Download NIPA Formulas

NIPA (National Income and Product Accounts)
Gross Domestic Product (GDP)
GDP=C+I+G+(X-M)
Easier for US economists and business
firms to make international economic
comparisons.
Net Domestic Product (NDP)
NDP=GDP-depreciation
NDP=C+ Net Investment+G+NX
Nominal GDP
Real GDP
Nominal GDP
Real GDP= ---------------- x100
Price Level
The total dollar value of all final goods
and services produced within a
country’s borders during one calendar
year. Is an output-expenditure model
of the product market—C+I+G+(X-M)
C—personal consumption expenditures
Consumer purchases both
durable(life of more than 1 year) and
nondurable goods
I—Gross investment
Total value of all capital goods
produced in a given year, as well as,
changes in the dollar value of business
inventories. Split into two categories,
(fixed investments) residential and
nonresidential structures—office space,
factories and capital goods
G—government purchases of goods
and services
Total dollar value that federal,
state and local governments spend on
goods and services (highways, public
education and national defense)
(X-M)—Net exports
Total US exports minus total
US imports
Accounts for the depreciation of
machines and structures in the course
of a year
Current prices of the year being
measured.
Adjusted (for inflation) for price changes
Gross Domestic Income
(GDI)(GDP)
GDI=W+I+R+P+SA
GDP=compensation of employees
+rent +interest +proprietors’
income +corporate profits
+depreciation +indirect business
taxes
Gross National Product (GNP)
Main measurement used until 1991
The payment made to the factors of
production (FOP/CELL) or total factor
payment.
Wages (salaries)= Includes: incentive
payments and in kind and Social Security
taxes (employee and employer)
Interest=households receive-household
pay
Rent=use of assets
Profits=gross corporate profit and
proprietors income
SA=statistical adjustment
measures the total dollar value of all
final output produced with factors of
production (natural, human, capital
resources and entrepreneurship)
owned by residents of a country during
one year
Net National Product (NNP)
Depreciation of replacing defective or
outdated equipment and machinery of the
investment portion of the GDP subtracted
from GNP. It is a better measure of the
nation’s output. (not frequently used by
economists)
National Income (NI)
The total income paid to the owner’s of
a nation’s factors of production. Refers
to the sum of employees’ and
proprietors’ income, real and estimated
rental income, corporate profits and
net interest.
Personal Income (PI)
The total amount of income paid to
individuals living in a given nation. (The
total amount of income earned by people
in a given nation.) Subtract all income that
does not go to people (profits that firms
retain and reinvest and money that firms
spend on corporate income taxes and
employees’ Social Security) from national
income, then add in government transfer
payments (Social Security, unemployment,
welfare).
The total amount of income available to a
nation’s people to spend or save.
Subtract personal taxes (income, estate,
gift, property and motor vehicle taxes) and
non-tax payment (fines and passports)
from personal income
Disposable Personal Income
(DPI)
National Income Accounting Formulas:
1. Gross Domestic Product (GDP)= C+I+G+(X-M)
2. Net Domestic Product (NDP)
 NDP=GDP-Capital Consumption Allowance (Depreciation)
 NDP=C +Net Investment +G+NX
3. Net Investment = I-Depreciation
4. National Income (NI)
 NI= NDP-Indirect Business Taxes
 NI= Sum of Factor Payments
5. Personal Income (PI)
 PI= NI- Social Security Contributions -Corporate Income Taxes Retained Earnings +Transfer Payments
 PI=Household Income
6. Disposable Income (DI)
 DI =PI – Personal Taxes
 DI = Take Home Household Income
 DI = Consumption Expenditures + Personal Savings + Interest
Payments to Businesses
 DI = NI – Corporate Profits – Taxes (personal, corporate, and
Social Security) +Personal Dividend Receipts + Interest Paid by
Government + Transfer Payments by Government and Businesses
to Households
7. Personal Savings (S)
 S= DI -C
Where: C =household consumption spending
I = gross investment
G = government spending
NX = foreign net export spending = (X-M)
X = export
M = import
Indirect taxes—are taxes included in the final price of goods and services
Direct taxes—taxes on income
Price Index—is a set of statistics that allows economists to compare prices over time.
Base Year is used to create a price index.
1) select a base year to measure changes in prices
2) assign the base year an index of 100
3) calculate index numbers for other years to indicate the amount prices higher or
lower to the base year
4) update the base year every few years
Limitations on GDP
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Information is gathered slowly, so figures are always revised
Nonmarket activity (barter or chores)excluded
Underground economy (under the table)excluded
Homemakers’ activities excluded—non-market
Goods and bads analyze costs and trade-offs
Does not indicate anything about the distribution of income
Fails to reveal anything about the quality of life, value of leisure time, costs of
growth such as crime and pollution, and value of education and health care.