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Fenster schliessen

National income identity formula ?


Y = C + I + G + NX

Y = GDP, C = private consumption, I = Investitions,

G = Gov. expend., NX = Net export

Fenster schliessen

GDP (Gross Domestic Product)

what does it mesaure ? 

total value of final goods and services, produced by an economy 

during a particular period.

Fenster schliessen

GDP can be calculated and decomposed in three ways

- Expenditure decomposition: main use of the final products


- Value added decomposition: which sectors generate how much value

(diff. between revenue and expend. for intermed. products)

- Decomposition by factor incomes (capital income, labor income, 

indirect taxes)

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GNP (Gross national product)

measures the "total value of final goods and services

produced by productoin factors owned by domestic residents"

- diff. between GDP and GNP is net income received

from abroad (GNP = GDP + NIRA)

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NIRA (net income received from abroad)

calculated by adding up the income received from all 

domestically-owned foreign assets and then subtracting

the income paid on all foreing-owned domestic assets.

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- GNP is very close to GDP for most countries. 

- Countries that has more foreign assets than for. 

liabilites is called a foreing creditor (GNP > GDP)

- Net debtor countries, with negative net foreing assets, 

 (GNP < GDP)

- for closed countries (GNP = GDP)

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GNP = GDP + NIRA = C + I + G + NX + NIRA

                          CB = current acc. balance

CB = GNP - (C + I + G)

- a country that spends more than it produces

is running a current accoutn deficit (CB < 0).

- a country that produces more than it spends

has a current account surplus (CB > 0).


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S (national savings)

S is defined as part of total production that is neither

consumed by individuals nor spent by Government.

S = GNP - C - G = CB + I

CB = S - I