Economic Growth

Economic growth is the increase in the

productive output of a country measured
in monetary value. The main indicator of
economic growth is increase in GDP

National Income Accounting

Gross Domestic Product: (GDP) This
is the total monetary value of all
goods and services produced within
the national boundaries of the
country over a calendar year.
Note: With GDP not all the value of
goods and services produced is
available to be spent in the country.
Some is repatriated

Gross National Product

(GNP)
GNP is the total monetary value of all goods and
services produced by nationally owned factors
of production whether the factors are owned
locally or overseas.
To move from GDP to GNP we subtract any
income payments to foreigners and add income
payments from overseas operations.
GNP = GDP + Net property income from abroad.
Net property income is the difference between
income paid abroad and income received from
abroad

Net National Product (NNP)

NNP is the total monetary value of all goods
and services produced by nationally owned
factors of production after accounting for
capital consumption (Depreciation)
NNP= GNP- Capital Consumption.
Note: As machines and building are used up
to produced output, they become worn out
and this represents an added cost to
production that should be balanced against
total output.

GDP at Factor Cost

GDP at factor cost is the cost at the point
of production. GDP at factor cost
measures domestic output exclusive of
indirect taxes since indirect taxes are
levied on market transactions. However
producers could receive subsidies; hence
subsidies could be included in GDP fc.
GDP at factor cost = GDP at Market price
indirect taxes + subsidies.

GDP at Market Price

Gross Domestic Product at market
prices is the sum of the gross values
added of all resident producers at
market prices, plus taxes less
subsidies on imports.
GDP at market price = consumption
expenditure + Government
expenditure + Investment
expenditure + Exports Imports

Measuring National Output

There are three methods of
measuring a nation's output: The output methods
The Expenditure methods
Income Method

Output Method
This measures the value of the total
flow of goods and services by
breaking the information down into
industrial classification.
In using the output method, care
should be taken to avoid double
counting.
Double
counting
occurs
when
the
Furniture
Lumber
Timber
Lumber
200,000
20,000
60,000
120,00
value
of output
are
counted
more
than once.

The Expenditure Approach

The expenditure approach measures national
product by looking at the total money value of final
demand. It uses the identity:
Y= C + I + G + X- M . Where Y= Value of GDP
C= household consumption expenditure
G= Government expenditure
X= Exports
M= imports.
Note: This approach measures GDP at market price.

Expenditure Approach

Expenditure on consumer goods:

Current exp by public authorities:
Expenditure on capital goods
Subsidies
Income from abroad
Indirect taxes
Income paid abroad
Goods and services exported
Goods and services imported
Deprecation

18,500
5,000
5000
500
1000
4000
500
5,500
6,000
2,000

From the data above, calculate GDP at market price

Gross National Product at factor cost
National Income

Income Approach
The income approach measures
national income directly by adding
the compensation paid to factors of
production. These compensation are
rents, wages, salaries, interest and
profits. Welfare and social security
payments are not included in
national income because these
payments are made without any
corresponding output.

Income Approach

Wages 18,000
Salaries 25,000
Profits 5,500
Rent
6,000
Social Security payment
2,000
Income paid abroad
1,000
Income from abroad
500
Depreciation
2,000

From the data provided:

Calculate: Gross National Product
Net National product