Macroeconomics National Income Accounting

Sophian Sout,
Politeknik Mukah
cikgupoli@gmail.com
Introduction
:: the Definition of National Income Accounting

refer to the final products/ goods and services produced by a
country for a specific period of time, such as a year
the aggregate income of the country earned by its nationals
through the production of goods and services for a certain period
of time
the total value of final goods and services produced by the
nationals of a country for a particular period of time.
Introduction
:: the calculation [01]

Item
RM
GDP at m a r k e t p r i c e
Net factor income payment from abroad (NFIPA)
Net factor income received from abroad (FIRA)
Net factor income paid abroad (FIPA)
GNP at m a r k e t p r i c e
+/-
Introduction

Item
GNP at m a r k e t p r i c e
Indirect tax / direct tax / Tax on expenditure
Subsidies
GNP at f a c t o r c o s t
RM
Introduction

Item
GDP at m a r k e t p r i c e
Indirect tax / direct tax / Tax on expenditure
Subsidies
GDP at f a c t o r c o s t
RM
Introduction

Item
RM
GDP at f a c t o r c o s t
Net factor income payment from abroad (NFIPA)
Net factor income received from abroad (FIRA)
Net factor income paid abroad (FIPA)
+/-
Introduction

Item
Depreciation / capital consumption
NNP at f a c t o r c o s t / N AT I O N A L I N C O M E
RM
Introduction

Item
RM
N AT I O N A L I N C O M E [ NNP at f a c t o r c o s t ]
Transfer payment
Interest in consumer loan
Interest on government loan
Employee Provisional Fund (EPF)
Corporate profit taxes / Corporate income taxes
Undistributed corporate profit
PERSONAL INCOME
+
+
+
Introduction

Item
RM
PERSONAL INCOME
Personal Income Taxes
DISPOSABLE PERSONAL INCOME
Question 1-1
:: Calculate Personal Income & Disposable Personal Income
ITEMS
NNP fc
Interest on consumer loan
Interest on government loan
Import taxes
Dividend
Transfer payment
EPF
Personal income tax
Undistributed corporate profit
Corporate tax
Saving
Tithe
Socso
RM (Million)
28930
1600
2100
1700
730
1050
1750
6900
1900
5700
9900
200
1500
Question 1-2
:: Calculate the National Income, Personal Income & Disposable Personal Income
ITEMS
Depreciation
Transfer Payment
Social Security Contribution
Retained earnings
Corporate tax
Personal income tax
GNP fc
RM (Million)
850
1000
200
100
800
400
65850
Question 1-3
ITEMS
Depreciation
Transfer Payment
Retained earnings
Corporate tax
Personal income tax
GNP fc
RM (Million)
1000
1000
200
100
800
400
71000
Calculation Approach
:: Expenditure Approach
Item
Personal consumption / Household Expenditure / Personal Expenses (C)
Investment (I)
Government Spending / Government Expenditure
Net Export (export import)
*Changes in Stock
GDP in m a r k e t p r i c e
RM
+
+
+
+
+
:: Production Approach
Item
RM
Agriculture, forestry, and fishing
Mining and quarrying
Manufacturing
Construction
Electricity, gas, and water
Transportation, storage, and communication
Commerce, retail, hotel and restaurant
Finance, insurance, and real estate
Government services
Other services
GDP in m a r k e t p r i c e
:: Income Approach
Item
Wages and salaries
Rent
Companies profit
RM
+
+
+
+ Undistributed company profit

+ Dividend
+ Corporate income taxes
Private enterprise earning
Net interest
NNP at f a c t o r c o s t / N AT I O N A L I N C O M E
+
+
Example
Example 2-1
ITEMS
RM (MILLION)
Personal income taxes
750
Indirect taxes
10000
Factor income received from abroad
21470
Private investment
43769
Social security contribution
800
Export
609133
Public investment
55161
Subsidies
12000
Transfer payment
4000
Factor income paid abroad
20470
Private consumption
215876
Undistributed company profit
1260
Import
492928
Changes in stock
1059
Company income tax
900
Depreciation
5000
Government spending
64592
Calculate:
(a)National Income (NNP fc)
(b)Personal Income
(c)Disposable Personal Income
ITEMS
RM (MILLION)
Private consumption
215876
Public investment
55161
Private investment
43769
Government spending
64592
Changes in stock
1059
Net Export : 609133 - 492928
116205
GDP mp
496662
Indirect taxes
(10000)
Subsidies
12000
GDP fc
498662
NFIRA: 21470 - 20470
1000
GNP fc
499662
Depreciation
(5000)
National Income
494662
ITEMS
RM (MILLION)
National Income
494662
(800)
Transfer payment
4000
Undistributed company profit
(1260)
Company income tax
(900)
Personal Income
495702
Personal income tax
(750)
Disposable Income
494952
PRACTISE[02]
Question 2-1
:: Calculate the National Income

ITEMS
Wages and sales
Income from rent, dividend and interest
Profit
Corporate tax
Depreciation
Private investment
Net factor income abroad
RM (Million)
500
100
200
80
50
1000
400
Question 2-2

ITEMS
Government services
Net factor income from abroad
Exports
Mining and Quarrying
Manufacturing
Indirect business tax
Depreciation
Subsidies
Private investment
Electricity, gas and water
Banking and tourism
Rent
RM (Million)
1000
250
1500
1800
1500
400
100
150
5000
700
3000
200
Question 2-3

ITEMS
Personal taxes
Social security contributions
Corporate income taxes
Transfer payment
Exports
Government purchases goods and services
Personal consumption expenditure
Import
Capital consumption
Private investment
RM (Million)
40
15
20
40
22
10
100
250
20
25
10
5
Question 2-4

ITEMS
Construction
Manufacturing
Agriculture
Mining and gas
Banking and insurance
Wholesale and retail
Other services
Taxes on expenditure
Factor payment abroad
Capital consumption
Factor payment from abroad
RM (Million)
22000
15000
12000
7000
13500
9500
4000
650
7800
360
6600
Question 2-5

ITEMS
RM (Million)
Household expenditure
44.5
Depreciation
7.6
Rent
5.6
Gross investment
15.1
Export
18.7
Government expenditure
17.7
Imports
16.1
Net factors income from abroad
- 0.5
Subsidy
2.2
Private corporation income
10.7
Company profits
12.5
Indirect taxes
12
Answer Q: 2-5

ITEMS
RM (Million)
Household expenditure
44.5
Gross investment
15.1
Government expenditure
17.7
Net Export: 18.7 - 16.1
2.6
GDPmp
79.9
Subsidy
2.2
Indirect taxes
(12)
GDPfc
70.1
Net factors income from abroad
(0.5)
GNPfc
69.6
Depreciation
(7.6)
National Income (NNPfc)
62
Question 2-5
ITEMS
Depreciation
Transfer Payment
Retained earnings
Corporate tax
Personal income tax
GNPfc
RM (Million)
5000
4000
800
100
7000
800
351200
Question 2-6
ITEMS
Consumption
Exports
Government Expenditure
Change in stock
Personal income tax
Imports
Taxes on expenditure
Transfer payment
Wages and salaries
Capital consumption
Employees provident fund
Subsidies
Net FIRA
Private investment
RM (Million)
30
10
25
-5
3
15
10
5
30
5
2
4
50
20
Question 2-7
ITEMS
RM (Million)
Depreciation
10
40
Export
10
Government purchase
100
Import
20
20
25
250
Personal taxes
40
Private investment
15
Transfer payment
22
Answer Q:2-7(a)
ITEMS
RM (Million)
250
Private investment
Government purchase
100
Net Export: 10 - 20
(10)
GDPmp
345
25
GNPmp
370
(20)
Subsidy
GNPfc
350
Depreciation
(10)
National Income
340
Answer Q:2-7(b)
ITEMS
RM (Million)
National Income
340
(40)
(15)
Transfer payment
22
Personal Income
307
Personal taxes
(40)
Disposable Income
267
RReal
e a Income
l Income
Real income or real Gross National Product (GNP) is GNP measured on a fixed
price or base year.
Nominal GNP measured in current price
Can convert the nominal GNP to Real GNP by using a GNP deflator
GNP deflator: obtained by comparing the base year index

with the current year price index
GNP deflator =
Current year price index

Base year price index
To find the Real Income or real GNP, the following formula can be used:
Real GNP =
Base year price index

Current year price index
Nominal GNP
GNP deflator
X Nominal GNP
Per Capita Income & Growth Rate

Per Capita Income
Per Capita Income refers to the average income per head of population.
Per Capita Income as index of change in the standard of living of a country
Per Capita Income =
National Income
Total Population
Growth Rate
The economic growth rate of a country can be measured as a gross domestic
product (GDP) or gross national product (GNP) based on real income.
Growth Rate percentage change in the quantity of good and services
produced from one year to another.
Growth Rate =
Real GNP this year Real GNP last year

Real GNP last year
X 100
* This formula can also be used to calculate Real GDP
PRACTISE[02]
Question 3-1
The National Income for country X for the year 2013 is
84000 million with 30 million of population.

:: Calculate per capita income for country X
Question 3-2
The National Income for country ABC for the year 2012 is
78500 million with 20 million of population.

:: Calculate per capita income for country X
Question 3-3
The real per capita income for the years 2012 and 2013 are
RM4268and RM4375 respectively.
:: Calculate the growth rate of the economy between 2012 and
2013.
Question 3-4
Year
Contribution to GDP by
the industrial sector
(RM million)
2005
24307
2006
26859
2007
30324
2008
34458
:: Calculate the average growth rate of the contribution of the

manufacturing sector to Malaysians GDP between 2005 \
and 2008
PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING
Calculation of National Income

Double counting
Accuracy of information
Unpaid activities
Transfer Payment
Activities that are illegal but productive
Depreciation
Comparison of National Income between countries

Comparison of National Income between time periods

Concepts of national income
Different treatments of items
Pattern of income distribution
Unpaid productive activities
General Price Levels
Working Hours
Foreign exchange rate

General Price Level
Quality of goods and services
Population composition and total population
Pattern of income distribution
FACTORS AFFECTING NATIONAL INCOME
Internal
Quality and quantity of factors of population
Level of technical knowledge and usage of modern technology
Level of specialization
Political stability
External
FACTORS AFFECTING NATIONAL INCOME
Internal
External
Foreign investment
Terms of trade
Receiving assistance
USAGE OF NATIONAL INCOME DATA
Measure countrys rate of economic growth

Measure total contribution of economic sectors to total national production
Economic planning
Measure countrys general standard of living
Show or indicate the success or failure of government policies

Economic planning

Economic planning

Economic planning

Economic planning
Finish Chapter 2

Macroeconomics National Income Accounting

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Sophian Sout,

:: the Definition of National Income Accounting

:: the calculation [01]

Net factor income paid abroad (FIPA)

:: the calculation [02]

:: the calculation [03]

:: the calculation [04]

Net factor income paid abroad (FIPA)

:: the calculation [05]

:: the calculation [06]

:: the calculation [07]

DISPOSABLE PERSONAL INCOME

Agriculture, forestry, and fishing

Mining and quarrying

Electricity, gas, and water

Transportation, storage, and communication

Commerce, retail, hotel and restaurant

Finance, insurance, and real estate

+ Undistributed company profit

Personal income taxes

Factor income received from abroad

Social security contribution

Factor income paid abroad

Undistributed company profit

Company income tax

Net Export : 609133 - 492928

NFIRA: 21470 - 20470

Social security contribution

Undistributed company profit

Company income tax

Personal income tax

:: Calculate the National Income

:: Calculate the National Income

:: Calculate the National Income

:: Calculate the National Income

:: Calculate the National Income

Net factors income from abroad

Private corporation income

:: Calculate the National Income

Net Export: 18.7 - 16.1

Net factors income from abroad

National Income (NNPfc)

Corporate income taxes

Indirect business tax

Net factor income from abroad

Personal consumption expenditure

Social security contribution

Personal consumption expenditure

Net factor income from abroad

Indirect business tax

Corporate income taxes

Social security contribution

GNP deflator: obtained by comparing the base year index

Current year price index

Base year price index

Per Capita Income & Growth Rate

Per Capita Income =

Real GNP this year Real GNP last year

* This formula can also be used to calculate Real GDP

The National Income for country X for the year 2013 is

84000 million with 30 million of population.

78500 million with 20 million of population.

:: Calculate the average growth rate of the contribution of the

PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING