National Income Accounting

 National income accounting is a term that refers to measuring the health of an economy,

the economic activity, and the forecasted growth and development during a particular

time period. Activities such as domestic revenue, wages to foreign and domestic

employees, sales, and income taxes are all included. In simple terms, it measures the

aggregate (total) output as well as the aggregate income in an economy. Using national

income accounting gives us a look at how the economy is performing and where money

is being earned and spent.

 National income accounting is used to determine the level of economic activity of a

country. Two methods are used and the results reconciled: the expenditure approach

sums what has been purchased during the year and the income approach sums what

has been earned during the year.

 The income approach measures the incomes received by the producers of output.

 The expenditure approach measures the amount of spending by the ultimate

purchasers of output.

Gross Domestic Product (GDP)

 The gross domestic product is the sum of all the final goods and services produced by

the residents of a country in one year. Summing the production of residents (rather than

nationals as in GNP) gives often a more accurate picture of the level of activity in a

country.

 The total market value of all final goods and services produced within a country in a

given period. It includes private and public consumption, private and public investment,

and exports less imports.

 Gross Domestic Product (GDP) measures the total value of final goods and services

produced within a given country’s borders. It is the most popular method of measuring

an economy’s output and is therefore considered a measure of the size of an economy.

When people say one economy is larger than another or that an economy is growing or

shrinking, usually they’re referring to GDP figures.

 GDP is defined as all consumption by households, all investment by businesses, and all

purchases by the government, plus purchases made by foreigners minus purchases of

things made abroad.

There are three ways of calculating GDP - all of which in theory should sum to the same

amount:

National Output = National Expenditure (Aggregate Demand) = National Income

(i) The Expenditure Method - Aggregate Demand (AD)

The full equation for GDP using this approach is

GDP = C + I + G + (X-M) where

 C: Household spending on goods and services

 I: Capital Investment spending

 G: Government spending

 X: Exports of Goods and Services

 M: Imports of Goods and Services

The Income Method – adding together factor incomes

GDP is the sum of the incomes earned through the production of goods and services. This

is:

 Income from people in jobs and in self-employment (e.g. wages and salaries)

 +

 Profits of private sector businesses

 +

 Rent income from the ownership of land

 =

 Gross Domestic product (by sum of factor incomes)

Only those incomes that are come from the production of goods and services are included

in the calculation of GDP by the income approach. We exclude:

Transfer payments e.g. the state pension; income support for families on low incomes; the

Jobseekers’ Allowance for the unemployed and other welfare assistance such housing

benefit and incapacity benefits

Private transfers of money from one individual to another

Income not registered with the tax authorities Every year, billions of pounds worth of

activity is not declared to the tax authorities. This is known as the shadow economy.

Published figures for GDP by factor incomes will be inaccurate because much activity is not

officially recorded – including subsistence farming and barter transactions

GDP of Philippines for 2018

 For Quarter 1, January to March 2018, according to National Statistician Lisa Grace

Bersales that the gross domestic product (GDP) grew by 6.8. This is the 10th

consecutive quarter that the economy grew by 6.5% or better. Strong government

and household consumption drove the Philippine economy to grow by 6.8% in the

1st quarter of the year, despite a slower agricultural output, higher inflation, and

wider trade deficit. This is slightly higher than the 6.4% growth in the same period a

year ago, and 6.5% in the last quarter of 2017. The Philippine economy slowed down

to 6% during the 2nd quarter of the year, the Philippine Statistics Authority (PSA)

said on Thursday, August 9.

 The gross domestic product (GDP) from April to June 2018 is lower than the revised

1st quarter figure of 6.6%. The growth is also slower than the 6.7% recorded during

the same period last year. According to Ernesto Pernia that the closure of Boracay

"partly made a dent on the economy with growth in exports of services slowing to

9.6% in the 2nd quarter from 16.4% in [the] 1st quarter."

 During the 3rd quarter of 2018 the country's gross domestic product (GDP) growth

slowed down to 6.1%, the Philippine Statistics Authority (PSA) said on Thursday,

November 8. The figure is lower than the revised 2nd quarter figure of 6.2%. With

this, the Philippines needs to expand by at least 7% in the 4th quarter to attain the

low end of the government's target of 6.5% to 6.9% growth for the entire 2018.

 The country's gross domestic product (GDP) growth inched up to 6.1% during the

4th quarter of 2018, the Philippine Statistics Authority announced on Thursday,

January 24. The growth for the 4th quarter is slightly higher than the revised 3rd

quarter figure of 6%.The main drivers of growth for the quarter were construction,

trade and repair of vehicles and household goods, and other services. Among the
 major economic sectors, industry had the fastest growth with 6.9%, followed by

services (6.3%), and agriculture (1.7%).

Is GDP a good measure of Economic Output and Welfare?

 Yes, because an increase in real output and real incomes suggests people are better off

and therefore there is an increase in economic welfare. Economic welfare can be

measured through a variety of factors such as GDP and other indicators which reflect

welfare of the population, since GDP is one of the primary indicators used to gauge

the health of a country's economy.

How Market Economy leads to economic growth?

 A market economy is a system in which the economic decisions and the prices of goods

and services are determined by supply and demand. The assumption behind a market

economy is that supply and demand are the best determinants for an economy's growth

and health. The advantages of a market economy include increased efficiency,

productivity and innovation. Economic growth is the increase in the market value of the

goods and services produced by an economy over time.

Who is an Entrepreneur? Explain its roles to Economic Growth.

 An entrepreneur is an individual who, rather than working as an employee, founds and

runs a small business, assuming all the risks and rewards of the venture. The

entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services

and business/or procedures. Entrepreneurship plays an influential role in the economic

growth and standard of living of the country. Each new business launched has an impact
 on an economy and affect people around it. Some of its roles to Economic Growth:

Wealth Creation and Sharing: By establishing the business entity, entrepreneurs invest

their own resources and attract capital (in the form of debt, equity, etc.) from investors,

lenders and the public. This mobilizes public wealth and allows people to benefit from

the success of entrepreneurs and growing businesses. Create Jobs: Entrepreneurs are

by nature and definition job creators, as opposed to job seekers. The simple translation

is that when you become an entrepreneur, there is one less job seeker in the economy,

and then you provide employment for multiple other job seekers. This kind of job

creation by new and existing businesses is again is one of the basic goals of economic

development. Standard of Living: Increase in the standard of living of people in a

community is yet another key goal of economic development. Entrepreneurs again play

a key role in increasing the standard of living in a community. Exports: Any growing

business will eventually want to get started with exports to expand their business to

foreign markets. This is an important ingredient of economic development since it

provides access to bigger markets, and leads to currency inflows and access to the

latest cutting-edge technologies and processes being used in more developed foreign

markets.

Status of Philippines Economy as of today

 Way back on the first quarter of 2018 the economic performance of the Philippines is

better, but as the year passed by Philippines experienced a rapid increase in consumer

price growth last year, higher excise taxes on certain goods and a surge in the cost of oil

imports. Today’s economy, government sectors watch for the adjustment that will happen in

the next few quarter, the economic indicators that they will look to are the Price of the

goods, Employment rate in the economy and Income of the household or per family. The
 ideal Income for 2019 per household is 25,000 a month per family composing of 5

members for an average family.

What is Inflation? What is the Latest Inflation rate?

 Inflation is the increase in the prices of goods and services over time. It's an economics

term that means you have to spend more to fill your gas tank, buy a gallon of milk, or get

a haircut. Inflation increases your cost of living. In January 2019, Inflation slow down with

the rate of 4.4% compare to December 2018 with 5.1% rate but faster compare to

January 2018 with 3.4% inflation and according to Philippine Statistic Authority the Price

of the petroleum is not still included with the computation since some of the gas

company doesn’t still add the excise tax on the petroleum for January
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 Macroeconomics

Dominguez, Janelle R.

BSA- IV