Measuring Domestic Output And National Income Pdf

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Gross domestic product

Not a MyNAP member yet? Register for a free account to start saving and receiving special member only perks. Natural and social scientists concerned about natural resources and the environment have endeavored to take the measure of nature. Measures used for this purpose range from those used to monitor the state of major environmental indicators, such as air and water quality, to analytical measures of major environmental aggregates. For the most part, however, measures of the economic contribution of natural resources and the environment have lagged behind physical measures.

The slow development of economic measures is due to two major factors. First, economic accounts generally record and measure activities that pass through the marketplace, while most of the activities that raise environmental concerns—from air pollution to appreciation of pristine wildernesses—take place outside the market.

Second, the paucity of data and difficulties of valuation for most environmentally related activities make constructing economic measures much more difficult than is the case for market-related activities. The end result is that most nations produce detailed national economic accounts accompanied by vast quantities of useful data for market-related activities and little or no comparable data for nonmarket environmental activities.

The intuitive idea behind the desire to broaden the U. Natural resources such as petroleum, minerals, clean water, and fertile soils are assets of the economy in much the same way as are computers, homes, and trucks. An important part of the. Likewise, consuming stocks of valuable subsoil assets such as fossil fuels or water or cutting first-growth forests is just as much a drawdown on the national wealth as is consuming aboveground stocks of wheat, cutting commercially managed forests, or driving a truck.

From the perspective of environmental accounting, the key point to recognize is that gross domestic product GDP is conceptually defined to include only the final output of marketed goods and services, that is, goods and services that are bought and sold in market transactions.

Department of Commerce, There are, however, important exceptions to this basing of the NIPA on market transactions. One is the exclusion of illegal activities such as drugs, prostitution, and illegal gambling; thus GDP will rise as gambling moves into the legal market sector. In addition, there are imputations for near-market services that are not recorded in market transactions. For example, there is an imputation for the services of owner-occupied housing so that these services can be included in output and income as are the rent and output associated with rental housing.

There is also an imputation for the fuel and food produced on farms and consumed by the farmers themselves. A further large imputation is made for banking and other financial services furnished by financial businesses below cost in lieu of interest payments. The key issue involved in environmental and other augmented accounts is whether to broaden the above boundaries and if so, how and how far. It has long been recognized that drawing the line at the limits of the market distorts the value of the NIPA as a measure of economic activities and well-being see also Chapter 1.

There is a vast and changing amount of productive nonmarket activity that produces goods and services quite similar to those produced in the marketplace. Commercial laundry services are reckoned as part of GDP, while parents' laundry services are not; the value of downhill skiing at a ski area is captured by GDP, while the value of cross-country skiing in a national park is not.

These core accounts are of great importance for purposes of historical and international comparison and will continue to be a critical indicator for economic policy making. The objective of augmented accounting is not to replace the core accounts with a preferred new bottom line; rather, the emphasis is on developing alternative approaches and measures that can illuminate the diverse dimensions of economic activity.

Work on augmented accounting by official statistical agencies, as well as by individual scholars, has provided estimates for a wide variety of nonmarket activities for experimental augmented national accounts see Eisner, , for a comprehensive review of augmented accounting. Beyond the environmental arena, which is reviewed in the next section, significant examples of work to extend the accounts include the following areas:. This work on extending the accounts is motivated by the idea that expanding the boundaries of the accounts would provide a better estimate of the size, distribution, and growth of economic activity and economic welfare than that offered by the current accounts.

In revising and extending the U. These efforts have entailed both modifications in core measures, such as the introduction of separate current and capital accounts for government, and the development of satellite accounts, such as for research and development. Satellite accounts sometimes referred to as supplemental accounts expand the analytical capacity of the national accounts without overburdening them or interfering with their general orientation. Because they supplement rather than replace the core accounts, they can serve as a laboratory for experimentation and provide a means for applying alternative approaches and new methodologies.

The guiding principle in developing augmented accounts is to measure as much economic activity as is feasible, regardless of whether that activity is of a market or nonmarket nature. The goal is to achieve a better measure of final output—of what consumers in the United States currently enjoy in the way of goods and services, and of the accumulation of capital, of all kinds, that will permit the future production of goods and services.

In terms of current consumption, augmented output includes not merely what consumers buy in stores, but also what they produce for themselves at home; the government services they ''buy" with their taxes; and the flow of services that are produced by environmental capital such as forests, national parks, and ocean fisheries. The need to include nonmarket components arises because of the tradeoffs between market and nonmarket activity. For example, parents produce more in the market when they go to work, but they also have less time at home for child care and domestic services.

Likewise, the resources used to provide government services that add to real consumption may reduce the quantity of services provided by businesses. In the environmental area, resources devoted to removing lead from gasoline and paint will lower conventionally measured consumption, but will raise the nation's human capital by protecting children from brain damage and other debilitating illnesses.

Similar issues arise in the measurement of national saving and investment. Conventional NIPA saving and investment measures include only tangible investments in plant, equipment, and inventories. This conventional picture omits the much larger intangible and human investments in education, training, research and development, health, and the environment.

A complete set of accounts would entail full integration of comprehensive investment flows with comprehensive capital or wealth accounts. These accounts would then relate not only to current production of goods, but also to changes in the value of human capital; to the accumulation of knowledge and technical advances; and to the improvement or deterioration of the basic environmental capital of land, water, and air. Development of a complete set of capital accounts would thus give the nation a much more complete picture of how well the current generation is performing in its role as trustees of the nation's tangible, human, and natural resources.

Comprehensive accounts and environmental accounting provide information that can help governments set sound economic and social policies and aid the private sector in making productive investments. An important example is use of pollution abatement costs to estimate the impacts of regulation on productivity and output growth. Studies by Denison and by Jorgenson and Wilcoxen have provided valuable information on the relative importance of regulation, pollution.

In addition, these data have been crucial inputs to studies of the cost of air pollution regulation and the benefits and costs of controlling air pollution conducted by the U. Environmental Protection Agency. Two major issues arise in the design of augmented accounts.

The first is where to draw the line when extending the accounts beyond the boundary of market transactions. The dilemma is similar to that faced by the little boy who said, "I know how to spell banana, but I don't know where to stop. Or should the accounts extend to all private goods, such as educational investments and the value of visits to Yellowstone National Park? Should the accounts attempt to measure the value of leisure time? Should they extend to include public goods such as the value of clean air and clear water?

Should they include international concerns such as the damages from ozone depletion and global warming? These thorny questions are taken up later in this report, but we note here that they are pervasive in the design of augmented accounts.

The second major issue is how to measure nonmarket activities. Measurement involves collecting data that will support estimates of both quantities and prices. While data on market activities are often costly to collect, for the most part the elemental data exist in the form of individual transactions in which someone buys a banana, a computer, or a haircut—transactions that are generally recorded.

Nonmarket activities pose difficulties because the physical activities involved are generally not recorded, and there are no objective records of the valuations. An example of the difficulty is a consumption service such as swimming in the Atlantic Ocean. No one records how many times Americans actually swim in the Atlantic Ocean in a given year. More difficult is the valuation of swimming: since swimming is generally free, except in congested areas, we do not know how to value the swims.

There are numerous techniques available for estimating both the quantity and value of nonmarket activities such as swimming, but they almost always require gathering additional data and involve complex imputations of value where no market data are available.

We must not, however, forsake what is relevant and important merely because it presents new problems and difficulties.

The economic light is brightest under the lamppost of the market, but neither drunks nor statisticians should confine their search there. In extending the accounts, we must endeavor to find dimly lit information outside our old boundaries of search, particularly when the activities are of great value to the nation. Over the last decade, BEA has taken a number of important steps in extending the core economic accounts and developing satellite and supplemental accounts BEA, a.

Among the most important developments in the core accounts are the following:. In its efforts to improve the national economic accounts, BEA has been proceeding in a prudent and conservative fashion, employing proven and consistent techniques. Such production-based measures of income and output are useful for delineating market activity and should continue to form the basis of the core national accounts.

Market-based concepts are inadequate, however, for tracking the entire range of economic activity, market and nonmarket. The purposes of augmented accounting are to provide more comprehensive measures of output, saving, and investment; to ensure that the accounts treat economic activity in a consistent way when the boundaries between market and nonmarket activities change; and to provide information on the interaction between the economy and the environment so that natural and environmental resources can be more effectively managed and regulated.

Environmental and natural-resource accounting has emerged over the last three decades in response to increasing awareness of the interac-. Growing concerns about resource scarcity were reinforced by the dramatic increases in energy and mineral prices of the s.

Many began to worry that the nation was rapidly depleting its precious stocks of subsoil assets. Further awareness resulted from documentation of the economic and social costs of environmental degradation and pollution in terms of human health and property values, reinforced by pictures of rivers and lakes on fire and serious oil spills.

A set of well-designed environmental accounts could overcome the shortcomings of the current market-based accounts. Indeed, the construction of environmental accounts is one element of the more general task of developing a set of comprehensive economic accounts that includes both market and nonmarket economic activity. This section reviews the primary shortcomings of the current accounts and explains why a well-constructed set of comprehensive accounts would have significant economic value to the nation.

Efforts to develop alternative accounting approaches to supplement the standard market accounts with measures of changes in consumption and investment in natural resources and the environment have been undertaken in response to three perceived deficiencies in the way the conventional accounts treat natural resources and the environment. First, as an indicator of economic well-being, the accounts sometimes behave perversely with respect to environmental degradation and changing stocks of natural resources.

For example, cutting down the nation's dwindling redwood forests increases GDP, yet no account is taken of the loss of this precious asset because the nation's forests have not been included in the asset accounts. For similar reasons, when fishing activities increase the harvest of cod or halibut, the national accounts record the increased production and consumption, but omit the decline in breeding stocks and the costs imposed on future producers and consumers.

And pollution abatement expenditures increase measured output—even when such expenditures serve only to offset environmental deterioration, and there is no net increase in current or future consumption. In these and many other examples, changes in production do not reflect genuine changes in economic well-being and may even result in economic harm or cost in the future. Second, the standard national accounts are inconsistent in their treatment of different forms of wealth.

For example, the NIPA include a full set of accounts of gross investment, net investment, depreciation, and the capital stock for produced, tangible producer capital. In contrast, natural. When a commercially grown tree is cut, the production cost of the tree is counted as a cost of production, but when a first-growth national forest is clear-cut, there is no parallel subtraction.

As a factory ages, this is counted as a depreciation charge, but the accounts are not charged when an oil deposit is exhausted. Likewise, the national accounts nowhere reflect the occurrence of widespread deterioration or improvement in the quality of environmental assets such as air and water. The distinction between gross and net investment for reproducible capital is justified on the grounds that those investments which simply replace depreciated stock add nothing to economic well-being and that failure to subtract depreciation would yield income measures that might be unsustainable in the long run.

The logic of this argument is equally applicable to environmental and natural capital. The third and perhaps most important deficiency of the conventional national accounts is that they give a very incomplete picture of the full scope of economic activity.

Chapter 07 - Measuring Domestic Output, National Income, and the Price Level

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We here present the earliest input—output table of Germany: It covers forty economic branches, five final demand categories, and five primary inputs. The symmetric table for is completely based on original statistical data and does not rely on separate supply and use tables. The core of our endeavor is based on the German industrial census of The input—output table offers a new benchmark for gross domestic product GDP and thus production, income, and expenditure of Germany in We illustrate the use of the new input—output table for German historical national accounts and apply our findings to reassess the impact of military spending on employment and production. This contribution presents the final results of a long-term research project which aimed at constructing an input—output table for Germany in


Terms: National Income Accounting. Personal Consumption Expenditures. Net Domestic Product (NDP). Gross Domestic Product (GDP). Gross Private Domestic​.


Expenditure Method

It includes all final goods and services—that is, those that are produced by the economic agents located in that country regardless of their ownership and that are not resold in any form. It is used throughout the world as the main measure of output and economic activity. In economics , the final users of goods and services are divided into three main groups: households, businesses, and the government. One way gross domestic product GDP is calculated—known as the expenditure approach—is by adding the expenditures made by those three groups of users. The expenditure approach is so called because all three variables on the right-hand side of the equation denote expenditures by different groups in the economy.

Not a MyNAP member yet? Register for a free account to start saving and receiving special member only perks. Natural and social scientists concerned about natural resources and the environment have endeavored to take the measure of nature. Measures used for this purpose range from those used to monitor the state of major environmental indicators, such as air and water quality, to analytical measures of major environmental aggregates. For the most part, however, measures of the economic contribution of natural resources and the environment have lagged behind physical measures.

GDP concept 2.

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CHAPTER 7 Measuring Domestic Output, National Income, and ...

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3 Comments

  1. Senbpetenbo 14.04.2021 at 07:57

    CHAPTER MEASURING DOMESTIC OUTPUT AND NATIONAL INCOME. Introduction. Ii f t·. 's macroeconomic per ormance. Gross domestic product (GDP​).

  2. Kevin L. 15.04.2021 at 07:08

    Its resale does not measure new production. 5. Explain why an economy's output, in essence, is also its income. LO1 Answer: Everything that is produced is sold.

  3. Leon S. 18.04.2021 at 04:55

    Fundamentals of human resources management 4th edition pdf libro el lenguaje corporal de judi james pdf