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INFO 4470/ILRLE 4470
National Income and Product
Accounts: Business Cycles
John M. Abowd and Lars Vilhuber
February 23, 2011
Thanks to Brent Moulton, BEA
What are the NIPAs?
• The National Income and Product Accounts
(NIPAs) are a set of economic accounts that track
economic flows within the U.S. economy.
• Two key NIPA measures are:
– Gross domestic product (GDP): Measures the total
value of goods and services produced within the U.S.
in a period.
– Gross domestic income (GDI): Measures the incomes
earned and the costs incurred in producing those
goods and services.
2/23/2011
Thanks to Brent Moulton, BEA
The Circular Flow
Income
Labor
Businesses
Households
Goods and services
Expenditures
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Thanks to Brent Moulton, BEA
NIPA Seven Section Summary
1. Domestic Income and Product Account
–
2.
3.
4.
5.
6.
7.
Private Enterprise Income Account
Personal Income and Outlay Account
Government Current Expenditures and Receipts
Foreign Transactions
Savings and Investment
Income and Employment by Industry
Supplemental Tables
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Thanks to Brent Moulton, BEA
GDP as Value-added
• Value-added is measured as:
– Output less intermediate consumption
• Example: Wheat to flour to bread.
• GDP is value of bread.
– Equals sum of value added of farmer, miller, and
baker.
• GDP: the sum of industry value added
• Also equals sum of final expenditures
• Also equals sum of income earned in production
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Thanks to Brent Moulton, BEA
Section 1: Domestic Income and Product
Compensation of employees, paid
Personal consumption expenditures
Taxes on production and imports
Gross private domestic investment
Less: Subsidies
Net exports of goods and services
Net operating surplus
Government consumption
expenditures and gross investment
Consumption of fixed capital
Gross Domestic Income
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Gross Domestic Product
Thanks to Brent Moulton, BEA
Expenditure components of GDP (2005)
GDP = C + I + G + X - M
Consumption
70.0%
+
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Investment
Government
Exports
Imports
16.9%
18.9%
10.4%
16.2%
+
+
Thanks to Brent Moulton, BEA
-
= GDP
Income components of GDP (2005)
Compensation
57.1%
Net operating
surplus
23.2%
Consumption
of fixed capital
TOPI less
subsidies
12.6%
6.8%
+
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+
+
Thanks to Brent Moulton, BEA
Statistical
discrepancy
+
0.3%
= GDP
Section 1: Domestic Income and Product
Compensation of employees, paid
Taxes on production and imports
Less: Subsidies
Net operating surplus
Consumption of fixed capital
Gross domestic income
Personal consumption expenditures
Gross private domestic investment
Net exports of goods and services
Government consumption expenditures
and gross investment
Statistical discrepancy
Gross Domestic Product
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Gross Domestic Product
Thanks to Brent Moulton, BEA
Section 1 (16): Private Enterprise
Income
• Provides information on the sources and uses
of the income of private enterprises.
• Includes current-production corporate profits
and proprietors’ income.
Sources and Uses of Private Enterprise Income
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Thanks to Brent Moulton, BEA
Section 2: Personal Income and Outlays
• Provides information on the sources and uses
of income received by persons.
• Includes personal income and personal saving.
• Can derive disposable personal income and
personal saving rate.
Personal Income and Its Disposition
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Thanks to Brent Moulton, BEA
Section 3: Government Receipts and Expenditures
• Provides information on the transactions of
the federal government and state and local
governments.
• Includes social benefits and government
saving.
Government Current Receipts and Expenditures
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Thanks to Brent Moulton, BEA
Section 4: Foreign Transactions
• Provides information on trade in goods in
services with the rest of the world.
• Includes imports, exports, and the balance on
the current account.
Foreign Transactions in the NIPA
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Thanks to Brent Moulton, BEA
Section 5: Savings and Investment
• Provides information on saving and
investment for the U.S. economy.
• Key measures: Gross saving, which is net
saving plus the consumption of fixed capital,
and net saving, which is a measure of saving
that is available for adding to the nation’s net
stock of fixed assets.
Saving and Investment by Sector
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Thanks to Brent Moulton, BEA
Section 6: Income and Employment by
Industry
• Provides industry detail on national income,
compensation and employment
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Thanks to Brent Moulton, BEA
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Section 7: Supplemental Tables
• Provides detail on selected sectors of the
economy
• Provides detail on imputations
• Provides detail on capital accounts
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Thanks to Brent Moulton, BEA
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Features of national accounts
• Inflation-adjusted (“real” GDP)
• Quarterly frequency
• Seasonally adjusted
• Annualized
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Thanks to Brent Moulton, BEA
Estimation cycle
• “Advance” estimates are released about
31/2 weeks after a calendar quarter
concludes.
• “Preliminary” and “final” estimates are
released 30 and 60 days after the
advance.
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Thanks to Brent Moulton, BEA
Annual revisions and benchmarking
• “Annual revisions” are released in July of noncomprehensive revision years.
• “Comprehensive revisions” occur about every
4-5 years.
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Thanks to Brent Moulton, BEA
GDP by Sector, 2005
Households and institutions
11.5%
Business
77.3%
Government
11.2%
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Thanks to Brent Moulton, BEA
Featured measures
• Real GDP growth, as indicated by the percent change in the
chain-type quantity index.
• Contributions to real GDP growth reflect the role that
individual components of GDP play in producing the growth in
GDP.
• Gross domestic purchases price index (and personal
consumption expenditures price index)—inflation measures
that reflect prices of goods and services purchased by U.S.
residents.
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Thanks to Brent Moulton, BEA
Other important GDP-related measures
• Current-dollar GDP represents the value of
production at a point in time.
• GDP percentage shares provide a measure of
the size and importance of a component.
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1960q1
1961q2
1962q3
1963q4
1965q1
1966q2
1967q3
1968q4
1970q1
1971q2
1972q3
1973q4
1975q1
1976q2
1977q3
1978q4
1980q1
1981q2
1982q3
1983q4
1985q1
1986q2
1987q3
1988q4
1990q1
1991q2
1992q3
1993q4
1995q1
1996q2
1997q3
1998q4
2000q1
2001q2
2002q3
2003q4
2005q1
2006q2
2007q3
2008q4
2010q1
NBER Recessions
Real GDP
14,000
12,000
10,000
8,000
Real GDP
6,000
Peaks
Troughs
4,000
2,000
0
Thanks to Brent Moulton, BEA
National Income and Product Account
Data
• Accounts:
http://www.bea.gov/national/index.htm
• NBER Business Cycles:
http://www.nber.org/cycles/main.html
2/23/2011
Thanks to Brent Moulton, BEA
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