Economic indicators allow you to assess the standard of living in a particular state. Many different methods of its calculation were developed, and in this article one of them will be considered - a pure national product. To supplement it and accurately display the state of affairs, an indicator of national income is used. It will also be considered and described in the article. It is necessary to understand that these indicators and characteristics of states - net national product and national income - allow us to determine welfare, and the difference between gross domestic product and gross national product shows the level of dependence on other countries. The smaller the difference, the better for the inhabitants of the country. Alas, Russia so far cannot boast of good performance. After reading further, you will learn what a pure national product, national income, personal income is.
Gross national product
This indicator is used to determine the total amount of all goods produced by representatives of one nation on the territory of the whole Earth. When using it on the territory of one state, among its shortcomings should be called the inability to determine the exact welfare of society. Not least because of the overstatement of production by the amount of indirect taxes and annual deductions for depreciation. Therefore, it is impossible to consider it as an accurate indicator of economic power, but it can show the level of state self-sufficiency.
What is a pure national product?
The net national product includes the gross national product minus annual deductions for depreciation. With its help, they consider the volume of goods and services produced by the country that were produced during the year and are represented in all sectors of the country's economy. In other words, using this value, they calculate the volume of real production that the state produces without harming production opportunities in the future, therefore, the net national product is equal to the state’s production capacities times the working time that can be used to support the country in a difficult situation.
What is national income?
National income is understood to mean the value of goods produced in the country and the services provided here, which added certain values to the general welfare. In other words, national is understood as the net income of society. So, for those who supply resources, it is used as a measure of the level of income received from current production. For companies, national income is a measure of price indicators for economic resources used for production purposes in a given year.
What is his opinion?
Given the importance of national income, they calculate it to control the country's macroeconomic indicators. There are two calculation options, and the net national product is equal to:
- ND = GDP-QAP, where ND is national income, GDP is gross domestic product, QAP is consumption of fixed capital.
- ND = NNP-KN, where ND is national income, NNP is net national product, NN is indirect taxes.
What national income distinguish?
For the convenience of operating indicators, two types of national income are distinguished, which allow more accurate information on the parameters of interest. There are two of them, as well as calculation methods:
- Industrial. This includes the entire volume of goods created during the year and services rendered to people.
- Used.This includes production national income, net of losses due to storage, natural disasters and foreign trade balances.
Methods of calculating the national product
Since the goal of calculating net national product and national income is to output data showing the potential opportunities that can be obtained by the state, several more points are taken into account. So, if we calculate from national income social security contributions for personnel, taxes and retained earnings, add transfer payments with interest paid by government loans, you get personal income. If from personal income subtract income tax, then you get disposable income - the amount of money that households personally manage. As you can see, some indicators of net national product are not taken into account in calculating national income. But still, these indicators are interesting regarding the methods of calculating the state national product:
- production;
- distribution;
- final consumption.
Production calculation
When it summarizes the added value of all manufactured goods and services provided by the country. By value added is meant the value that was created during the production process, which does not include the cost of raw materials.
Distribution calculation
With him, attention is paid to the flows of funds that go as income. Money is received by the owners of the production. Therefore, they can be divided into two types: labor and business. First of all, labor incomes include wages received by various workers, specialists and managers. Entrepreneurial income includes rent, company income, profit (including tax), net profit, dividends and interest on deposits. But in this calculation method, two components are not taken into account: payments that will be used to cover capital depreciation (amortization) and indirect taxes (which include customs duties, VAT, sales taxes).
Here it should be noted that the amounts of money earned by the owners always exceed those received on hand. This is due to the fact that the national income when moving between owners by the factor of production is changed by subtractions and additions. These amendments and allow you to separately highlight personal income.
In the analysis of income movements, these phases are distinguished: their formation, primary distribution, subsequent redistribution (distribution), final, use for consumption and increased savings. And a pure national product at this angle is indeed the volume of all final products that were produced during the year, excluding depreciation of production factors.
Final consumption calculation
It is the sum of expenses of economic agents and represents aggregate demand on a net national domestic product. In other words, if we take all personal consumer expenditures (including households), add to them gross investment (including capital that was invested in fixed assets), government procurement (for budget organizations) and net export abroad then we get the national product of the state.
