NATIONAL INCOME ACCOUNTS

NATIONAL INCOME ACCOUNTS

Adjustments to GDP are introduced to account for the realities of modern economies

Personal Consumption Expenditure

Expenditure Approach
Spending of households and private non-profit institutions on goods & services

Government Consumption Expenditure

Expenditure Approach
Government’s payments for its workforce and purchases of goods & services

Gross Domestic Capital Formation

Expenditure Approach
Investment spending of domestic agents:
Fixed capital
Changes in stocks

Exports of Goods & Services

Expenditure Approach
Spending of foreigners on goods and non-factor services produced in the Philippines

Imports of Goods & Services

Expenditure Approach
Philippine purchases of goods & non-factor services produced in other countries

Statistical Discrepancy

Expenditure Approach
Accounting and reporting errors inserted to ensure that the three approaches generate the same GDP

Income Approach

GDP = COE+NOS+Depreciation+IBTS

COE Compensation of Employees

Wages

NOS Net Operating Surplus

Rent, profit, interest

Depreciation

Wear and tear of physical capital

Indirect Business Taxes less Subsidies

Taxes on the use, purchase or production of goods & services:
VAT

Value-Added Approach

GDP = Agriculture, fishery, and Forestry+Industry+Services

Nominal GDP

= GDP at current prices; prices for the year used

Nominal GDP

Measure the value of output in a given period in the price of the period or as it is sometimes put in current pesos

Real GDP

= GDP at constant prices; prices of pre-selected/base year used

Real GDP

Measures changes in physical output in the economy between different time periods by valuing all goods produced in the two periods at the same prices or in constant pesos

Real GDP

Eliminates impact of changing prices
= (Nominal GDP / GDP Deflector) 100

GDP Deflector

A price index that allows conversion of nominal GDP into real GDP

GDP per capita

GDP / population

PPP adjusted GDP

Adjusts for the fact that one dollar spent in one country does not buy the same quantity of goods as in another country

Personal Disposable Income

Income households are free to spend or save

Personal Disposable Income

GDP does not consider income distribution, costs of achieving high output levels such:
Pollution and leisure time
Informal transactions
Illegal activities

Price Index

Indicates the change in the cost of purchasing a given bundle of goods in one year relative to another (base year)

Consumer Price Index (CPI)

Indicates the change in the cost of purchasing a given bundle of goods that are brought by the average household

Inflation Rate

Measures the rate of change in general price level