National Accounts

7 Key excerpts on "National Accounts"

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  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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  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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  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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