Economics_National_Income_Accounting.pdf - INDIGOLEARN National Income Accounting www.IndigoLearn.com 91 9640 11111 0 National Income Accounting

Economics_National_Income_Accounting.pdf - INDIGOLEARN...

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National Income Accounting INDIGOLEARN +91 9640 11111 0
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National Income Accounting IndigoLearn Page | 2 1. INTRODUCTION 1.1. Structure of the Unit 1.2. System of National Accounts United Nations has developed concepts of National Income and these concepts and definitions are adopted by most countries for computation and reporting of National Income. Such concepts are given in System of National Accounts (SNA). National accounts refer to the accounts of the various Macro-economic activities that nations undertake macro-economic factors and methods of computation and reporting of such macroeconomic factors and activities. The system given by United Nations for such National Accounts is known as System of National Accounts. National Income Concepts of National Income 1. GDP MP 2. NDP MP 3. GNP MP 4. NNP MP 5. GDP FC 6. NDP FC 7. NNP FC 8. Per Capital Income 9. Personal Income 10. Disposable Income Methods of Computation of National Income Product Method Income Method Expenditure Method Usefullness and Limitations of National Income System of Regional Accoutns in India Question: What is the purpose that SNA serves? Answer: 1. It provides a comprehensive accounting framework 2. For compiling and reporting Macroeconomic statistics 3. It helps in analyzing and evaluating performance of an economy.
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National Income Accounting IndigoLearn Page | 3 1.3. Circular Flow of Income In Production phase, firms employ factors of production for production of goods and provision of services. In the next phase of Income distribution, firms pay factor incomes to the factors of production in the form of rent, wages, interest and profits towards land, labor, capital and entrepreneurship. In the expenditure or disposition phase, the income received by factors of production is spent on various goods and services, and such expenditure leads to further production of goods and services. In the circular flow, the same income flows at three different levels and thus National Income can be computed and analyzed from three different angles, viz. Flow of Production, Flow of income and Flow of expenditure. Production of Goods and Services Distribution as Factor Incomes (Rent, wages, int, profit) Disposition - Consumption /Investment
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National Income Accounting IndigoLearn Page | 4 2. CONCEPTS OF NATIONAL INCOME 2.1. Gross Domestic Product Gross Domestic Product (GDP) refers to the value of goods and services produced in a country. GROSS refers to the value being gross of depreciation. Depreciation represents the value of Capital Expenditure made for production of goods and provision of services, which is one the factors of production. As the benefit of capital expenditure generally extends beyond one year, depreciation is charged every year as an expense over the years to which the benefit of such capital expenditure is spread. Such amount of depreciation is included in the value of GDP which is a measure of National Income, as it represents the value attributed to one of the factors of production, i.e. Capital Expenditure.
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