▪ Private Corporate Income (Corporate Profits)
▪ Proprietary and Corporate Income of
Government
• GNP – from the factor incomes approach,
it is the sum of national income at factor
costs, indirect business taxes minus
subsidies, and depreciation.
➢GNP = NI + IBT + D
• Net National Product – This is an
important concept that is defined by taking
out depreciation from the GNP.
➢NNP = GNP – D = NI + IBT
• GDP – is GNP with the exclusion of net
factor earnings from abroad. It would
represent a better measure of what is
produced in the country
➢GDP = GNP (net factor incomes received
from abroad)
➢NDP = GDP – D
= NNP – net factor incomes from
abroad
OTHER INCOME
ACCOUNTS
Eula Marie Quiñones
● Other measures of income
● The Consumer Price Index
● The Unemployment Rate
OTHER MEASURES OF INCOME
● Net National Product (NNP) - is the total income of a
nation’s residents (GNP) minus losses from depreciation.

Depreciation is the wear and tear on the economy’s stock

of equipment and structures, such as trucks rusting and
computers becoming obsolete.

- “consumption of fixed capital.”

● National income - is the total income earned by a
nation’s residents in the production of goods and services.
● Personal income - is the income that households and
noncorporate businesses receive.
● Disposable personal income - is the income that
households and noncorporate businesses have left after
satisfying all their obligations to the government
 THE CONSUMER PRICE INDEX

● Consumer Price Index (CPI) - is a measure of the overall cost of the goods
and services bought by a typical consumer.

Consumer Price = Price of basket of goods and services in current year

Index ___________________________________________ x 100

Price of basket in base year

■ Employed: This category includes those who at the time of the survey worked as
paid employees and worked in their own business

■ Unemployed: This category includes those who were not employed, were
available for work, and had tried to find employment during the previous four
weeks.

■ Not in the labor force: This category includes those who fit neither of the first two
categories, such as a full-time student, homemaker, or retiree.
 THE UNEMPLOYMENT RATE

● The labor force is defined as the sum of the employed and unemployed, and
the unemployment rate is defined as the percentage of the labor force that is
unemployed.

Labor Force = Number of Employed + Number of Unemployed

Unemployment Rate = Number of Unemployed

______________________________________ x 100

Labor Force
 THE UNEMPLOYMENT RATE

● A related statistic is the labor-force participation rate, the percentage of the

adult population that is in the labor force:

Labor Force Participation = Labor Force

Rate ______________________________________ x 100

Adult Population