National accounts and macroeconomic indicators

The National Accounts System (SNA) aims to show the quantitative situation on the main economic macro-aggregates related to the generation of the product and the use of income, thereby facilitating analyzes of the behavior of the economy. It starts from the macroeconomic balance between global or total supply and demand.

Total or global offer (OT)

The total supply is made up of the total of goods and services available by society in a given period of time, it includes, then, the total production of goods and services of all sectors plus imports.

Total or global demand (DT)

Total demand is made up of the value of the goods and services that are used to satisfy the needs of companies, the government and families, plus exports, in a given period of time.

The SNA breaks down total demand into two main items: intermediate demand and final demand.

In turn, intermediate demand or intermediate consumption (IC) is made up of the raw materials, materials, fuels, electricity and services that are used in the different production processes.

For its part, the final demand (DF) is made up of goods and services that are destined for final consumers. The SNA considers as final demands those destined for families, the government, exports, changes in inventories and gross fixed capital formation.

In accordance with the above, the basic balance between supply and demand can be expressed from:

OT = PTBS + M

DT = CI + DF = CI + CH + CG + CIPSFL + FBKF + VE + X

So:

PTBS + M = CI + CH + CG + CIPSFL + FBKF + VE + X

Where each of these indicators expresses the following:

Total production of goods and services, gross production or gross value of production (PTBS)

Equivalent to the gross value of the goods and services produced in a certain period of time, regardless of their destination.

The gross production of goods is recorded at the time they are produced, whether they are sold or not, while the production of services takes place at the time they are rendered. The gross production of commerce or commerce services is measured at the moment they are sold.

The production also includes goods and services that are not exchanged in the market, although they are similar to those offered in it. This is the case of production self-consumed by farmers and that of goods exchanged by establishments belonging to the same company.

Capital goods (fixed assets) that producers manufacture for their own use, and the valuation that is made of the services provided by the homes to the owners themselves, also form part of the gross production.

In the case of the production of the financial sector, it must be borne in mind that it has the function of serving as a financial intermediary between the different sectors and economic agents, by attracting and placing financial resources.

At the same time, it provides other services for which it receives a specific commission or explicit payment.

Thus, the gross production value of this sector is made up of two elements: the commissions charged for services rendered plus the difference between interest received and paid.

In general, it is recommended that production be valued at producer prices, although there are special cases, for various reasons, when it is necessary to resort to other types of valuations.

The producer price represents the sale value of the production in the producers' establishment, while the buyer's price, final consumption or market, represents the sale value of the goods and services at the point of delivery to the buyer; equals producer price plus transportation, distribution and delivery margins.

It is also customary to divide or differentiate production into tradable and non-tradable goods. Tradable goods are those that can be exported or imported, non-tradable goods are those non-commercial goods internationally. Services are considered non-tradable goods.

Imports (M)

It represents the value of all the goods and services that the economy has during a given period and that have not been created in the national territory.

Includes both merchandise and services purchased abroad and donations received. They are expressed in national currency according to the current exchange rates and, in general, the goods are valued at CIF prices (cost, insurance and freight), because they are actually available to the economy when they are in the territory national.

Intermediate Consumption (IC)

As already mentioned, it is made up of raw materials, materials, fuels, electrical energy and services destined for the different production processes.

Household consumption (CH)

Represents the value of goods (durable, semi-durable, and non-durable) and services intended to meet the needs of families, resident units, or resident households.

In general, it includes purchases made in the domestic market less sales of used goods, as well as remuneration in kind, self-consumption productions and the imputed value of owner-occupied dwellings. Purchases of land and buildings for housing should be excluded.

Government Consumption (CG)

It represents the total current expenditure of the government in all its instances, that is, the total value of the goods and services that allow the fulfillment of its functions.

consumption of private non-profit institutions (CIPSFL)

It represents the value of the goods and services used by these institutions, which provide services to households. On many occasions it is included within household consumption for practical reasons.

In general, the sum of these last three indicators is called Final Consumption (CF), that is:

Stock variation (VE)

Represents the market value of the variation, in a given period, of the stocks of raw materials and materials, work in progress or production in process (except construction works) and finished products.

Gross fixed capital formation (FBKF) OR Gross Investment (IB)

Represents the expenses incurred in the purchase of durable goods to replace or increase fixed assets; they are normally valued at buyer prices. It includes those produced by the units themselves and the expenses that prolong the useful life of said media. Government expenditures on durable goods for military uses are excluded.

Net formation of fixed capital or net investment is the gross formation less consumption of fixed capital, the definition of which will be given later.

The sum of gross fixed capital formation (FBKF), plus the change in stock, plus the purchase of non-physical assets is generally called gross accumulation (ACB) or as it is also known as gross capital formation (FBK).

Exports (X)

It represents the value of all the goods and services created in the country during a given period and that are destined to satisfy the needs of other countries. Includes both merchandise and services sold abroad and donations made.

In addition to the elements that make up total supply and demand, there are other macroindicators that the SNA uses for the purposes of the global analysis. They will be seen below.

Gross Domestic Product (GDP)

The Gross Domestic Product or also called Gross Added Value or Gross Geographical Product, is one of the most important indicators in the evaluation of the development of economic activity.

To carry out production, economic agents buy goods and services, both of national origin and import, which they then use in the production process.

These goods and services, as already indicated, constitute intermediate demand or consumption.

The difference between the Total production of Goods and Services, as defined and these Intermediate Consumption goods and services represents the measure of the Gross Added Value of each activity.

The sum of these added values represents the Gross Domestic Product. So:

GDP = PTBS - CI

This added value, both at the sectoral and global level, is decomposed into the payments of the internal factors of production.

They are salaries of employees, net operating surplus, consumption of fixed capital and indirect taxes net of subsidies.

These payments have, respectively, a consideration in the use made of salaried labor, entrepreneurial capacity and the use of fixed capital employed; taxes net of subsidies represent the necessary contribution to the support of the state apparatus.

So:

The Gross Domestic Product is also equivalent to what is called the Gross Domestic Expense, so from the point of view of use or destination it can be expressed as:

Which can also be expressed as:

Where XN are net exports, that is, the difference between exports and imports:

While final consumption (CF) and gross accumulation (ACB) have already been defined above.

Compensation of employees (RA)

Represents the payment of wages, salaries and wages to workers and employees, as well as the contribution to social security; It also includes bonuses, overtime payments, bonuses, bonuses, compensation, unit participation, tips and any other form of payment, either in cash or in kind, before making any similar discount, tax or deduction.

Net operating surplus (ENE)

Represents the difference between gross production, at producer prices, less intermediate consumption at buyer prices, compensation of employees, consumption of fixed capital and net indirect taxes.

Also, obviously, it can be calculated as the difference between the value added and the sum of the remuneration to work, the consumption of fixed capital and the net indirect taxes.

Fixed capital consumption (CCF)

Represents the attributed value, the wear and tear experienced by fixed assets as a result of their use, foreseeable obsolescence and normal accidental damage.

Indirect taxes (II)

They are the taxes that are charged to producers for the production, sale, purchase or use of goods and services and that are part of the production costs. It includes among others: export duties, sales taxes, shows, vehicle licenses, use of airports and court fees. Duties and value added tax (VAT) on imports are also included.

When speaking of net indirect taxes (IIN), the corresponding deduction has been made for the subsidies received, that is:

Subsidies (S)

They represent donations received by companies and public agencies from the state to compensate for operating losses. Subsidies are generally a consequence of official policy that wants to keep prices at a level that does not allow producers to cover their current production costs.

It also includes current donations that private industries receive from the state, and that increase the income that these producers receive for the maintenance of their production.

Tax exemptions do not constitute subsidies, although they may have a similar effect, but rather reduce the amount of taxes, direct or indirect, that must be paid to the government.

Net Domestic Product (PIN)

It expresses the aggregate of internal incomes that the production factors receive and that is destined for the purposes of consumption and saving. It can be calculated by subtracting the Consumption of Fixed Capital from the Gross Domestic Product:

And also:

National Income (IN)

As noted, the SNA differentiates the domestic from the national, hence the Net Domestic Product is not enough to explain all the incomes received by the factors of production, but must take into account those that correspond to national that do not reside in the territory of the country and discount those that have been generated in the country but are sent abroad.

This concept, which would be a net national product, is what is defined as National Income. It can be calculated by adding to the Net Domestic Product the balance of current transfers with a counterpart:

Net balance of current transfers with counterparty (SNTCC)

It represents the difference between current transfers with a counterpart received from abroad and those sent to the rest of the world.

They are denominated with a counterpart because they come from factors of production, and include remittances from workers who work abroad to their countries of origin, remittances of profits from and to the rest of the world, payments for debt service, etc.

Gross National Product (GNP)

This indicator, which expresses the total value created by a country in question, either within its geographical borders or abroad by its non-resident nationals, is one of the most important in the field of macroeconomic analysis. It can be calculated from both the Gross Domestic Product and the National Income, since it includes both:

And substituting the gross domestic product in the previous expression:

GNP = GDP + CCF + SNTCC

PNB = (PIN + SNTCC) + CCF

PNB = IN + CCF

National Available Income (IND)

It represents the total income of the nation that is available for consumption and saving purposes, that is, it includes not only the total income that the factors of production have received, but others that are considered current transfers without counterpart from the or shipped to the rest of the world.

It can be calculated:

Net balance of current transfers without counterparty (SNTSC)

It represents the difference between current transfers without compensation received from abroad and those sent to the rest of the world. They are denominated without compensation to differentiate them than those that come from the factors of production and include: payments for taxes and consular fees; contributions to international organizations; donations in goods, services or financial; and others similar.

Then the following practical exercises will be developed.

Exercise 1: The following macroeconomic information is available in the year 2000

The accumulated depreciation for capital repairs reached 69. The state subsidizes productive companies for a value of 40. The state taxes on companies amounted to 76. The state invested in the service sector 150. The population spent on consumer goods. 160. Cuba purchases goods in Europe for a value of 104. The country sends goods to Caribbean countries for a value of 102. Remittances with a counterpart 1 Inventories totaled 57. The economy's gross investment rose to 90. • The payments to employees for a value of 240 • Payments to the property and businessman amount to 110

It is requested:

1) Calculate the following equilibrium equations.

a) PIBI, PIBU

b) GNP (INB)

c) PNBD

d) PNN (IN)

e) IND I, U

f) PNRM

Reply:

Data:

CCF = 69

IIN = II - S = 76 - 40 = 36

CG = 150

CH = 160

CF = CG + CH = 310

XN = X - M = 102 - 104 = (2)

SNTCC = 1

Ve = 57

Ib = FBKF = 90

RE = RA = 240

JAN = 110

a) GDP I = RA + EE + IIN + CCF GDP U = CH + CG + Ve + FBKF + X - M

GDP I = 240 + 110 + 36 + 69 GDP U = 310 + 90 + 57 + 102 - 104

GDP I = 455 GDP U = 455

b) GNP (GNI) = GDP + SNTCC c) PNBD = GNP + SNTSC

GNP (INB) = 455 + 1 PNBD = 456 + 0

GNP (INB) = 456 PNBD = 456

d) PNN = PNB - CCF

PNN = 456 - 69

PNN = 387

e) IND = IN + SNTSC

IND = 387 + 0

IND = 387

INDI = RA + EE + IIN + (SNTCC + SNTSC)

INDI = 240 + 110 + 36 + 1

INDI = 387

INDU = CF + Ann Ann = IND - CF

INDU = 310 + 77 Ann = 387 - 310

INDU = 387 Ann = 77

f) FBK = Anb + o- PNRM Anb = Ann + CCF Anb = PNBD - CF

FBK = 146 + 1 Anb = 77 + 69 Anb = 456 - 310

FBK = 147 Anb = 146 Anb = 146

Exercise 2: You have the following information corresponding to Latin American country X.

Employee remuneration 140 Net operating surplus is 60 Depreciation reaches a value of 19 Indirect taxes are 41 Loas subsidies were 5 Government consumption is 60 Household consumption amounts to 150 Imports take a value of 54 The country exports merchandise with a value of 52 Current transfers received with a counterpart are 5 Current transfers sent with a counterpart are 4 Gross investment is 40 The change in stock amounts to 7

It is requested:

a) Calculate GDP by way of utilization and income.

b) Find the gross national product (GNP)

c) Determine the gross national product available (GNPD)

d) Calculate the net national product (PNN)

e) Find the National Available Income (IND) through the general route, of income and use.

f) Determine the net loan to the rest of the world (PNRM)

g) Determine the Total Supply (OT) equal to the Total Demand (DT)

Answer:

Data:

RE = 140

EE = 60