The National Income Accounts and the Government Budget

1
The National Income Accounts and the Government
Budget

• Lecture 6

2
National Income and Product Accounting

• Income and Spending on Domestic Goods Should Add
  to Same Total, which is also Domestic Output
• All Measure the Value-Added Purchased and
  Provided
• SpendingPurchases of buying groups households,
  business, government, foreign buyers
• IncomeEarnings of all types wages, rent,
  interest, dividends, retained earnings,
  depreciation allowances

3
SpendingPurchases of buying groups households,
business, government, foreign

• Dont Double Count -- Only Final Purchases by
  Final User Are Added Up
• Deduct Purchases from Foreign Suppliers and Add
  Purchases by Foreign Buyers
• GNP/GDP All Final Purchases by Domestic Buyers
  - Imports Exports
• GNPOutput Produced by Factors Owned by US
• GDPOutput Produced in Our Borders

4
Income Earnings of all types wages, rent,
interest, dividends, retained earnings,
depreciation allowances

• Gross Product vs. Net Product/ Income
• the difference is just depreciation, the using up
  of output (capital) created in earlier periods
• a.k.a. capital consumption allowance
• NNP vs National Income
• the difference is a set of sales-like (excise)
  taxes collected before any private sector unit
  calculates its income

5
Income Earnings of all types wages, rent,
interest, dividends, retained earnings,
depreciation allowances

• National Income the economic pie sliced up among
  the private sector participants
• Households earn wages, benefits, interest, rent,
  and entrepreneurial income (laymen call them
  profits, but these are not earned by a formal
  corporation)
• Corporations earn the residual profits, and
  then pay part out as dividends to households
• Both pay some taxes, get some transfers (negative
  taxes)

6
The Relationships among the Basic Spending and
Income Categories
7
The Relationships among the Basic Spending and
Income Categories
8
The Relationships among the Basic Spending and
Income Categories
9
The Federal Budget
10
State Local Budgets