National Income Determinants and the Economy of Ghana

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Economy of Ghana
National income determinants and the economy of Ghana

NATIONAL INCOME ACCOUNTING
National income accounting refers to a set of rules and techniques that are used to measure the national income of a country. In other words, National income is a measure of the value of goods and goods produced by the residents of an economy in a given period of time, usually a quarter or a year.

National income can be real or nominal. Nominal national income refers to the current year production of goods and services valued at current year prices. Real national income refers to the current year production of goods and service valued at base year prices.

In estimating national income, only productive activities are included in the computation of national income. In addition, only the values of goods and services produced in the current year are included in the computation of national income. Hence, gains from resale are excluded but the services provided by the agents are counted. Similarly, transfer payments are excluded as there is income received but no good or service produced in return. However, not all goods and services from productive activities enter into market transactions. Hence, imputations are made for these non-marketed but productive activities e.g. imputed rental for owner-occupied housing. Thus, national income refers to the market value or imputed value of additional goods and services produced and services performed in the current period.

GDP, GNP, NDP and NNP
National income in many countries are either in Gross Domestic Product (GDP) or Gross National Product (GNP). Gross Domestic product (GDP) refers to the total value of goods and services produced within the geographical boundary of a country before the deduction of capital consumption. Net Domestic product (NPD) refers to the total value of goods and services produced within the geographical boundary of a country after the deduction of capital consumption. Gross National Product (GNP) refers to the total value of goods and services produced by productive factors owned by residents of the country both inside and outside of the country before the deduction of capital consumption. Net National Product (NNP) refers to the total value of goods and services produced by productive factors owned by residents of the country both inside and outside of the country after the deduction of capital consumption.

Relationship between GDP and GNP
GNP = GDP + NPIFA (Net Property Income from Abroad)
Net Property Income from abroad refers to the difference between income from abroad and income to abroad. Measurement of National Income
There are 3 approaches to measure national income i.e. output approach, income approach and expenditure approach

Output Approach
Output approach measures national income by adding the total value of the final goods and services produced in the year or by adding the value added by each sector of the economy. Where Value added refers to the difference between the value of gross output of all goods and services produced in a given period and the value of intermediate inputs used in the production process during the same period. In distributive trade, value added is the difference between the gross margin and the cost of intermediate inputs. In the banking sector, value added is the difference between the sum of actual and imputed bank service charges and intermediate inputs. For government services and non-profit institutions, value added is the wages and salaries, and depreciation allowance set aside for consumption of fixed capital. The output approach consists of the sum of value added by each sector in the economy i.e. Agriculture and Fishing, Quarrying, Manufacturing, Utilities, Construction, Commerce, Transport and Communication, Financial and Business Services.

Income Approach
Income approach measures national income by adding the income earned by the factor owners that are residents...
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