Calculation of chapter 2: National Income

Accounting
Net National product(NNP)
NNP=GNP-depreciation
Market price(mp)
Factor cost(fc)
GDP&GNP at market price & factor cost

GDP
GDPfc

GDPmp

+Indirect taxes

+subsidies

-Subsidies

-Indirect taxes

GDPmp

GDPfc

GNP
GNPfc

GNPmp

+Indirect taxes

+subsidies

-Subsidies

-Indirect taxes

GNPmp

GNPfc

1st Formula
Gross Domestic Product(GDP)
+ Factor income from abroad
-Factor income paid abroad
__________________________
Gross National Product(GNP)

2nd Formula
Gross National Product(GNP)
+Factor income paid abroad
-Factor income from abroad
__________________________
Gross Domestic Product(GDP)

(National income)
National income:

Personal income
(-) Transfer Payment
(-) Interest in consumer
loans
(-) Interest on government
loans
+ Corporate profit taxes
+ Undistributed corporate
profit

(Personal Income)
2

Method 1:
Method
2: salaries
Wages and

National income

+ Rent

+ Transfer payments

+Interest

+Interest on government
loans

+Profit

+Interest on consumer
loans

+Dividends
+Transfer Payments

(-) Taxes on corporate

profit

+Interest on government
loans

(-) Undistributed corporate

+Interest on consumer loans

(-) Taxes on corporate profit
(-) Undistributed corporate
profit

(Disposable Personal Income)

Disposable personal income= Personal Income-Personal Income Tax
(Per Capita Income)
Per capita income=National income/Total population

Methods of calculating national income

3

1st method: Expenditure approach

1. Household consumption expenditure (C)

(+)

2. Private and public investment expenditure (I)

(+)

3. Government expenditure (G)

(+)

4. Changes in inventory

(+)

5. Export of goods and services (X)

Import of goods and services (M)
Net exports(X-M)

(+)

GDP at market price (GDPmp)

6. Factor income from abroad
Factor income paid abroad
Net factor income from abroad

(+)

GNP at market price (GNPmp)

7. Indirect taxes

(-)

8. Subsidies

(+)

GNP at factor cost (GNPfc)

9. Depreciation

(-)

NNP at factor cost (NNPfc)/National income

2nd Method: Product approach

1. Agriculture, fishery, livestock, and forestry
4

(+)

2. Mining and quarrying

(+)
3. Industries
(+)
4. Construction
(+)
5. Utilities
(+)
6. Transportation, storage and communications

(+)

7. Trade and commerce, hotels and restaurants

(+)

8. Finance, insurance, and real estate

(+)
9. Government services
(+)
10. Other services
(+)
GDP at market price (GDPmp)
11. Factor income from abroad
Factor income paid abroad
Net factor from abroad
(+)
GNP at market price (GNPmp)
12. Indirect taxes
(-)
13. Subsidies
(+)
GNP at factor cost (GNPfc)
14. Depreciation
(-)
5

NNP at factor cost (NNPfc)/National income

3rd method: Income approach

1. Salaries and wages

(+)

2. Net interest
Gross interest(+)
Interest on consumer loans(-)
Interest on government loans(-)

(+)

3. Rent
(+)
4. Private corporate income

(+)

5. Corporate profit
Dividends(+)
Undistributed profit(+)
Corporate income tax

(+)

NNP at factor cost(NNPfc)/National income