National income(national income) - the value of the total product newly created in the country during the year, calculated in monetary terms, representing the income brought by all factors of production (land, labor, capital, entrepreneurship).
The country's national income is equal to minus () and indirect taxes. On the other hand, national income can be defined as the sum of all income for the year in the form of wages, industrial and commercial profits, interest on invested capital and land rent.
National income is one of the most important general indicators of a country's economic development. National income consists of:
- wages of workers and salaries of employees;
- additional payments;
- rental income of property owners;
- net interest on consumer loans;
- corporate profits;
- owners' income.
National income is the value newly created (over the year) in the branches of material production (interpretation adopted in Marxist literature). For many years, national income in this interpretation was considered as the basis for further expanded reproduction and growth in the material well-being of people and was the main indicator of Soviet statistics.
The growth of national income depends on two factors: the growth rate of labor productivity (intensive) and the growth rate of the number of people employed in material production (extensive). The sum of the net output of individual branches of material production - national income produced. If we calculate the sum of consumption funds and , we get the so-called used national income. It is less than what was produced by the amount of losses in the national economy (as well as the balance of foreign trade).
In the modern interpretation, the sources of national income are not limited only to material production: they also include all activities for the production of services, the role of which has been rapidly increasing in recent decades. In this interpretation, national income is the entire net national product, which differs from the gross national product by the amount of depreciation. There are three approaches to calculating national income:
- The income approach is national income as the sum of income from economic activity (profits, rent, wages); that is, it is the total income received by resource suppliers for their contribution to the production of GNP. It is equal to GNP minus deductions that are not someone else's income.
- Expenditure approach. Here, national income is the total cost of expenses for and, accumulation of reserves, etc.; With this approach, national income is divided into payments:
- firstly, to households (wages, interest, dividends and rent) spent on consumption (denoted by - WITH);
- secondly, to the government (taxes minus subsidies going towards government spending) - G;
- thirdly, to the owners of enterprises (profits invested in the economy) - I.
- Output approach. Here, national income acts as the total value of all products of sectors of the national economy.
Thus, we obtain the main identity of many macroeconomic models (it must be emphasized: closed models). This is the identity (or rather, approximate equality in volume) of the national product, national income and national costs:
Y ≡ N ≡ C + I + G,Where
Y– national product;
N– national income;
C— consumption;
I— investments;
G– state (government) expenses.
Moving to an open model, it is also necessary to take into account the results of foreign economic activity (foreign trade balance, import and export of capital, profits of transnational companies, etc.), and some other elements (the usually accepted designation NX with the corresponding sign - plus or minus).
Currently, in domestic practice, national income does not appear as an official general indicator. However, it certainly retains analytical significance and is used as such in the System of National Accounts.
When analyzing economic dynamics, the index of physical volume of national income is used; for its calculation, the net production of different years is assessed in comparable prices (directly reduced to a certain date or - for a long period - calculated by the chain method). When analyzing the static processes of distribution and redistribution of national income, it is necessary to calculate it in actual (current) prices. The latter are, however, also used in analyzing dynamics, characterizing value shifts over the period under study.
As a parameter in a number of economic and mathematical models of national economic development, the ratio between the consumption fund and the accumulation fund in the national income is used. It serves as one of the factors determining the effectiveness of economic development.
A general indicator of production volume in the national economy is gross product (GP), which is divided into GDP and GNP:
Gross Domestic Product (GDP) – This is the total market value of the total final production of goods and services created in the territory of a given country during the year using factors of production owned both by that country and by other countries.
Gross National Product ( GNP) – it is the market value of the total final production of goods and services created by national enterprises at home or abroad during the year using factors of production owned by that country.
GNP differs from GDP by the sum of the balance of income received by a given country from abroad and income transferred abroad received in the territory of a given country. Features of the GDP or GNP indicator:
1) all goods and services are paid in cash once;
2) these are indicators that take into account the volume of production for a certain period of time, usually a year;
3) these are indicators that take into account goods and services, regardless of whether they have been sold or not;
4) these indicators take into account only final products (products for final consumption), and not for resale and processing.
The basic principles for calculating these indicators are: exclusion "double counting errors""and exclusion from calculation unproductive transactions. The first principle is ensured by industry accounting of only added value.
Added value- this is the market price of the volume of products produced by the company minus the cost of consumed raw materials and materials purchased from suppliers. This is the contribution of a given company to the production of the current year, consisting of the wages of its employees, utility payments and rent payments.
Exclusion from the calculation of non-production transactions, i.e. those transactions that are not accompanied by an increase in the production of goods and services. Non-productive transactions are: Firstly, purely financial transactions of three types: purchase and sale of securities; government transfer payments to certain categories of citizens (social insurance payments, unemployment benefits, pensions, benefits, scholarships); private transfer payments (one-time gifts from relatives, monthly subsidies to students from their parents), Secondly, sale of second-hand items (each item should be counted in the calculation of GDP only once).
where C – personal consumer expenses;
I – gross private domestic investment, including industrial capital investment in primary production;
G – government procurement of goods and services;
Xn – net exports – the difference between exports and imports.
The calculation method based on company income includes:
where A – depreciation – deductions for capital consumption;
T – indirect taxes on business;
(C+S) – (expenses and savings show income) – these are wages, contributions to social insurance funds, pensions and employment;
R – rent payments (rent);
r – interest income of capital owners;
P – profit, including that received by private owners, corporate profits.
A peculiarity of the calculation of GNP by income is the presence in the income composition of two categories of distribution of funds not related to the payment of income - depreciation (A) and indirect business taxes (T).
Depreciation – These are annual deductions for the reimbursement of capital consumed during the year, i.e., fixed assets operating in production for no more than a certain period, which depends on the policy of the enterprise. In general, for the national economy, depreciation charges are a huge amount, but it is not an increase in profit, since it must be set aside to replace in the future the capital consumed during production in individual years.
Indirect business taxes include: value added tax (VAT), sales tax, excise taxes, customs duties, property tax, etc. These taxes are included in the price of goods and services, and thus are passed on to the buyer. The influx of indirect payments into the treasury is, in fact, unearned income of the government, since it does not make any contribution to the current year's production in exchange for the receipt of indirect taxes into the budget.
Calculation of GDP by industry takes into account the role of industries in creating GDP by value added.
Reducing the value of GDP by the amount of depreciation charges, we get net national product (NNP ) – the total annual production of goods and services produced and consumed in the country.
National income (NI)– the value newly created during the year, characterizing the welfare of society, i.e. the amount of wages, rent, profit, interest, is determined by subtracting from the value of income indirect taxes on business, which do not reflect the contribution of economic resources in its creation.
Personal income (PI)- this is the amount of income of the population, determined by deducting from the national income (NI) the contributions of workers, employees and employers to the social insurance system, taxes on corporate profits and undistributed profits, but adding transfer payments . It is earned income, not received income. Citizens do not receive all of their personal income, as it is subject to taxes.
Disposable income (Disposable income)– income available for direct spending by households; determined by subtracting individual taxes from personal income.
The income level of the population is reflected using the following indicators.
Average per capita cash income, which are calculated by dividing the total cash income by the current population.
Nominal money income population is characterized by the total amount of money received (or accrued) over a certain period of time.
Disposable cash income – This is income that can be used for personal consumption and savings. They are equal to nominal income minus taxes, mandatory payments and voluntary contributions from the population.
National income- this is the total annual cost of goods produced and services provided, characterizing what production added in a given year to the welfare of society. To calculate national income, the amount of indirect taxes on business, such as excise taxes, sales tax, and customs duties, is subtracted from it.
National income = - consumption of fixed capital
National income = - indirect taxes
Indirect taxes- excise taxes, VAT, customs duties, etc., i.e. surcharges to the price of any good.
That is, it is the net earned income of society. This explains the importance of using national income in comparable analysis.
National income is generated by each type of activity, regardless of occupation (military, government official, etc.). Part of the income is appropriated by the state in the form of indirect taxes, the other goes to the disposal of firms and the population. Revenues, which are appropriated by the state in the form of indirect taxes, are directed to support sectors of the national economy that require state support - for the development of agriculture, financing environmental protection, compensation for losses from natural disasters, etc.
For resource suppliers, national income is a measure of the income they received from participating in current production, and for companies, national income is a measure of the prices of economic resources that were used to create the production volume of a given year.
National income is distinguished:- Industrial national income is the entire volume of newly created value of goods and services.
- Used national income is the national income produced minus losses from damage during storage (natural disaster) and the foreign trade balance.
National income distribution
The formation of national income is inextricably linked with its distribution. Entrepreneurs at all levels constantly pay for the use of all factors of production in the form of wages, rent, and interest on capital used. In a market system, the price of each factor is determined according to supply and demand for it, which affects the fair distribution of factor income. Its recipients may not have full control over it. All commodity producers are forced to pay direct taxes, which are deducted from the income of the population. These include income tax, profit tax, and inheritance tax.
Today in Russia, as in other developed countries, a social insurance system is developing, which assumes that part of the income of legal entities and individuals is transferred to social insurance funds.
The company constantly feels the need for money to expand and update production, hence part of the profit received is directed to the creation and acquisition of new equipment and technologies, the other goes to the formation of a reserve fund to maintain stability in unforeseen circumstances. Another part remains at the disposal of the company in the form of retained earnings. By decision of the meeting of shareholders, part of the profit is distributed in the form of dividends among shareholders.
The system of market economic relations is structured in such a way that the entire working-age population pays taxes to the state, and a certain part of the population receives various payments from the state budget in the form transfer payments. These include state payments for accident insurance, old age, unemployment benefits, various pensions (for age, disability, war veterans, etc.). Holders of government securities receive interest payments on them. These payments do not relate to factor income. Transfer payments are sent to the direct recipient only in cash. Through the collection of direct taxes, social security fees, on the one hand, and transfer payments, on the other, the state carries out the process of redistribution of national income, as a result of which the process of formation of the total disposable personal income.
GNP) - the total value of the entire volume of final production of goods and services in current prices (nominal GNP) or base year prices (real GNP), produced on the territory of a given country and abroad, using factors of production owned by a given country. In other words, GNP is all products produced by a given country over a certain period of time, the cost of all goods produced and services provided. Since then, according to the new System of National Accounts, GNP has been renamed gross national income (GNI). However, national statisticians in some countries continue to use the same terminology.GNP, along with gross domestic product, is the basic, most holistic and generalizing macroeconomic indicator, since production volumes make it possible to assess the economic power of a given country. The higher the GNP, the more products the national economy produces.
Methods for calculating GNP
GNP = GDP + Balance of primary income received from abroad or transferred abroad (such first income usually includes wages, income from property in the form of dividends)
Nominal and real GDP
Due to constant dynamics in production volumes, each country's GDP tends to change over time. If the volume of per capita GDP increases, then this indicates an increase in the standard of living of citizens of a given society. On the contrary, negative dynamics of GNP indicates an economic crisis. Therefore, by comparing the GDP of two different years, you can find out in which of them the standard of living of citizens was higher.
However, the following problem arises with such comparisons. The fact is that GDP is measured in monetary units (rubles, dollars, euros, etc.), which in different years may have different purchasing power due to price changes. For example, if GDP was 1000 monetary units in 2000 and 2005, and the price level rose during this period of time, then in reality the standard of living has decreased, since the same amount can buy less goods at the end of the period than at the beginning. Therefore, in order to be able to make comparisons of GDP in different years, it is necessary to take into account price dynamics. For this purpose, the concepts of nominal and real GDP are introduced.
Nominal GDP- production volume in the current year, expressed in prices of the current period.
Where Q- volume of goods or services produced, P- the cost of a given product or service on the market.
Real GDP- production volume in a given year, but expressed in prices of the base period (for example, the previous year with which the GDP value is compared; allows for more accurate comparison of data, making adjustments for price increases):
, Where P base
- the cost of a given product or service on the market during the base period. To illustrate, consider the following example. Let the economy produce only two goods in 2000: product 1 and product 2. Moreover, in 2000, 80 units were produced. product 1, the price of which was 5 monetary units, and 50 pcs. 2 goods at a price of 12 monetary units per piece. Therefore, nominal GDP in 2000 was: 80 x 5 + 50 x 12 = 1000 monetary units. Let, further, in 2005, 60 units were produced. 1 product at a price of 6 monetary units and 40 pcs. 2 goods at a price of 16 monetary units. Nominal GDP in 2005 is equal to: 60 x 6 + 40 x 16 = 1000 monetary units. Thus, nominal GDP has not changed over these years. However, due to rising prices, real GDP in 2005, i.e. the volume of output in 2005 in 2000 prices decreased: 60 x 5 + 40 x 12 = 780 monetary units.
The ratio of nominal GDP to real GDP is called GDP deflator. For our example, the GDP deflator in 2005 is equal to 1000 / 780 = 1.282. The GDP deflator shows how much the general price level in the economy has increased (in this example, by 28.2%).
see also
Wikimedia Foundation.
2010.
See what “Gross National Product” is in other dictionaries: gross national product Technical Translator's Guide
GROSS NATIONAL PRODUCT (GNP)- (gross national product GNP) (Political Economy) the total monetary value of final goods and services produced in the economy during the year, including income from foreign property... Large explanatory sociological dictionary
Nominal gross national product- product not adjusted to the price level; reflects current prices, expressed in national currency at the current exchange rate...
Potential gross national product- (economic potential) – production volume at full employment of resources. Full employment of resources involves maintaining the share of idle production capacity at the level of 10–20% of their total volume and the natural level of unemployment... Dictionary of Economic Theory
Gross domestic product- (Gross domestic product, GDP) Definition of GDP, history of origin and calculation methods Information on the definition of GDP, history of origin and calculation methods Contents > Gross domestic product is the definition of GROSS DOMESTIC, )
