National Product

Aggregates

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 • Personal Income = Income available for Consumption,
Saving and
• Payment of personal taxes.
• Disposable Income = Personal Income – Personal Taxes
•
• Real GNP = Nominal GNP GNP Deflator(BY)
• (Current Year ) X -----------------------
• GNP Deflator(CY)
•

• Nominal GDP PQ
• Q = Real GDP = ---------------- = ---
• GDP deflator P
•
• GNP Deflator is a measure of the Current Price level compared to
Price level during the Base Year.
• Product Approach -- Identity between measured Saving and
Investment
• I = Product Approach GDP minus C
• S = Earnings Approach GDP minus C
• I = S the identity between measured saving and investment
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• Total Gross National Investment(In)=Personal
Saving (PS) + Gross business savings(GBS ) +
Govt Surplus ( GS) = total saving

• Govt. Surplus represents the algebraic excess of

government’s tax revenues over its expenditures
on goods and services and on transfers.
• Where there is no business saving , the identity
reduces to:
• I + X = PS + GS
• Or Domestic investment plus net exports equals
personal saving plus the budget surplus
• Net Investment = Gross Investment –
Depreciation

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 Two sector model without savings

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 Two sector model with savings

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 Three sector model

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 Four sector model

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 Open Economy
Wages and Profits
(i.e. income (Y)
Rs.1000
Equilibrium :
Y = AD
Household Sector
Productive Sector Y = C + I +G+ X
∴ = C +J
Private
Consumption (C)
Rs.800
Investment (I) Rs.80 Savings (S) Rs.100
Exports (E) Rs.60 Imports (M) Rs.50
Government Taxes (T) Rs.50
Expenditure (G)
Rs.60
[Withdrawals (W)
[Injections (J) Rs.200]
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Rs.200]