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Introduction to National Income Accounting BY AYUSSH SANGHI Part 1.1
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Introduction National income expresses the current achievements of an economy in monetary terms. These achievements are expressed in terms of all the goods and services that the economy produces during the course of one financial year.
Introduction National Income is used: as a measure of economic growth & reflects the productive power of an economy to turn out goods reflects the productive power of an economy to turr and services for the satisfaction of human wants.
Popular Measure of Economic Growth The key measure of Economic growth used by all the countries around the world is Gross Domestic Product (GDP)
What is GDP? GDP is the total market value of a country's output. . It is the market value of all final goods and services produced within a financial year by factors of production located within a country, irrespective of ownership.
Explanation of Definition Final Goods/ Services Final goods/ services are produced for absolute final use. Many goods produced in the economy are not classified as final goods but instead as intermediate goods. Intermediate goods are produced by one firm for use, in further processing by another firm Example: Tyres/ Seat Covers/ Engine/ Glass sold to automobile industry Many soods produced in the econoy are not casied s final
Explanation of Definition Type of Final Goods . Capital goods: Those goods produced by the economic system that are used as inputs to produce other goods. Capital goods thus vield valuable productive services over time. Example 1: Machinerv. It is used to produce other goods. . Example 2: Built road is a capital good. Once it is built, we can drive on it or transport goods and services over it for many years to come.
Explanation of Definition Type of Final Goods Coas cnsm Coent consumption are known Example 1: Perishable commodities like food items which have to be consumed in a short span of time as they will deteriorate irn quality. as consumer goods. . Example 2: Clothing, Toys etc.
Explanation of Definition New Goods to be Produced GDP ignores all transactions in which goods are exchanged for money but in which no new goods and services are produced. Example - Sale of securities are not counted in GDP. These exchanges are transfers of ownership of assets and do not correspond to current production .But fees paid to the broker for selling of stocks is counted in GDP as the broker is performing a service.