MACROECONOMICS
RESUME NATIONAL INCOME
ARRANGED BY :
NANDIAS ALFIANA ROSI
1610631030191
FACULTY OF ECONOMICS AND BUSINESS
UNIVERSITY OF SINGAPERBANGSA KARAWANG
2016
LIST OF CONTENT
List of Content
Preface
BAB I : INTRODUCTION
Defining of National Income
BAB II : EXPLANATION
Concept of National Income
Difference Between GDP and GNP
BAB III : CASES
Example Case
BAB IV : CLOSING
Bibliography
Preface
Assalamualaikum wr.wb
First of all, i wanna say thank you for Allah to give me a chance to keep breathing untill now and for all blesses here,also, thanks to my parent, my partner and all my friends. Special thanks for Mr. Irvan Yoga Pardistya,SE,MM to give me this exercises.
All of the things that we know when i'm doing this exercise isnt easy, i hope that all of my answers can useful and helpful for another people out of here.
Wassalamualaikum wr.wb.
Karawang, 9th October 2016
Nandias Alfiana Rosi
DEFINING OF NATIONAL INCOME
National income is the total value a country’s final output of all new goods and services produced in one year. Understanding how national income is created is the starting point for macroeconomics.
The gross national income (GNI) is the total domestic and foreign output claimed by residents of a country, consisting of gross domestic product (GDP) plus factor incomesearned by foreign residents, minus income earned in the domestic economy by nonresidents (Todaro & Smith, 2011: 44). (All figures in millions of US dollars). Comparing the GNI and GDP shows whether a nation's resources are put to capital creation or declining toward abroad. The Gross national income has gradually replaced the Gross national product (GNP) in international statistics. While being conceptually identical, it is calculated differently.
Gross national income is the basis of calculation of the largest part of contributions to the budget of the European Union.
CONCEPT OF NATIONAL INCOME
(A) Gross Domestic Product (GDP):
GDP is the total value of goods and services produced within the country during a year. This is calculated at market prices and is known as GDP at market prices. Dernberg defines GDP at market price as “the market value of the output of final goods and services produced in the domestic territory of a country during an accounting year.”
There are three different ways to measure GDP:
Product Method, Income Method and Expenditure Method.
These three methods of calculating GDP yield the same result because National Product = National Income = National Expenditure.
1. The Product Method:
In this method, the value of all goods and services produced in different industries during the year is added up. This is also known as the value added method to GDP or GDP at factor cost by industry of origin.
2. The Income Method:
GDP by income method is the sum of all factor incomes: Wages and Salaries (compensation of employees) + Rent + Interest + Profit.
3. Expenditure Method:
This method focuses on goods and services produced within the country during one year.
The expenditure approach is basically an output accounting method. It focuses on finding the total output of a nation by finding the total amount of money spent. This is acceptable to economists, because like income, the total value of all goods is equal to the total amount of money spent on goods. The basic formula for domestic output takes all the different areas in which money is spent within the region, and then combines them to find the total output.
GDP = C + G + I + (X-M)
Where:
C = household consumption expenditures / personal consumption expenditures
I = gross private domestic investment
G = government consumption and gross investment expenditures
X = gross exports of goods and services
M = gross imports of goods and services
Note: (X - M) is often written as XN or less commonly as NX, both stand for "net exports"
The names of the measures consist of one of the words "Gross" or "Net", followed by one of the words "National" or "Domestic", followed by one of the words "Product", "Income", or
"Expenditure". All of these terms can be explained separately.
"Gross" means total product, regardless of the use to which it is subsequently put.
"Net" means "Gross" minus the amount that must be used to offset depreciation – ie., wear-and-tear or obsolescence of the nation's fixed capital assets. "Net" gives an indication of how much product is actually available for consumption or new investment.
"Domestic" means the boundary is geographical: we are counting all goods and services produced within the country's borders, regardless of by whom.
"National" means the boundary is defined by citizenship (nationality). We count all goods and services produced by the nationals of the country (or businesses owned by them) regardless of where that production physically takes place.
The output of a French-owned cotton factory in Senegal counts as part of the Domestic figures for Senegal, but the National figures of France.
"Product", "Income", and "Expenditure" refer to the three counting methodologies explained earlier: the product, income, and expenditure approaches. However the terms are used loosely.
"Product" is the general term, often used when any of the three approaches was actually used.
Sometimes the word "Product" is used and then some additional symbol or phrase to indicate the methodology; so, for instance, we get "Gross Domestic Product by income", "GDP (income)", "GDP(I)", and similar constructions.
"Income" specifically means that the income approach was used.
"Expenditure" specifically means that the expenditure approach was used.
Note that all three counting methods should in theory give the same final figure. However, in practice minor differences are obtained from the three methods for several reasons, including changes in inventory levels and errors in the statistics. One problem for instance is that goods in inventory have been produced (therefore included in Product), but not yet sold (therefore not yet included in Expenditure). Similar timing issues can also cause a slight discrepancy between the value of goods produced (Product) and the payments to the factors that produced the goods (Income), particularly if inputs are purchased on credit, and also because wages are collected often after a period of production.
Gross National Product (GNP):
GNP is the total measure of the flow of goods and services at market value resulting from current production during a year in a country, including net income from abroad.
The Difference Between GNP and GDP
While GDP is the most widely-followed measure of a country's economic activity, GNP is still worth looking at because large differences between GNP and GDP may indicate that a country is getting more engaged in international trade , production or financial operations. Finally, real GNP may prove to be a more useful measure, since it factors out any changes in national income due to inflation.
Case :
Revenue in a city in economics like this :
Amount of Goods 25.000 unit
Price of Goods Rp. 600.000,-
Wages And Salaries Rp. 15.000.000,-
Rent Ground Rp. 10.000.000,-
Consumption Rp. 13.335.000,-
Government Outcome Rp. 20.000.000,-
Interest Capital Rp. 4.000.000,-
Profit Rp. 13.500.000,-
Investation Rp. 4.000.000,-
Export Rp. 10.000.000,-
Import Rp. 8.000.000,-
Determine the national income through production approach, the income approach, and expenditure approach !
Answer :
- Production Approach
NI = A x P
=(25.000 x 600.000)
= 15.000.000.000
Where ;
A : Amount Price
P : Price of Goods
- Income Approach
NI = R + W + I +P
= 10.000.000 + 15.000.000 + 4.000.000 + 13.500.000
= 42.500.000
Where ;
R : Rent
7
W : Wages And Salaries
I : Interest
P : Profit
- Expenditure Approach
NI = C + G + I + (X-M)
= 13.335.000 + 20.000.000 + 4.000.000 + ( 10.000.000 – 8.000.000)
= 39.335.000
Where ;
C : Consumption
G : Government Outcome
I : Investation
X : Export
I : Import
Bibliography
http://www.yourarticlelibrary.com/notes/national-income-definition-concepts-and-methods-of-measuring-national-income/30801/
http://www.economicsonline.co.uk/Managing_the_economy/National_income.html
Australian Bureau of Statistics, Concepts, Sources and Methods, Chap. 4, "Economic concepts and the national accounts", "Production", "The production boundary". Retrieved October 2016
E.g., William Petty (1665), Gregory King (1688); and, in France, Boisguillebert and Vauban. Australia's National Accounts: Concepts, Sources and Methods, 2000. Chapter 1; heading: Brief history of economic accounts (retrieved October 2016).
Australian Council of Trade Unions, APHEDA, Glosssary, accessed October 2016
United States, of the United States, retrieved October 2016
U.S Federal Reserve, the link appears to be dead as of late 2016
http://www.investopedia.com/terms/g/gnp.asp#ixzz4MVcjyJoF
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