Economic Performance- Part Dos

GNP

• When economists measure income, they use Gross National Product

• GNP- the dollar value of all final goods, services, & structures produced in 1 year with labor & property supplied by a country’s residents

• Its based on GDP, but it has differences

• GDP only measures final goods & services produced in the US

• GNP measures the income of all Americans, regardless of where the goods & services originate

• To go from GDP to GNP, you must add all payments Americans receive from outside the US, then subtract all payments made to foreign owned resources

• GNP is smaller, because the US pays out more income for production to the rest of the world, than it receives

• 5 income measures are included in the National Income & Product Accounts

• GNP is first• 2nd is the Net National

Product or GNP less depreciation- represents capital equipment that has worn out or become obsolete over the year

• The 3rd is national income- the income left after all taxes (except corporate profits tax) are subtracted from NNP

• Ex. (know 2) excise taxes, property taxes, licensing fees, general sales taxes & customs duties

• 4th is Personal Income- total amount of income going to consumers BEFORE individual income taxes are subtracted

• 5th is Disposable Personal Income- total income the consumer sector has at its disposal AFTER personal income taxes

• Reflects the actual amount of money consumers can spend

• This is the money you receive from employers after taxes

Economic Sectors• Its useful to think of the

economy as being made up of several parts (sectors)

• These sectors receive various parts of national income and use it to purchase total output

Consumer (Private) Sector• Largest sector in macro economy• Its basic unit, the household, is made up of all

people who occupy a living space• Not necessarily family, households demand

durable goods • Consumers receive income from disposable

personal income

Investment (Business) Sector• Made up of proprietorships,

partnerships, and corporations• Responsible for bringing the factors of

production together to produce output

Government (Public) Sector• Includes all local,

state, & federal levels of govt

• Receives income from indirect business taxes, corporate income taxes, Social Security contributions, and personal income taxes

Foreign Sector• Includes all consumers

& producers outside the US

• Represents the difference between the dollar value of goods sent abroad and the dollar value of goods purchased abroad