Alomar_1111 The Income Approach Components of National Income.

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Presentation transcript:

Alomar_1111 The Income Approach Components of National Income

Alomar_ Compensation of Employees: wages and salaries paid to employees 2. Rents: income received from supplying property resources 3. Interest: income paid to the suppliers of money capital (loans, deposits, bonds...)

Alomar_ Profits: two accounts: A. Owner’s income: income from partnerships and unincorporated businesses B. Corporate Profits: income to owners of corporations and subdivided into: - Corporate income tax - Dividends - Undistributed corporate profits (retained earnings)

Alomar_111 4 The previous are components of national income: income received from participating in production process. Yet, need to add other components:

Alomar_111 5 From National Income to GDP Indirect Business Taxes: sales taxes, excise taxes, business property tax, license fees, and customs duties. Consumption of Fixed (private and social) Capital: to count depreciation allowance Net Foreign Factor Income: the difference between income Kuwaitis gain from supplying resources abroad and income foreigners gain by supplying resources in Kuwait.

Alomar_111 6 Other National Accounts: 1. Net Domestic Product (NDP)= GDP – Consumption of fixed capital (Dep.) “NDP is GDP adjusted for depreciation”. NDP – net foreign factor income – indirect business taxes = NI

Alomar_ Personal Income (P I ): all income received (earned or not): NI – Social security payments – corporate income tax – undistributed corporate profits + transfer payments = Personal Income

Alomar_ Disposable Income (D I ): personal income after paying personal taxes: After paying your tax, you can consume your income (C) and\or save (S): D I = C + S

Alomar_111 9 GDP - consumption of fixed capital = NDP - net foreign factor income - indirect business tax = NI - SS - corporate income taxes - undistributed corporate profits + transfer payments = P I - personal tax = D I - C = S