In economic theory and statistics of foreign countries, macroeconomic indicators calculated on the basis of the system of national accounts are used to characterize the final results of annual production: gross national product (GNP), gross domestic product (GDP), national income (ND), net national product (NPV), etc.
In the national statistics of some countries (USA, Japan), the gross national product is considered the main indicator of the performance of the national economy. It represents the market value of all final goods and services produced in an economy over a period of time (usually a year). It should be noted that final goods and services are those that are purchased during the year for final consumption and are not used for intermediate consumption (i.e. in the production of other goods and services). GNP characterizes the value of the final proportion, created by residents in the territory of this state and the foreign sector of the economy, but does not include the activities of non-residents in the economic territory of this country. When calculating it, the entire value of final goods and services that are produced by domestic enterprises (firms, organizations) within the country is taken into account and the balance between payments abroad and payments from abroad is added (or subtracted) to this amount. Thus, the calculation of GNP is based on the national principle: the value of products produced by residents of a given country, regardless of their location, is taken into account.
Gross domestic product. This indicator is a kind of modification of GNP, but unlike the latter, it covers the results of activities in the territory of a given country of all economic entities, regardless of their nationality. The difference between GNP and GDP is twofold. On the one hand, when calculating GDP, the amount of income from the use of the country’s resources abroad (wages, interest, dividends, etc.) is deducted from GNP. On the other hand, in the calculation of GDP, similar incomes of foreigners received in a given country are added to GNP. For example, dividends received by foreign investors are accounted for in the GNP of the country of their habitual residence and in the GDP of a country whose corporate shares are purchased by foreigners. Thus, the value of GNP differs from the value of GDP by an amount equal to the trade balance, i.e. it is the difference between the value of a country’s exports and imports. A surplus increases the size of society’s product, and therefore GNP will be greater than GDP.
In economic theory, the following types of GDP (GNP) are distinguished:
– nominal GDP (GNP) – calculated in current or current prices;
– Real GDP (GNP) – adjusted nominal GDP taking into account the price level (inflation or deflation). For example, real GDP is calculated by the formula:
Real GDP = | Nominal GDP | x 100 |
Price index |
Real GDP is a more accurate characteristic of the national economy. The ratio of nominal to real GDP shows the change in GDP as a result of price changes and is called the GDP deflator. It should be borne in mind that the GDP deflator includes not only the prices of consumer goods and services, but also the prices of investment goods, goods purchased by the government, as well as goods and services bought and sold on the world market.
the actual GDP is determined in real conditions, and the potential – taking into account the achievement of full employment and the use of all production potential. the created GDP is calculated as the totality of the market value of the final products and services created in a year. distributed GDP is calculated as the sum of the income of all enterprises, business structures and the population engaged in the production of material goods and the provision of services, i.e. the amount of income in the form of wages, interest on capital, rents and profits, as well as the amount of depreciation and social insurance contributions. the GDP used is calculated as the sum of the final consumption of material goods and services by the population, investments by enterprises, government spending and the balance of foreign trade (exports and imports).
There are three methods of measuring GDP (GNP): production (by value added), distributive (by income) and final use (by expenditure). These methods reflect the processes of production, distribution and use of the national product.
The production method is based on the exclusion from the cost of all released goods and services of that part of them that was consumed in the production process. The fact is that the production of goods and services covers several stages: at some enterprises, raw materials turn into an intermediate product (units, parts, components), which is then transferred to other enterprises that produce the finished product. Therefore, the calculation of the value of all final products and services consists in summing up the value added at each stage of production.
Added value is the value created in the production process. It does not include the cost of consumed raw materials and materials. To determine the monetary value of value added, it is necessary to subtract the cost of materials and components purchased from suppliers from the company’s sales volume. Suppose that the Minsk Automobile Plant produced and sold cars worth 10 billion rubles per year. Of this amount, 4 billion rubles represent the cost of wheels, engines, glass, electrical equipment, paints and other goods purchased for production. In other words, 4 billion rubles is the cost of an intermediate product, which was included in the cost of the final product – a car. In this case, the added value will be 6 billion (10 billion – 4 billion).
Thus, in order to calculate the total GDP for a country, it is necessary to add up the value added by all its producers, including deductions for depreciation, since the fixed assets of the enterprise are involved in the creation of new value for the products produced.
It should be noted that GDP should take into account all output. But some of it is not sold in the markets and therefore is difficult to assess. This is the repair of the apartment by its owner, homework for washing, cleaning, cooking, all types of self-service, etc. There is also a “shadow” economy: illegal income from the “underground” production of goods, moonshine, drug sales, etc. The volume of the shadow economy reaches significant proportions. In different countries, it ranges from 3 to 25% of GDP. This part of GDP is calculated approximately and forms a contingent value.
It should also be borne in mind that GDP includes the value of goods produced only for a certain period. Therefore, for example, transactions with pre-existing assets, such as houses, are not included in GDP, since they are not the results of current production. But if the house is built this year, its value is fully taken into account in GDP.
GDP calculated by the production method, in addition to value added, includes net indirect taxes. In the SNA, these are taxes on production and imports. Net indirect taxes are the difference between the sum of all taxes on production and imports paid by enterprises and the subsidies for production and imports received from the state.
When calculating GDP (GNP) by the distributive method (by income), all types of factor income (wages, rents, interest, etc.) are summed up, as well as two components that are not income: depreciation deductions and net indirect taxes on business, i.e. taxes minus subsidies. However, it is important to consider the flow of income that the owners of factors of production receive. The total income in the economy received by the owners of factors of production is called gross domestic income. If we add to the gross domestic income, which is the sum of primary income, the balance of factor income from abroad, we get gross national income.
There are two types of income: labor and property. The main part of labor income is wages. In addition, it includes the income of owners of unincorporated enterprises, received as remuneration for their work.
Income from property (entrepreneurial income) includes:
rental income, i.e. income from the transfer of rights (to land, to patents, to the development of subsoil, etc.); profit from investing equity in its enterprises; corporate profit – income on capital (equipment, buildings, patents) in the corporate sector of the economy; net interest income – payments of business and the outside world to firms and farms of a given country for loans provided.
When analyzing the movement of income, it is customary to distinguish the following phases: the formation of incomes, primary distribution, redistribution, the formation of final (disposable) incomes, the use of disposable income to finance final consumption and savings.
Disposable income is income that goes to households. Note that not all gross national income is made available to households, as some of its elements are excluded from payments to these households.
However, some types of income received by households are not included in gross national income and must therefore be added to it. The share of firms’ profits that remain at their disposal and corporate income taxes are excluded from gross national income; added: part of the profits at the disposal of the shareholders of the corporation in the form of dividends, interest payments by the government, as they are initially included in transfer payments, transfer payments – child benefits and other social payments. The result is gross disposable income (GDD). The WFD comes in the form of household consumption expenditure – the total expenditure of households on goods and services. They make up to 90% of the VRD. The balance of the VRD is national savings.
Savings are the part of the VRD that goes to savings. Savings are made by buying securities, purchasing real estate or jewelry, as well as placing money on deposit in a bank. The share of personal savings in the VRD is called the rate of personal savings. It ranges from 22% (in Italy) and 18% (in Japan) to 4% (in the US).
When calculating GDP (GNP) by expenditure (end-use method), the expenditures of all economic agents using this product are summed up: households, firms, the state and foreigners (the cost of our net exports). In fact, we are talking about aggregate demand for produced GDP (GNP). The calculation of GDP (GNP) by expenditure is carried out according to the formula:
GDP (GNP) = C + I + G + Hen,
where C is personal consumption expenditure, which includes household expenditure on durable goods and current consumption, on services, but does not include expenditure on the purchase of housing;
I – gross investments, including production capital investments or investments in fixed production assets (firms’ costs for the acquisition of new production enterprises and equipment); investment in housing construction; investments in inventories (the growth of reserves is taken into account with the “+” sign, the decrease – with the “-” sign). Gross investment (investments that increase the stock of capital in an economy) can also be represented as the sum of net investment and depreciation;
G – public procurement of goods and services, for example, for the construction and maintenance of schools, roads, maintenance of the army and the state administration apparatus, etc. However, this is only part of public spending, financed from the state budget. This does not include, for example, the net export of goods and services abroad, calculated as the difference between exports and imports.
When calculating GNP, it is necessary to take into account all costs associated with the purchase of final goods and services produced in a given country, including the costs of foreigners, i.e. the value of exports of this country. At the same time, it is necessary to exclude from the purchases of economic agents of a given country those goods and services that were produced abroad, i.e. the cost of imports.
The above equation of GDP (GNP) is often called the basic macroeconomic identity. The difference between the components of GDP (GNP) – C, I, G, Hn – is based mainly on the difference between the types of buyers who make these costs (households, firms, the state, foreigners), and not on the difference in the goods and services purchased. Thus, a car purchased by a household is included in component C; If it is acquired by a firm, this is part of the investment in fixed assets, etc. The exception is investments in housing construction, which are included in GDP (GNP) without dividing into components depending on who made these investments – households, businesses or the state.
Among the components of GDP (GNP), the largest are usually consumer spending (C) and the most volatile are investment spending (I).
Other macroeconomic indicators (net national product, national income, personal income, disposable personal income, consumption, savings, gross national disposable income) are also calculated on the basis of GDP (GNP):
The net national product can be obtained from GNP by deducting depreciation (A) from it:
NPV=GDP – A
There is a difference between the prices at which consumers buy goods and the selling prices of firms. This difference represents indirect business taxes (value added tax, excise duties, import duties, taxes on monopoly activities, etc.).
National income (ND) is an indicator representing the total income of all residents of the country, it turns out if net indirect taxes on business, i.e. indirect taxes minus subsidies to business, are deducted from the NPP.
Personal income (LD) is obtained by subtracting social security contributions, retained earnings of corporations, corporate income taxes, and adding the amount of transfer payments from national income. It is also necessary to deduct the net interest and add personal income received in the form of interest, including interest on domestic public debt.
Disposable personal income (RLD) is calculated by reducing personal income by the amount of income tax from citizens and some non-tax payments to the state. Disposable personal income is used by the household for consumption and savings.
Consumption (C) is the most important component of GDP (GNP). In the long term, the changes in GDP (GNP) and consumer spending are approximately the same, but in the short term, consumer spending fluctuates to a lesser extent than GDP (GNP), since they depend mainly on disposable income, the growth or decrease of which, both in magnitude and in its components, does not coincide with the dynamics of GDP (GNP). For example, the two most important components of disposable personal income that distinguish it from GDP (GNP) – taxes (under a progressive tax system) and transfers – act as automatic stabilizers during periods of recessions and booms: taxes decline during recessions, and transfers rise, so disposable personal income does not decline as fast as GDP (GNP).
Savings (S) are defined as income minus consumption.
Disposable income can be defined not only at the household level (disposable personal income) but also at the level of the economy as a whole.
Gross national disposable income (GNRD) is obtained by summing up GNP and net transfers from abroad, i.e. transfers received from the “rest of the world” (donations, donations, humanitarian aid, etc.) minus similar transfers transferred abroad. Gross national disposable income is used for final consumption and national savings.
Thus, the system of basic macroeconomic indicators introduced into statistical practice by the System of National Accounts (SNA), which is now widely used by market economies and implemented by the CIS countries, can be represented in the form of a system of basic indicators of GNP (GDP), which is reflected in Fig. 3.2.