DOCSLIB.ORG

Gross Domestic Product (GDP)

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Gross Domestic Product (GDP) CHAPTER 8 GROSS DOMESTC PRODUCT(GDP)-AN OVERVIEW 8.1 Domestic product is an indicator of overall generated through the production activity is production activity. GDP is a measure of distributed between the two factors of production. The level of production is production, namely, labour and capital, important because it largely determines how which receive respectively the salaries and much a country can afford to consume and it the operating surplus/mixed income of self also affects the level of employment. The employed. Thus the income approach GDP consumption of goods and services, both is the sum of compensation of employees, individually and collectively, is one of the gross operating surplus and gross mixed most important factors influencing the income plus taxes net of subsidies on welfare of a community. The concept of production. In the National Accounts GDP in the 1993 SNA framework has been Statistics of India, the production approach briefly discussed in the following paragraphs. GDP is considered firmer estimate; and the NAS presents the discrepancy with the expenditure approach GDP explicitly. 8.2 It should be noted, however, that GDP is not intended to measure the production taking Production approach GDP place within the geographical boundary of 8.3 GDP is a concept of value added. It is the the economic territory. Some of the sum of gross value added of all resident production of a resident producer may take producer units (institutional sectors, or place abroad, while some of the production industries) plus that part (possibly the total) taking place within the geographical of taxes, less subsidies, on products which is boundary of the economy may be carried out not included in the valuation of output. by non-resident producer units. For Gross value added is the difference between example, a resident producer may have output and intermediate consumption. teams of employees working abroad temporarily on the installation, repair or 8.4 The underlying rationale behind the concept servicing of equipment. This output is an of GDP for the economy as a whole is that it export of a resident producer and the should measure the total gross values added productive activity does not contribute to the produced by all institutional units resident in GDP of the country in which it takes the economy. However, while the concept of places. Thus, the distinction between GDP is based on this principle, GDP as resident and non-resident institutional units defined in the System may include not only is crucial to the definition and coverage of the sum of the gross values added of all GDP. In practice, of course, most of the resident producers but also various taxes on productive activity of resident producers products, depending upon the precise ways takes place within the country in which they in which outputs, inputs and imports are are resident. However, producers in service valued. industries which typically have to deliver their outputs directly to their clients 8.5 Output: Output is a concept that applies to a wherever they are located are increasingly producer unit- an establishment or tending to engage in production in more enterprise–rather than a process of than one country, a practice which is production. Output has to be defined in the encouraged by rapid transportation and context of a production account (refer to instantaneous communication facilities. Table 1, Appendix 5.1), and production There are three equivalent approaches to accounts are compiled for establishments or measure the GDP, namely the production, enterprises, and not for processes of income, and expenditure. The production production. Output therefore consists only of approach GDP measures the sum of value those goods and services; that are produced added of all economic activities within the within an establishment that becomes country’s territory (sum of output minus available for use outside that establishment. intermediate consumption) plus indirect When an enterprise contains more than one taxes minus subsidies on products. The establishment, the output of the enterprise expenditure approach GDP depicts the final is the sum of the outputs of its component use (demand) of the output and comprises establishments. (i) Government Final Consumption Expenditure (GFCE) (ii) Private Final 8.6 The output of most goods or services in Consumption Expenditure (PFCE) (iii) Gross majority of the cases is recorded when their Fixed Capital Formation (GFCF), (iv) Change production is completed. However, when it in Stocks (CIS), and (v) Net Export of Goods takes a long time to produce a unit of & Services. The income (value added) output, it becomes necessary to recognize National Accounts Statistics-Sources & Methods, 2007 Î 83 CHAPTER 8 that output is being produced continuously amounts the producers are willing to supply and to record it as "work-in-progress". For and on the amounts purchasers wish to example, the production of certain buy. Apart from certain service industries agricultural goods or large durable goods for which special conventions are adopted, such as ships or buildings may take months the value of the market output of a producer or years to complete. In such cases, it is given by the sum of the values of the would distort economic reality to treat the following items for the period in question: output as if it were all produced at the (a) The total value of goods and services moment of time when the process of sold (at economically significant prices); production happens to terminate. In any (b) The total value of goods or services case, whenever a process of production, bartered; however long or short, extends over two or (c) The total value of goods or services used more accounting periods, it is necessary to for payments in kind, including calculate the work-in-progress completed compensation in kind; within each of the periods in order to be able (d) The total value of goods or services to measure how much output is produced in supplied by one establishment to each period. another belonging to the same market enterprise to be used as intermediate 8.7 Goods or services produced as outputs may inputs; be used in several different ways. Apart from (e) The total value of changes in inventories certain service producers, such as financial of finished goods and work-in-progress intermediaries and wholesale and retail intended for one or other of the above traders whose outputs have special uses. characteristics, goods or services produced as outputs must be disposed of by their 8.10 Output produced for own final use (P.12): owners in one or more of the following ways Such output consists of goods or services during the period in which they are that are retained for their own final use by produced. Output may: the owners of the enterprises in which they • be sold: only goods or services sold at are produced. As corporations have no final economically significant prices are included consumption, output for own final here; consumption is produced only by • be bartered in exchange for other goods, unincorporated enterprises: for example, services or assets, provided to their agricultural goods produced and consumed employees as compensation in kind, or by members of the same household. The used for other payments in kind; output of domestic and personal services • enter the producer's inventories prior to produced for own consumption within their eventual sale, barter or other use: households is not included, although housing incomplete outputs enter the producer's services produced for own consumption by inventories in the form of additions to owner-occupiers and services produced on work-in-progress; own account by employing paid domestic • be supplied to another establishment staff are included under this heading. belonging to the same enterprise for use, as intermediate inputs into the later's 8.11 Goods or services used for own gross fixed production; capital formation can be produced by any • be retained by their owners for own final kind of enterprise, whether corporate or consumption or own gross fixed capital unincorporated. They include, for example, formation; the special machine tools produced for their • be supplied free, or sold at prices that are own use by engineering enterprises, or not economically significant, to other dwellings, or extensions to dwellings, institutional units, either individually or produced by households. A wide range of collectively. construction activities may be undertaken for the purpose of own gross fixed capital 8.8 A fundamental distinction is drawn between formation in rural areas, including communal market output, output produced for own construction activities undertaken by groups final use and other non-market output. of households. 8.9 Market output (P.11): Market output is 8.12 The value of output produced for own final output that is sold at prices that are use is given by the sum of the values of the economically significant or otherwise following items for the period in question: disposed of on the market, or intended for sale or disposal on the market. Prices are (a) The total value of goods and services said to be economically significant when produced by household enterprises and they have a significant influence on the consumed by the same households; National Accounts Statistics-Sources & Methods, 2007 Î 84 CHAPTER 8 (b) The total value of the fixed assets free, but they are not intended to eliminate produced by an establishment that are such excess demand. Once a decision has retained within the same enterprise for been taken on administrative, social or use in future production (own-account political grounds about the total amount of a gross fixed capital formation); particular non-market good or service to be (c) The total value of changes in inventories supplied, its price is deliberately fixed well of finished goods and work-in-progress below the equilibrium price that would clear intended for one or other of the above the market.
Load more

Recommended publications
  • A PORTRAIT of TRADE in VALUE-ADDED OVER FOUR DECADES Robert C
    A PORTRAIT OF TRADE IN VALUE-ADDED OVER FOUR DECADES Robert C. Johnson and Guillermo Noguera* Abstract—We combine data on trade, production, and input use to document We show that changes in trade frictions, particularly fric- changes in the value-added content of trade between 1970 and 2009. The ratio of value-added to gross exports fell by roughly 10 percentage points tions for manufactured inputs, play a key role in explaining worldwide. The ratio declined 20 percentage points in manufacturing, but all five stylized facts. rose in nonmanufacturing sectors. Declines also differ across countries and To track value-added trade over time, we combine time trade partners: they are larger for fast-growing countries, for nearby trade partners, and among partners that adopt regional trade agreements. Using series data on trade, production, and input use to con- a multisector structural gravity model with input-output linkages, we show struct an annual sequence of global bilateral input-output that changes in trade frictions play a dominant role in explaining all these tables covering 42 countries back to 1970. These synthetic facts. tables track shipments of final and intermediate goods within and between countries. Using this framework, we compute I. Introduction value-added exports: the amount of value added from a given source country that is consumed in each destination ECENT decades have seen the emergence of global (i.e., embodied in final goods absorbed in that destination) supply chains. Echoing Feenstra (1998), rising trade R (Johnson & Noguera, 2012a). Value-added exports mea- integration has coincided with the simultaneous disintegra- sure international transactions in a manner consistent with tion of production across borders.
    [Show full text]
  • Calculation of Owner-Occupied Dwelling Services In
    Calculation of Owner-Occupied Dwelling Services in Georgia Abstract Output of owner-occupied dwellings (OOD) is included within the production boundary according to the System of National Accounts. Different methods may be selected for measuring OOD services due to housing market development level. The paper presents estimation of services produced by OODs based on a User Cost Method, which replaced a self-assessment method in 2019 year in the National Accounts of Georgia during the general revision of time series. Key words: Owner-Occupied Dwellings, Imputed rent, User Cost Method Author: Levan Karsaulidze – Head of National Accounts Department, National Statistics Office of Georgia Introduction Imputed rents, representing services produced by owner-occupied dwellings (OOD), has always been included within the production boundary of National Account and are part of the official GDP estimates of Georgia as well. In 2019 transition to the SNA 2008 was implemented1 in the National Accounts of Georgia from the SNA 1993, accompanied with a general revision of time series. Along with other major changes related to the newly adopted methodology, user-cost method was implemented for measuring imputed rents for owner occupied houses, while self-assessment method was used until 2019 year. The paper describes a methodological background and detailed calculation steps for measuring imputed rents of OODs in Georgia, based on the user-cost method, briefly summarizes widely used approaches for estimating services of OODs and provides arguments for adopting the use-cost method for the country. Final results are presented in the last part of the paper. 1. Methodological Framework Methodology for measuring imputed rents of owner-occupied dwellings differs by country based on a rental market development level.
    [Show full text]
  • Capital Expenditures and Gross Fixed Capital Formation in Nigeria
    CORE Metadata, citation and similar papers at core.ac.uk Provided by International Institute for Science, Technology and Education (IISTE): E-Journals Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.6, No.12, 2015 Capital Expenditures and Gross Fixed Capital Formation in Nigeria *Kanu, Success Ikechi Ph.D and Nwaimo, Chilaka Emmanuel Ph.D Department of Management technology (FMT), Federal university of technology, Owerri (FUTO) P.M.B 1526, Owerri,, Imo State, Nigeria. Abstract This paper explores the relationship between capital expenditures and gross fixed capital formation in Nigeria. The study made use of secondary data covering the period 1981 to 2011. A least square regression analysis was carried out on a time series data, and to avert the emergence of spurious results, unit root tests were conducted. Other econometric tools of co- integration, Vector Auto Regression technique as well as Granger causality tests were deployed to ascertain the order of co integration and the level of relationships existing between the dependent and independent variables. Findings of study reveal that while Capital Expenditures (CAPEX) maintained a negative significant relationship with Gross Fixed Capital Formation (GFCF) in Nigeria at both 1% and 5% Alpha levels; Imports and National Savings had a positive significant relationship with GFCF at both the short and long runs. It was equally observed that the lagged value of GFCF had no significant impact on GFCF in the preceding year. Outcome of study did not come as a surprise, seeing that a functional classification of Nigeria’s expenditure profile for the period under review reveals that; outlays on capital expenditure accounted for only about 32% of total expenditures, while the remaining balance of 68 % went to recurrent expenditures.
    [Show full text]
  • 14.54 F16 Lecture Slides: Production Functions
    14.54 International Trade Lecture 10: Production Functions 14.54 Week 6 Fall 2016 14.54 (Week 6) Production Functions Fall 2016 1 / 20 Today's Plan 1 Midterm Results 2 Properties of Production Functions (2 Factors) 3 Isoquants 4 Input Choice and Cost Minimization 5 Relative Factor Demand Graphs on slides 7, 10-17, and 19 are courtesy of Marc Melitz. Used with permission. 14.54 (Week 6) Production Functions Fall 2016 2 / 20 Introduction We will now introduce another factor of production: capital Can also think about other production factors: land, skilled versus unskilled labor, ... 14.54 (Week 6) Production Functions Fall 2016 3 / 20 What issues can be addressed when production requires more than a single factor? In the short-run, some factors are more ‘flexible’ than others: how quickly and at what cost can factors move from employment in one sector to another? Example of labor and capital: After a U.S. state is hit with a regional shock, unemployment rate falls back to national average within 6 years (most inter-regional employment reallocations also involve worker reallocations across sectors) In comparison, capital depreciates over 15-20 years and structures over 30-50 years In the short-run, labor is more ”flexible” than capital across sectors Distributional consequences across factors from changes in goods prices even in the long run 14.54 (Week 6) Production Functions Fall 2016 4 / 20 Production Function Under constant returns to scale, a production function with one factor can be summarized by a single number: unit input requirement (an overall productivity index) With more than one factor, a production function also characterizes the substitutability between the factors of production (as well as an overall productivity index) We will now assume that QC = FC (KC , LC ) and QF = FF (KF , LF ) We will continue to assume constant returns to scale: F (tK , tL) = tF (K , L) for any t > 0 And will also assume diminishing marginal returns to a single factor ..
    [Show full text]
  • National Income in India, Concept and Measurement
    National Income in India, Concept and Measurement National Income :- • National income is the money value of all the final goods and services produced by a country during a period of one year. National income consists of a collection of different types of goods and services of different types. • Since these goods are measured in different physical units it is not possible to add them together. Thus we cannot state national income is so many millions of meters of cloth. Therefore, there is no way except to reduce them to a common measure. This common measure is money. Basic Concepts in National Income:- • Gross domestic product • Gross domestic product at constant price and at current price • Gross domestic product at factor cost and Gross domestic product at market price • Net domestic product • Gross national product • Net national Product • Net national product at factor cost or national income Gross Domestic Product • Gross domestic product is the money value of all final goods and services produced in the domestic territory of a country during an accounting year. Gross Domestic Product at Constant price and Current price • GDP can be estimated at current prices and at constant prices. If the domestic product is estimated on the basis of the prevailing prices it is called gross domestic product at current prices. • If GDP is measured on the basis of some fixed price, that is price prevailing at a point of time or in some base year it is known as GDP at constant price or real gross domestic product. GDP at Factor cost and GDP at Market price • The contribution of each producing unit to the current flow of goods and services is known as the net value added.
    [Show full text]
  • Volume 3: Value-Added
    re Volume 3 Value-Added Tax Office of- the Secretary Department of the Treasury November '1984 TABLE OF CONTENTS Volume Three Page Chapter 1: INTRODUCTION 1 Chapter 2: THE NATURE OF THE VALUE-ADDED TAX I. Introduction TI. Alternative Forms of Tax A. Gross Product Type B. Income Type C. Consumption Type 111. Alternative Methods of Calculation: Subtraction, Credit, Addition 7 A. Subtraction Method 7 8. Credit Method 8 C. Addition Method 8 D. Analysis and Summary 10 IV. Border Tax Adjustments 11 V. Value-Added Tax versus Retail Sales Tax 13 VI. Summary 16 Chapter -3: EVALUATION OF A VALUE-ADDED TAX 17 I. Introduction 17 11. Economic Effects 17 A. Neutrality 17 B. saving 19 C. Equity 19 D. Prices 20 E. Balance of Trade 21 III. Political Concerns 23 A. Growth of Government 23 B. Impact on Income Tax 26 C. State-Local Tax Base 26 Iv. European Adoption and Experience 27 Chapter 4: ALTERNATIVE TYPES OF SALES TAXATION 29 I. Introduction 29 11. Analytic Framework 29 A. Consumption Neutrality 29 E. Production and Distribution Neutrality 30 111. Value-Added Tax 31 IV. Retail Sales Tax 31 V. Manufacturers and Other Pre-retail Taxes 33 VI. Personal Exemption Value-Added Tax 35 VII. Summary 38 iii Page Chapter 5: MAJOR DESIGN ISSUES 39 I. Introduction 39 11. Zero Rating versus Exemption 39 A. Commodities 39 B. Transactions 40 C. Firms 40 D. Consequences of zero Rating or Exemption 41 E. Tax Credit versus Subtraction Method 42 111. The Issue of Regressivity 43 A. Adjustment of Government Transfer Payments 43 B.
    [Show full text]
  • Conceptual Framework
    Chapter 2 CONCEPTUAL FRAMEWORK 2.1. Introduction .............................................................................................................................................. 19 2.2. Production Boundaries ........................................................................................................................... 19 2.3. Transactions and Other Flows................................................................................................................ 22 2.4. Units and Classifications of Units .......................................................................................................... 23 2.4.1. Institutional Units, Sectors and Subsectors ...............................................................................23 2.4.2. Kind of Activity Units, Local Units and Establishments ........................................................... 25 2.5. Economic Territory and Residence ....................................................................................................... 25 2.6. Current Price and Volume Measures..................................................................................................... 25 2.7. Labour Related Concepts....................................................................................................................... 26 2.8. The Production Approach....................................................................................................................... 28 2.8.1. Introduction...................................................................................................................................
    [Show full text]
  • Introduction to Financial Services: Capital Markets
    Updated January 4, 2021 Introduction to Financial Services: Capital Markets This In Focus provides an overview of U.S. capital markets, stocks and bonds to enable investors to make informed Securities and Exchange Commission (SEC) regulation, decisions on whether to invest and at what price level to and related policy issues. compensate for their risks. Banking regulators, by contrast, focus more on safety and soundness to avoid bank failure. Market Composition This is largely because bank deposits are often ultimately Capital markets are where securities like stocks and bonds guaranteed by the taxpayers, whereas in capital markets, are issued and traded. U.S. capital markets instruments investors generally assume all the risk of loss. include (1) stocks, also called equities or shares, referring to ownership of a firm; (2) bonds, also called fixed income or Public and Private Securities Offerings. The SEC debt securities, referring to the indebtedness or creditorship requires that offers and sales of securities, such as stocks of a firm or a government entity; and (3) shares of and bonds, either be registered with the SEC or undertaken investment funds, which are forms of pooled investment pursuant to a specific exemption. The goal of registration is vehicles that consolidate money from investors. to ensure that investors receive key information on the securities being offered. Registered offerings, often called As a main segment of the financial system, capital markets public offerings, are available to all types of investors. By provide the largest sources of financing for U.S. contrast, securities offerings that are exempt from certain nonfinancial companies.
    [Show full text]
  • Ajai Chopra and Charles Collyns Long-Term Growth I Response to the 1991 Crisis I Results of Adjustment I Fiscal Initiatives 2 Structural Reforms 2 the Road Ahead 3
    OCCASIO NAL PAPE R 134 India: Economic Reform and Growth Ajai Chopra, Charles Collyns, Richard Hemming, and Karen Parker with Woosik Chu and Oliver Fratzscher INTERNAT IONAL MONETARY FUND Washington DC December 1995 ©International Monetary Fund. Not for Redistribution © 1995 International Monetary Fund Cataloging-in-Publication Data India: economic reform and growth/Ajai Chopra ... [et a1.].­ Washington, D.C. :International Monetary Fund, 1995 p. em.- (Occasional Paper, ISSN 0251-6365; 134) Includes bibliographical references. ISBN l-55775-539-6 l. India - Economic policy- 1980- . 2. Structural adjustment (Economic policy)- India. 3.Investments- India. I.Chopra, Ajai. II.Series: Occasional paper (InternationalMonetary Fund) ; no. 134. HC 435.2.163 1995 Price: US$15.00 (US$12.00 to full-time faculty members and students at universities and colleges) Please send orders to: International Monetary Fund, Publication Services 700 19th Street, N.W., Washington, D.C. 20431, U.S.A. Tel.: (202) 623-7430 Telefax: (202) 623-7201 Internet: [email protected] recycled paper ©International Monetary Fund. Not for Redistribution Contents Page Preface vii Abbreviations ix Overview Ajai Chopra and Charles Collyns Long-Term Growth I Response to the 1991 Crisis I Results of Adjustment I Fiscal Initiatives 2 Structural Reforms 2 The Road Ahead 3 II long-Term GrowthTrends 4 Ajai Chopra Output, Investment, and Macroeconomic Conditions 4 Education, Labor, Employment, and Poverty 7 Growth, Accumulation, and Productivity 9 Results of India-Specific Studies 13
    [Show full text]
  • 1. General Background of the Survey 1.1 Introduction the Economic
    1. General Background of the Survey 1.1 Introduction The Economic Sector in Jordan is considered one of the most important sectors that contribute to the Gross Domestic Product (GDP), and in the employment of manpower. Due to this importance, the Department of Statistics conducts an annual sample survey for the establishments engaged in this sector. The survey covers all establishments. The importance of this survey arises from the detailed data that it provides, such as the number of establishments, compensation of employees, paid up capital, material inputs, other production expenditures, gross output, value added and size of investment. These data provide economic indicators and help in preparing the National Accounts of the Country. 1.2 Objectives of the Survey The overall aim of the survey is to provide data on, or for the calculation of the following items by type of activity: a. Number of establishments. b. Compensation of employees whether in cash or in kind. c. Gross output and intermediate consumption. d. Size of investment and capital formation during the year. e. To compute the contribution to the GDP. f. Providing data for further economic analysis. 1.3 Survey Coverage The Survey covers all establishments classified in one of the economic divisions of the International Standard Industrial Classification for all Economic Activities, Third Revision, (ISIC3). 1.4 Sample Design In designing the sample of this survey, the stratified random sampling method was used. Moreover, the sample was selected on the regional level, where, the survey universe in each region was divided into different strata . 2. Preparatory Stage 2.1 Survey Main Documents The documents include, the survey questionnaire, the instructions manual and the coding manual.
    [Show full text]
  • Money Supply, Inflation and Capital Accumulation in Nigeria
    Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.4, No.4, 2013 Money Supply, Inflation and Capital Accumulation in Nigeria Dayo Benedict Olanipekun 1* Kemi Funlayo Akeju 1,2 1 Department of Economics, University of Ibadan, Ibadan, Oyo State, Nigeria. 2 Department of Economics, Ekiti State University, Ado Ekiti, Ekiti State, Nigeria. *e-mail: [email protected] Abstract This study examines the relationship between money supply, inflation and capital accumulation in Nigeria between 1970 and 2010. The study investigated the long run relationship of the variables using Johasen cointegration test. As a follow up to this, Error Correction Model was conducted on the variables to capture their short run disequilibrium behavior. Cointegration test reveals that variables employed in the study share long run relationship. The result of the Error Correction Model indicates that money supply (both broad and narrow) has a positive relationship to capital accumulation in Nigeria. It implies that government should direct finances on investment in other to stimulate economic growth in the country. Also the intention of government on inflation targeting should not neglect the contribution of money growth to capital accumulation. Keywords: Money growth, Inflation, Capital accumulation, Cointegration test, Error Correction Model and Stability test. 1. Introduction Money supply exerts considerable influence on economic activities in both developing and developed countries. The relationships between money growth, inflation and capital accumulation are core issues in developing counties due to the need to achieve a sustainable economic growth and development. Achieving a very low inflation rate has been the primary goal of monetary policy makers in many developing countries including Nigeria but most of the government policies to generate low inflation end up accelerating it.
    [Show full text]
  • L1A Production Accounts
    PFTAC GDP Compilation and Forecasting Workshop Measuring GDP by production Suva, Fiji October 17-21, 2016 Session Outline • The production account • The production boundary • The production account and value added • Output • Intermediate consumption • Data sources 2 Production account • Starting point for the sequence of accounts • Compiled for – institutional units, sectors, industries and also for the total economy • Examples: . Production account for agriculture, manufacturing industries, etc. Production account for financial corporations (banks, insurance companies, etc.), general government sector 3 Production • Production is an activity in which an enterprise uses inputs to produce outputs. • It is a process carried out under the responsibility, control and management of an institutional unit . Where labour and assets are used to transform inputs of goods and services into outputs of other goods and services. It does not cover purely natural processes without any human involvement or direction (e.g. natural fish stocks, wild forests) • The production account describes this transformation and the additional value created through the production process. 4 Production account • Output from production - resources • Intermediate consumption and consumption of fixed capital - uses • Value added is the balancing item – intended to measure the value created by production • At the economy level, resources include taxes less subsidies on products as well . Sum of GVA by sectors+T&S on prods = GDP 5 Products • Products are goods and services
    [Show full text]