Download Income_Approach.pps - Lindbergh School District

Income Approach
to GDP counting
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THE INCOME APPROACH
Compensation of Employees
Rents
Interest
Proprietors’ Incomes
Corporate Profits
• Corporate Income Taxes
• Dividends
• Undistributed Corporate Profits
THE INCOME APPROACH
Equating the NI to the GDP
Using the NI amount we add:
• Consumption of Fixed Capital (called
Depreciation)
• Indirect Business Taxes
• Net Foreign Factor Income
Now, the NI will
be equal to the
GDP!
Net Domestic Product
By subtracting DEPRECIATION
or Consumption of Fixed Capital
from the GDP, we now have a
figure for the true amount of new
goods and services.
Personal Income
• Subtracting from NI, losses to
income (Social Security contribution,
corporate profits and retained
earnings)
• Adding to NI a source of income
(transfer payments)
Disposable Income
• Subtracting from PI, the dollars lost
to taxes, yields the Disposable Income.
This is the “bottom” line of national
income accounting.
This figure of Disposable Income
gives us the funds available for
spending and/or saving.
U.S. GDP, NDP, NI, PI, & DI, 2002
Gross Domestic Product
Consumption of fixed capital
$10,446
-1,393
(GDP)
(NDP)
Net Domestic Product
Net foreign factor income earned
in the U.S.
Indirect business taxes
$9,053
National Income
Social security contributions
Corporate income taxes
Undistributed corporate profits
Transfer payments
$8,348
-748
-213
-141
+1,683
(NI)
Personal Income
Personal Taxes
$8,929
-1,113
(PI)
Disposable Income
$7,816
(DI)
- 10
-695
Personal income............................
As of Nov 2006 In billions of dollars adjusted
Compensation of employees, received......
Wage and salary disbursements..........
Private industries...................
Goods-producing industries.........
Manufacturing....................
Services-producing industries......
Trade, transportation, and
utilities.......................
Other services-producing
industries......................
Government...........................
Supplements to wages and salaries......
Employer contributions for employee
pension and insurance funds.........
Employer contributions for government
social insurance....................
Proprietors' income with inventory
valuation and capital consumption
adjustments.............................
Farm...................................
Nonfarm................................
Rental income of persons with capital
consumption adjustment..................
Personal income receipts on assets.......
Personal interest income...............
Personal dividend income...............
Personal current transfer receipts.......
Government social benefits to persons..
Old-age, survivors, disability, and
health insurance benefits...........
Government unemployment insurance
benefits............................
Other................................
Other current transfer receipts, from
business (net)........................
$ 11,091.20
7620.5
6137.8
5105.9
1191.8
739.5
3914.2
1011.9
$
1,031.90
$
468.90
$
994.30
$
77.30
$
668.80
1482.7
1013.8
1024.3
1712.2
1617.5
1581.4
937.1
27.3
617.0
Less: Contributions for government social
insurance...............................
Less: Personal current taxes...............
Equals: Disposable personal income.........
$—36.1
$—960.6
$ 1,391.40
National Income Practice – “How To Do It”
Personal taxes
403
Imports
362
+Transfer payments
283
-Corporate Income Taxes 88
Indirect business taxes
231
Exports
465
-Undistributed corp. profits
46
-Social Security contrib.
169
Personal consumption
2,316
Gross private domes invest.
503
Government purchases
673
Depreciation
307
N.F.F.I.E. in the U.S.
12
C= $
2,316
______
Ig = $
503
______
G+ $
673
______
Xn = $
103
______
Gross Domestic Product (GDP) $______
3,595
-Consumption of fixed capital
______
-307
3,288
Net Domestic Product (NDP)
$_______
______
-12
-Net For. Factor Inc. Earn. U.S.
______
-231
-Indirect business taxes
3,045
$______
National Income (NI)
-46
______
-Undistributed Corporate Profits
______
-88 -303
-Corporate income taxes
______
-Social Security Contributions
-169
+Transfer payments
_______
+283
3,025
Personal Income (PI)
$_______
________
-403
-Personal Taxes
$_______
Disposable Income (DI)
2,622
Personal taxes
Exports
Imports
Transfer payments
Corporate income taxes
Indirect business taxes
C=
Ig =
G+
Xn =
NIA Practice
50
34
32
32
40
30
Undistributed corp. profits
Social Security contrib.
Personal consumption
Gross private domes invest.
Government purchases
Depreciation
N.F.F.I.E. in the U.S.
$
$
$
$
Gross Domestic Product (GDP)
-Consumption of fixed capital
Net Domestic Product (NDP)
-Net For. Factor Inc. Earn. U.S.
-Indirect business taxes
National Income (NI)
-Undistributed Corporate
Profits
-Corporate income taxes
-Social Security Contributions
+Transfer payments
Personal Income (PI)
-Personal Taxes
Disposable Income (DI)
260
75
100
2
$437
-15
422
-20
-30
$412
-45
-50
-25
+32
$324
-50
$284
45
25
260
75
100
15
20