Текст 5 National Income Accounting. Measuring gdp

Gross domestic product (GDP) measures the output produced by factors of production located in the domestic economy regardless of who owns these factors.

GDP measures the value of output produced within the economy. Most of this output will be produced by domestic factors of production but there are some exceptions. Suppose Nissan or Peugeot builds a car factory in the UK. They employ UK workers and use machines made in the UK. Their output is part of GDP for the UK. However, the company's profits are owned by shareholders in Japan or France. Hence the value of the factory's output cannot be expected to be the same as the value of incomes earned by UK households. Initially we shall simply suppose that we are discussing a country with no links.

With the rest of the world. Shortly, we shall introduce the rest of the world and show that it is precisely the issue of how to treat payment of profits and other income to foreigners that explains why we have to distinguish GDP from the concept of GNP, which we introduced earlier. When an economy has no transactions with the rest of the world we say that it is a closed economy.

We begin by considering how our simple circular flow diagram should be extended to recognize that transactions do not take place exclusively between a single firm and a single household. Firms hire labor services from households, but they buy raw materials and machinery from other firms. If we include the value of the output of cars in GDP we do not want also to include the value of the steel sold to the car producer, which is already in the value of the car.

To avoid double counting, we use the concept of value added.

Value added is the increase in the value of goods as a result of the production process.

Value added is calculated by deducting from the value of the firm's output the cost of the input goods that were used up in the act of producing that output,

Closely related to the concept of value added i is the distinction between final goods and intermediate goods.

Текст 6 From gdp to gnp

To complete our description of the national accounts we must deal with two final problems. Thus far we have assumed that all factors of production are domestically owned: all net domestic output accrues to domestic households as factor incomes. But this need not be the case. When Nissan or Peugeot owns a car factory in the UK, some of the profits will be sent back to Japan or France to be spent or saved by Japanese or French households. Similarly, when immigrant workers send some of their wage packets back home to support relatives, or foreign owners of UK property or shares in UK companies send home some of their income from property rents or company dividends, there is a discrepancy between the factor incomes earned in the UK and the factor incomes accruing to UK households.

Conversely, UK households earn income from factor services that they supply in foreign countries. Since most of these income flows between countries are not labor income but income from interest, dividends, profits, and rents, they are shown in the national accounts as the flow of property income between countries. The net flow of property income into the UK is the excess of inflows of property income from factor services supplied abroad over the outflows of property income arising from the supply of factor services by foreigners in the UK.

When there is a net flow of property income between the UK and the rest of the world, the output and expenditure measure of GDP will no longer equal the total factor incomes earned by UK citizens. We use the term gross national product (GNP) to measure GDP adjusted for net property income from abroad.

GNP measures total income earned by domestic citizens regardless of the country in which their factor services were supplied. GNP equals GDP plus net property income from abroad.