MACROECONOMICS

MACROECONOMICS
NATIONAL INCOME
NATIONAL INCOME
National Income Accounting
• a bookkeeping system
that a government uses
to measure the level of
the country's economic activity
in a given time period.

• a set of principles and

methods used to measure
the income and production
of a country.

• Philippines:
National Economic Development
Authority (NEDA)
Measuring the Aggregate Performance
• Gross Domestic Product or GDP
- monetary value of all the finished goods and services
produced within a country's borders in a specific time period.

- the total value of everything produced in the country. It doesn't

matter if it's produced by are citizens or foreigners. If they are
located within the country's boundaries, their production is included
in GDP.
Gross Development Product
Includes: Not include:
1 Produced within the country's • Sales produced outside the
territory. country's borders.

2 LEGAL • Intermediate goods

•Sales of used goods
•Purely Financial Transactions

•Transfer Payments

•Unreported “Legal” Business

Activities

•Illegal Business Activities

 Gross Development Product
Nominal GDP
Total value of final goods and services
for a particular period valued in terms
of prices for that period.
include all of the changes in market
prices that have occurred during the
current year due to inflation or
deflation.
Real GDP
short for real gross domestic product,
is the total value of all final goods and
services produced during a particular
year or period, adjusted to eliminate
the effects of changes in prices.
evaluated at the market prices of
some base year.
Gross Development Product
Nominal GDP

NGDP2006 = Q2006*P2006
Gross Development Product
Limitations:
• GDP only measures the output produced and sold in
legal markets. It does not include productive activity
that does not have a market transaction.
• GDP does not consider how output contributes to the
quality of people’s lives.
• GDP does not measure the quality of the environment.
• GDP does not consider how leisure contributes to the
quality of life.
Measuring aggregate performance

• Gross National Income or GNI

- the total domestic and foreign output claimed by residents of a

country, consisting of gross domestic product, plus factor
incomes earned by foreign residents, minus income earned in the
domestic economy by nonresidents.
Gross National Income (GNI)c
Limitations:
1. Economic Versus Social Values:
National income and product figures measure the economic rather than the social value
of production in terms of market prices of the different types of goods and services.
2. Economic Versus Social Costs:
The same difficulty arises regarding economic and social costs because there is no
identity between the economic costs of producing the current national output and the
social costs of the output.
3. Distribution of National Output:
National income accounts as prepared currently do not tell us how the total output is
distributed amongst the different sections and members of society. It shows the
distribution of income in various forms like wages, interest, rents, profits etc. but it
does not show the distribution of income to persons.
Gross National Income (GNI)
4. Income and Output per Capita:
Again, it is necessary to take into account the changes in population as
well as changes in real output if meaningful comparisons of economic welfare are
to be made every time.

5. The Value of Leisure:

In any analysis of economic, welfare the account of leisure time at the
people’s disposal ranks high in importance, yet the national income and
product accounts do not measure directly the value of leisure to society.
During the last half century the length of standard work week has fallen from
70 hours a week to less than 48 hours a week—a development that shows a
considerable improvement in welfare. What it means, in part, is that people
are willing to exchange fewer goods and services for more leisure.
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