MACROECONOMICS

SIMPLIFIED

Edilberto B. Viray, Jr. MAE

Lucky Raymundo M. Malveda, MAE
Ma. Jesusa Avila – Bato, MAE
 CHAPTER V
The National
Income Accounting

ANVIL PUBLISHING INC., 2016

 CHAPTER V: The National Income Accounting

 Gross Domestic Product

 Gross Domestic Product Shortcomings
and Gross National
Product  Non-market
Transactions
 Approaches in
Measuring GDP  Distribution, Kind, and
Quality of Products
 The Expenditure
Approach  Neglect of Leisure Time
 The Income Approach  The Underground
Economy
 The Industrial Origin or
Gross Value Added  Economic Bads
Approach  Simplified
 Nominal or Current GDP Measurement of the
versus Real GDP Philippine’s Annual
Gross Domestic
Product
 CHAPTER V: The National Income Accounting

Gross Domestic Product and Gross National Product

Gross Domestic Product (GDP) is the total market or

money value of all final goods and services produced in
an economy over a period of one year. GDP excludes
production abroad by Philippine businesses

Gross National Product (GNP) is the total market or

money value of all final goods and services produced by
a nation’s residents (e.g. Filipinos), no matter where they
are located
 CHAPTER V: The National Income Accounting

Approaches in Measuring GDP

1. The Expenditure approach

2. The Income approach
3. The Industrial origin approach.
 CHAPTER V: The National Income Accounting

The expenditure approach measures GDP by

adding all the spending for final goods during a
period of one year. Thus, we can say that GDP is
equal to:
GDP = C + I + G + (X – M)
GNP = C + I + G + (X – M) + NFIA
where: C is personal consumption expenditure, I
is gross private domestic investment, G is
government consumption expenditures and gross
investment, and (X – M) is net exports.
 CHAPTER V: The National Income Accounting

The income approach measures GDP by

adding all the incomes earned by
households in exchange for the factors of
production during a period of time
National Income=compensation of employees
(w/s) + rents (r) + profits (P) + net interest (i)
GDP = National Income + IBT + D
GNP = National Income + IBT + D + NFIA
 CHAPTER V: The National Income Accounting

The third approach to GPD calculation is the

industrial origin or gross value added
approach. Under this approach, the economy
is divided into three sectors composed of
industries, as follows: (1) agriculture, fishery,
and forestry sectors; (2) industry sector; and
(3) service sector. The gross value added is
the domestic product of goods and services
produced by industries within the country
7 Top Industries in the Philippines:
Agriculture, Mining, Manufacturing,
Constructions, Trade, Transport
and Commerce and Services

GDP = A + I + S
GDP = GVA (Gross Value Added)
GNP = GVA + NFIA
GDP Shortcomings

•Nonmarket Transactions
•Distribution, Kind, and Quality of Products
•Neglect of Leisure Time
•The Underground Economy
•Economic Bads
 CHAPTER V: The National Income Accounting

Nominal or Current GDP versus Real GDP

Nominal or current GDP is the value of all final

goods and services based on the prices
existing during the time period of production

Real or constant GDP is the value of all final

goods and services produced during a given
time period based on the prices existing in a
selected base year
 CHAPTER V: The National Income Accounting

Simplified Measurement of the Philippine’s Annual

Gross Domestic Product (assumption).

Using the three approaches for GDP:

1. The Expenditure approach
2. The Income approach
3. The Industrial origin approach
CHAPTER V: The National Income Accounting
CHAPTER V: The National Income Accounting
CHAPTER V: The National Income Accounting
CHAPTER V: The National Income Accounting
CHAPTER V: The National Income Accounting
CHAPTER V: The National Income Accounting
CHAPTER V: The National Income Accounting

End of Chapter V