National Account
National Accounts
• Gross Domestic Product (GDP) measures the final value of all goods and services that are produced within a country in a given time period. • There are 4 types of expenditure:
1. 2. 3. 4.
Consumption: expenditure by domestic residents Investment: expenditure by firms on plants & equipment Government purchases: expenditure by governments on goods and services Net exports (exports minus imports): net expenditure by foreigners on domestic goods and services
1
GDP = Expenditure on a Country’s Goods and Services
National income = value of production
Y = Cd + Id + Gd + EX
expenditure on production
= (C-Cf) + (I-If) + (G-Gf) + EX = C + I + G + EX – (Cf + If +Gf) = C + I + G + EX – IM = C + I + G + NX
Domestic expenditure Net expenditure by foreigners
2
National Accounts
• Gross National Product (GDP) measures the final value of all goods and services that are produced by domestic factors of production in a given time period. • Q=Y+NFP • Net Factor Payments (NFP) is the income paid to domestic factors of production by the rest of the world minus income paid to foreign factors of production by the domestic economy. It includes wages and interest or dividend payments.
3
Expenditure and Production in an Open Economy • Q= Y+NFP = C + I + G +NX+NFP • Current account (CA) measures the size and direction of international borrowing. • CA=NX+NFP • Q= Y+NFP = C + I + G +CA
4
Expenditure and Production in an Open Economy
CA = NX+NFP = Q – (C + I + G )
• When production > domestic expenditure, exports > imports: current account > 0, trade balance > 0 when a country exports more than it imports, it earns more income from exports than it spends on imports ♦ net foreign wealth is increasing
♦
• When production < domestic expenditure, exports < imports: net exports < 0, trade balance < 0 when a country exports less than it imports, it earns less income from exports than it spends on imports ♦ net foreign
• Gross Domestic Product (GDP) measures the final value of all goods and services that are produced within a country in a given time period. • There are 4 types of expenditure:
1. 2. 3. 4.
Consumption: expenditure by domestic residents Investment: expenditure by firms on plants & equipment Government purchases: expenditure by governments on goods and services Net exports (exports minus imports): net expenditure by foreigners on domestic goods and services
1
GDP = Expenditure on a Country’s Goods and Services
National income = value of production
Y = Cd + Id + Gd + EX
expenditure on production
= (C-Cf) + (I-If) + (G-Gf) + EX = C + I + G + EX – (Cf + If +Gf) = C + I + G + EX – IM = C + I + G + NX
Domestic expenditure Net expenditure by foreigners
2
National Accounts
• Gross National Product (GDP) measures the final value of all goods and services that are produced by domestic factors of production in a given time period. • Q=Y+NFP • Net Factor Payments (NFP) is the income paid to domestic factors of production by the rest of the world minus income paid to foreign factors of production by the domestic economy. It includes wages and interest or dividend payments.
3
Expenditure and Production in an Open Economy • Q= Y+NFP = C + I + G +NX+NFP • Current account (CA) measures the size and direction of international borrowing. • CA=NX+NFP • Q= Y+NFP = C + I + G +CA
4
Expenditure and Production in an Open Economy
CA = NX+NFP = Q – (C + I + G )
• When production > domestic expenditure, exports > imports: current account > 0, trade balance > 0 when a country exports more than it imports, it earns more income from exports than it spends on imports ♦ net foreign wealth is increasing
♦
• When production < domestic expenditure, exports < imports: net exports < 0, trade balance < 0 when a country exports less than it imports, it earns less income from exports than it spends on imports ♦ net foreign