Name : Idha Rahma Iswianti

NIM : 19080304009

Accounting Education 2019 I

Macroeconomics
I. National Income Analysis
I.1 The national income analyses are an accounting framework used in measuring
current economic activity.
I.2 National income data play a vital role in country’s per capita income, which
reflects the economic growth of the country. It enables to find out the
distribution in income or disparities in the incomes of the different sections of
the society.
I.3 The national income analyses are based on the idea that the amount of
economic activity that occur during a period of time can be measured in terms
of :
a. The amount of output produced, excluding output used up in intermediate
stages of production (product approach);
b. The income received by the producer of output (income approach);
c. The amount of spending by the ultimate purchase of output (expenditure
approach).
I.4 Product Approach
a. Market value of final finished goods and services;
b. Excludes intermediate goods used in intermediate stages of production;
c. Value added is the value of output minus value of its input.
I.5 Expenditure Approach
a. Total spending on final goods;
b. Consumption is spending by domestic household on final goods;
c. Net exports means export minus import;
d. GDP= Consumption + Investment + Govt. purchases + Net Exports

I.6 Income Approach

a. Compensation of employees
b. Proprietor’s income
c. Rental income
d. Corporate tax
Name : Idha Rahma Iswianti

NIM : 19080304009

Accounting Education 2019 I

II. COR – ICOR –ILOR
II.1 COR (Capital Output Ratio)
Ration that shows the relationship between the existing capital stock and the
output produced, which is often known as the Average Capital Output Ratio
(ACOR). COR value is obtained by comparing the capital accumulation used
with the amount of output produced in a given period. This ratio is static.

II.2 ICOR (Incremental Capital Output Ratio)

The ratio shows the amount of additional new capacity (investment) needed to
increase or add one unit of output. This ratio is dynamic because they show an
increase.

II.3 Magnitude of COR / ICOR Value

(Based on empirical data) :
At first it goes up, then it goes down when economic development goes into
maturity, and then stabilizes in the long run.
II.4 ILOR (Incremental Labor Output Ratio)
Comparison between the addition of labor to the addition of one unit of output.
The function ILOR is measure the possibility of employment absorption
associated with the income element If there is an increase in labor, the output
will increase (Cateris Paribus).. The addition of labor is an increase in the
number of people working in all sectors of the economy.

III. Savings and Investment

Name : Idha Rahma Iswianti

NIM : 19080304009

Accounting Education 2019 I

III.1 The level of investment does not have to be the same as the level of savings;
III.2 If the savings are insufficient, they can be covered with foreign investment
and foreign aid;
III.3 Savings (private and government), taxes, foreign loans, forced savings
(budget deficit);
III.4 If the investment level is not the same with savings, then can be closed with
foreign assistance capital.
IV. Weaknesses COR / ICOR Analysis
IV.1 COR / ICOR is only a tool to estimate the total capital needs of an economy,
but cannot be used as a tool to determine priorities between various sectors in
the economy;
IV.2 COR / ICOR is unable to explain the amount of capital investment in human
capital needed to achieve growth rates assuming there is no change in
production / technology;
IV.3 The assumption is that if capital increases, the supply of supporting factors
also increases.
Name : Idha Rahma Iswianti

NIM : 19080304009

Accounting Education 2019 I

Questions and Answer
1. What are the benefits of ICOR calculations?
To show the relationship between increasing stockpile of production capacity and the
ability of people to produce output
2. How does ICOR influence the economy?
The increase in investment will be followed by an increase in purchases of capital
goods such as machinery or equipment and other production facilities. These capital
goods are used to establish various types of industries and companies.
3. How does ILOR influence the economy?
Growth in the industrial sector and companies is a real form of job creation. The
direct effect of the growth of industry and enterprise is the increase in demand for
labor, which is reflected in a fall in the unemployment rate.
4. What is included in ICOR calculation?

 The direct method is a method of calculating the value of investments obtained

directly from publications and reports of agencies or companies at current
prices. The investment value at constant prices is obtained by deflating the
investment value at current prices with the Wholesale Trade Price Index
(IHPB).

 Depreciation method is a method of calculating the value of investments

obtained by calculating the depreciation of fixed capital goods that occur in a
particular year.
5. What are the ICOR factors ?

 Natural resources

 Population growth

 Technological innovation (capital intensive)

 Investment composition

 Efficient use of production factors

 Managerial & organizational skills

 Policy on factor prices (interest rates, rent, wages, etc.)

 Employment policy

 Progress of industrialization

 Socio-economic infrastructure development