1. CHAPTER 6: NATIONAL INCOME ACCOUNTS

2. KEY POINTS FOR NATIONAL INCOME ACCOUNTS:
GDP = CONSUMPTION + INVESTMENT + GOVERNMENT EXPENDITURES + NET EXPORTS
GNP
EXPENDITURE APPROACH (Net Factor Income Abroad)
GNP = GDP + NFIA
INCOME APPROACH (Indirect Taxes & Depreciation)
GNP = NI + INDIRECT TAXES + DEPRECIATION
INDUSTRIAL APPROACH
DISPOSABLE INCOME AND CONSUMPTION
NATIONAL INCOME & LORENZ CURVE
TYPES OF INCOME DISTRIBUTION
PERSONAL
FUNCTIONAL
4 CAUSES OF INCOME INEQUALITY

4. GROSS NATIONAL PRODUCT
Market value of all the final products in the circular flow ( number of goods & services)
TRADE & COMMERCE: PRODUCTION & CONSUMPTION
CONSUMPTION OF HOUSEHOLDS

5. LIMITATION OF GNP: QUALITY OF PRODUCTS
DOES NOT REFLECT INCOME OF WORKERS (PER CAPITA INCOME)

7. FINAL GOODS AND SERVICES PRODUCED WITHIN NATIONAL BOUNDARIES

8. CONSUMPTION = P800K PER CAR X 200K UNITS SOLD =
P 160 B GOES TO GDP

16. ONLY EXPENDITURES ON THE FINAL PRODUCT BELONG TO THE GDP
NO MULTIPLE COUNTING IN MEASURING GDP
P60 of GARDENIA for CONSUMPTION
P60 x 10,000 units = P600, 000 goes to the GDP

17. BUYING USED GOODS? DOES THIS GO TO GDP?
Depreciated Value = final product was not purchased on the same year

18. decrease in the economic potential of an asset over its productive or useful life.

21. NFIA: NET FACTOR INCOME FROM ABROAD
NFIA is the difference between the factor income earned from abroad by normal residents of a country and the factor income earned by non-residents (foreigners) in the domestic territory

22. GNP = NI + INDIRECT TAXES + DEPRECIATION
II. INCOME APPROACH
GNP = NI + INDIRECT TAXES + DEPRECIATION
NI (NATIONAL INCOME): wages and salaries, profits and dividends, rent and interest, GOVERNMENT INCOME
INDIRECT TAXES: VAT (TAX PAID ON A SALE OF A PRODUCT)
DEPRECIATION: PURCHASE OF EQUIPMENT AND BUILDINGS THAT WERE INSTALLED IN THE PAST (DEVALUED)

25. III. INDUSTRY-ORIGIN APPROACH
GNP = Sum of the Gross value-added of all sectors + Indirect tax + depreciation
SECTORS: agriculture, fishery, forestry, service

27. Personal Income (PI)
It is the income received by the households.
Personal Disposable Income (PDI)
income used for consumption.
If disposable income is rising, most business can expect to find their sales rising as well.

28. SIGNIFICANCE OF “C” CROSSING THE 45* LINE?
CONSUMPTION < DI
CONSUMPTION > DI
MPC? = DI IS FROM 6 TO 8
DI = FROM 6 8 C?
5.5 7
1.5/2 = 0.75
CONSUMPTION SCHEDULE

29. DISTRIBUTION OF NATIONAL INCOME
The allocation of income among the owners of the factors of production. (LAND, LABOR, CAPITAL, ENTREPRENEUR)
There are those who receive more income and there are those who receive less.

31. TYPES OF INCOME DISTRIBUTION
Personal Distribution
Deals with the allocation of income among persons or households and the total incomes they receive.
The degree of income inequality among households or families is shown by the Lorenz Curve.
The further the Lorenz Curve from the line of equality, the greater is income inequality among families.

32. FUNCTIONAL DISTRIBUTION
It is the allocation of income among the factors of production: land, labor, capital, and entrepreneur.
The incomes of the factors of production are rent for land, wages for labor, interests for capital, and profits for the entrepreneur.

34. CAUSES OF INCOME INEQUALITY
Intelligence and Talents

35. Education and Training

36. Unpleasant and Risky Jobs

37. Ownership of Productive Factors