WHAT IS NATIONAL INCOME ?

NATIONAL INCOME (ALSO REFERRED TO AS NET NATIONAL PRODUCT) MAY BE

DEFINED AS “A MEASURE OF THE MONEY VALUE OF THE TOTAL FLOW OF GOODS

AND SERVICES PRODUCED IN AN ECONOMY OVER A SPECIFIED PERIOD OF

TIME”.

NATIONAL INCOME CONSISTS OF THE FOLLOWINGWAGE OR SALARY – THOSE GENERATED

BY LABOR INTEREST- THOSE GENERATED BY

LENDERS OF FUNDSRENT- THOSE GENERATED BY OWNERS OF

REAL STATEPROFIT-THOSE GENERATED BY THE

ENTREPRENEURSNET FACTOR-INCOME FROM ABROAD

IMPORTANT TERMS USED IN MEASURING NATIONAL INCOMEGROSS DOMESTIC PRODUCT(GDP)GROSS NATIONAL PRODUCT(GNP)MARKET VALUEVALUE ADDEDCONSUMPTIONINVESTMENTCONSUMER DURABLESGOVERNMENT EXPENDITURESNET FACTOR INCOME FROM ABROAD

GROSS DOMESTIC PRODUCT

THE GDP IS A MEASURE OF THE TOTAL FLOW OF GOODS AND THE SERVICES PRODUCED BY THE ECONOMY OVER A PARTICULAR TIME PERIOD.

GROSS NATIONAL PRODUCTTHE GNP IS A MEASURE OF THE MARKET VALUE OF

THE FINAL GOODS AND SERVICES PRODUSED BY NATIONALS OR CITIZENS OF A COUNTRY IN A PARTICULAR TIME PERIOD.

NONPRODUCTIVE TRANSACTIONS CONSIST OF THE FOLLOWING:

1. PURELY FINANCIAL TRANSACTIONS AND2. SECONDHAND SALES. PURELY FINANCIAL TRANSACTIONS CONSIST OF

THE FOLLOWING :1. PUBLIC TRANSFER PAYMENTS 2. PRIVATE TRANSFER PAYMENTS3. BUYING AND SELLING OF SECURETIES.

THE DIFFERENCE BETWEEN GDP AND GNP

GROSS DOMESTIC PRODUCT

GROSS NATIONAL PRODUCT

PRODUCTION WITHIN THE PHILIPPINES BY PHILIPPINE NATIONALS

PRODUCTION WITHIN THE PHILLIPINES BY FOREIGN NATIONALS

PRODUCTION WITHIN THE PHILIPPINES BY PHILIPPINE NATIONALS

PRODUCTION OUTSIDE THE PHILLIPINES BY FOREIGN NATIONALS

MARKET VALUE

MARKET VALUE REFERS TO THE CURRENT PRICE OF GOODS AND SERVICES PRODUSED IN THE ECONOMY.

VALUE ADDED

VALUE ADDED REFERS TO “THE DIFFERENCE BETWEEN THE VALUE OF GOODS PRODUSED ANG COST OF MATERIALS AND SUPPLIES USED IN PRODUCING THEM”.

CONSUMPTION

CONSUMPTION REFFERS TO “EXPENDITURE BY CONSUMERS ON FINAL GOODS AND SERVICES”.

INVESTMENT INVESTMENT IS “AN ACTIVITY THAT USES

RESOURCES NOW IN SUCH A WAY THAT THEY ALLOW FOR GREATER PRODUCTION IN THE FUTURE,AND,HENCE,GREATER CONSUMPTION IN THE FUTURE”.

TWO TYPES OF INVESTMENT1.FIXED INVESTMENT 2.INVENTORY INVESMENT

CONSUMER DURABLES

CONSUMER DURABLES ARE “CONSUMER GOODS, SUCH AS APPLIANCES AND FURNITURE, THAT USUALLY LAST FOR SEVERAL YEARS”.

GOVERNMENT EXPENDITURES

GOVERNMENT EXPENDITURES REFER TO “THE SUM OF GOVERNMENT PAYROLLS AND PURCHACES, WHICH IS THE COST OF GOVERNMENT OUTPUT.

NET FACTOR INCOME FROM ABROAD

THIS DEFFERENCE BETWEEN THE INCOME EARNED BY CITIZENS WHO OWN RESOURCES USED IN THE PRODUCTION PROCESS ABROAD AND THE INCOME OF FOREIGNERS WHO OWN RESOURCES USED IN THE PRODUCTION PROCESS HERE IN THE PHILPPINES.

APPROACHES TO A NATIONAL INCOME ESTIMATION1. INDUSTRIAL ORIGIN APPROACH(ALSO

REFERRED TO AS VALUE ADDED APPROACH)

2. PRODUCT APPROACH (ALSO EXPENDITURE APPROACH)

3. INCOME APPROACH

INDUSTRIAL ORIGIN APPROACH

1. AGRICULTURE,FISHERIES,AND FORESTRY

2. INDUSTRIAL SECTOR3. SERVICE SECTOR

PRODUCT APPROACHTHE PRODUCT APPROACH, ALSO

REFERRED TO AS THE EXPENDITURE APPROACH,IS ALSO WAY OF ESTIMATING NATIONAL INCOME. IT INVOLVES CALCULATING THE SUM OF ALL EXPENDITURES ON FINAL GOODS.

INCOME APPROACH CURRENT PRODUCTION IS MADE

POSSIBLE THROUGH THE USED OF ECONOMIC RESOURCES OF LAND,LABOR, CAPITAL ENTREPRENEURSHIP. THE OWNER OF THIS RESOURCES RECEIVE EARNINGS IN THE FORM OF RENT, WAGES AND SALARIES,INTEREST AND DIVIDENDS, AND PROFIT.