Sophian Sout,

Politeknik Mukah
[email protected]

Introduction

:: the Definition of National Income Accounting

refer to the final products/ goods and services produced by a
country for a specific period of time, such as a year
the aggregate income of the country earned by its nationals
through the production of goods and services for a certain period

of time
the total value of final goods and services produced by the
nationals of a country for a particular period of time.

Introduction

:: the calculation [01]

Item

RM

GDP at m a r k e t p r i c e
Net factor income payment from abroad (NFIPA)
Net factor income received from abroad (FIRA)

Net factor income paid abroad (FIPA)

GNP at m a r k e t p r i c e

+/-

Introduction

:: the calculation [02]

Item

GNP at m a r k e t p r i c e
Indirect tax / direct tax / Tax on expenditure
Subsidies
GNP at f a c t o r c o s t

RM

Introduction

:: the calculation [03]

Item

GDP at m a r k e t p r i c e
Indirect tax / direct tax / Tax on expenditure
Subsidies
GDP at f a c t o r c o s t

RM

Introduction

:: the calculation [04]

Item

RM

GDP at f a c t o r c o s t
Net factor income payment from abroad (NFIPA)
Net factor income received from abroad (FIRA)

Net factor income paid abroad (FIPA)

GNP at f a c t o r c o s t

+/-

Introduction

:: the calculation [05]

Item

GNP at f a c t o r c o s t
Depreciation / capital consumption
NNP at f a c t o r c o s t / N AT I O N A L I N C O M E

RM

Introduction

:: the calculation [06]

Item

RM

N AT I O N A L I N C O M E [ NNP at f a c t o r c o s t ]
Transfer payment
Interest in consumer loan
Interest on government loan
Employee Provisional Fund (EPF)
Corporate profit taxes / Corporate income taxes
Undistributed corporate profit

PERSONAL INCOME

+
+
+

Introduction

:: the calculation [07]

Item

RM

PERSONAL INCOME
Personal Income Taxes

DISPOSABLE PERSONAL INCOME

Question 1-1
:: Calculate Personal Income & Disposable Personal Income
ITEMS
NNP fc
Interest on consumer loan
Interest on government loan
Import taxes
Dividend
Transfer payment
EPF
Personal income tax
Undistributed corporate profit
Corporate tax
Saving
Tithe
Socso

RM (Million)
28930
1600
2100
1700
730
1050
1750
6900
1900
5700
9900
200
1500

Question 1-2
:: Calculate the National Income, Personal Income & Disposable Personal Income
ITEMS
Depreciation
Transfer Payment
Social Security Contribution
Retained earnings
Corporate tax
Personal income tax
GNP fc

RM (Million)
850
1000
200
100
800
400
65850

Question 1-3
:: Calculate the National Income, Personal Income & Disposable Personal Income
ITEMS
Depreciation
Transfer Payment
Social Security Contribution
Retained earnings
Corporate tax
Personal income tax
GNP fc

RM (Million)
1000
1000
200
100
800
400
71000

Calculation Approach

:: Expenditure Approach
Item
Personal consumption / Household Expenditure / Personal Expenses (C)
Investment (I)
Government Spending / Government Expenditure
Net Export (export import)
*Changes in Stock

GDP in m a r k e t p r i c e

RM

+
+
+
+
+

Calculation Approach

:: Production Approach
Item

RM

Agriculture, forestry, and fishing

Mining and quarrying

Manufacturing

Construction

Electricity, gas, and water

Transportation, storage, and communication

Commerce, retail, hotel and restaurant

Finance, insurance, and real estate

Government services

Other services

GDP in m a r k e t p r i c e

Calculation Approach

:: Income Approach
Item
Wages and salaries
Rent
Companies profit

RM

+
+
+

+ Undistributed company profit

+ Dividend
+ Corporate income taxes
Private enterprise earning
Net interest

NNP at f a c t o r c o s t / N AT I O N A L I N C O M E

+
+

Example

Example 2-1
ITEMS

RM (MILLION)

Personal income taxes

750

Indirect taxes

10000

Factor income received from abroad

21470

Private investment

43769

Social security contribution

800

Export

609133

Public investment

55161

Subsidies

12000

Transfer payment

4000

Factor income paid abroad

20470

Private consumption

215876

Undistributed company profit

1260

Import

492928

Changes in stock

1059

Company income tax

900

Depreciation

5000

Government spending

64592

Calculate:
(a)National Income (NNP fc)
(b)Personal Income
(c)Disposable Personal Income

ITEMS

RM (MILLION)

Private consumption

215876

Public investment

55161

Private investment

43769

Government spending

64592

Changes in stock

1059

Net Export : 609133 - 492928

116205

GDP mp

496662

Indirect taxes

(10000)

Subsidies

12000

GDP fc

498662

NFIRA: 21470 - 20470

1000

GNP fc

499662

Depreciation

(5000)

National Income

494662

ITEMS

RM (MILLION)

National Income

494662

Social security contribution

(800)

Transfer payment

4000

Undistributed company profit

(1260)

Company income tax

(900)

Personal Income

495702

Personal income tax

(750)

Disposable Income

494952

PRACTISE[02]

Question 2-1

:: Calculate the National Income

ITEMS
Wages and sales
Income from rent, dividend and interest
Profit
Corporate tax
Depreciation
Private investment
Net factor income abroad

RM (Million)
500
100
200
80
50
1000
400

Question 2-2

:: Calculate the National Income

ITEMS
Government services
Net factor income from abroad
Exports
Mining and Quarrying
Manufacturing
Indirect business tax
Depreciation
Subsidies
Private investment
Electricity, gas and water
Banking and tourism
Rent

RM (Million)
1000
250
1500
1800
1500
400
100
150
5000
700
3000
200

Question 2-3

:: Calculate the National Income

ITEMS
Personal taxes
Social security contributions
Indirect business tax
Corporate income taxes
Transfer payment
Exports
Government purchases goods and services
Personal consumption expenditure
Import
Net factor income from abroad
Capital consumption
Private investment

RM (Million)
40
15
20
40
22
10
100
250
20
25
10
5

Question 2-4

:: Calculate the National Income

ITEMS
Construction
Manufacturing
Agriculture
Mining and gas
Banking and insurance
Wholesale and retail
Other services
Taxes on expenditure
Factor payment abroad
Capital consumption
Factor payment from abroad

RM (Million)
22000
15000
12000
7000
13500
9500
4000
650
7800
360
6600

Question 2-5

:: Calculate the National Income

ITEMS

RM (Million)

Household expenditure

44.5

Depreciation

7.6

Rent

5.6

Gross investment

15.1

Export

18.7

Government expenditure

17.7

Imports

16.1

Net factors income from abroad

- 0.5

Subsidy

2.2

Private corporation income

10.7

Company profits

12.5

Indirect taxes

12

Answer Q: 2-5

:: Calculate the National Income

ITEMS

RM (Million)

Household expenditure

44.5

Gross investment

15.1

Government expenditure

17.7

Net Export: 18.7 - 16.1

2.6

GDPmp

79.9

Subsidy

2.2

Indirect taxes

(12)

GDPfc

70.1

Net factors income from abroad

(0.5)

GNPfc

69.6

Depreciation

(7.6)

National Income (NNPfc)

62

Question 2-5
:: Calculate the National Income, Personal Income & Disposable Personal Income
ITEMS
Depreciation
Transfer Payment
Social Security Contribution
Retained earnings
Corporate tax
Personal income tax
GNPfc

RM (Million)
5000
4000
800
100
7000
800
351200

Question 2-6
:: Calculate the National Income, Personal Income & Disposable Personal Income
ITEMS
Consumption
Exports
Government Expenditure
Change in stock
Personal income tax
Imports
Taxes on expenditure
Transfer payment
Wages and salaries
Capital consumption
Employees provident fund
Subsidies
Net FIRA
Private investment

RM (Million)
30
10
25
-5
3
15
10
5
30
5
2
4
50
20

Question 2-7
:: Calculate the National Income, Personal Income & Disposable Personal Income
ITEMS

RM (Million)

Depreciation

10

Corporate income taxes

40

Export

10

Government purchase

100

Import

20

Indirect business tax

20

Net factor income from abroad

25

Personal consumption expenditure

250

Personal taxes

40

Private investment

Social security contribution

15

Transfer payment

22

Answer Q:2-7(a)
:: Calculate the National Income, Personal Income & Disposable Personal Income
ITEMS

RM (Million)

Personal consumption expenditure

250

Private investment

Government purchase

100

Net Export: 10 - 20

(10)

GDPmp

345

Net factor income from abroad

25

GNPmp

370

Indirect business tax

(20)

Subsidy

GNPfc

350

Depreciation

(10)

National Income

340

Answer Q:2-7(b)
:: Calculate the National Income, Personal Income & Disposable Personal Income
ITEMS

RM (Million)

National Income

340

Corporate income taxes

(40)

Social security contribution

(15)

Transfer payment

22

Personal Income

307

Personal taxes

(40)

Disposable Income

267

RReal
e a Income
l Income
Real income or real Gross National Product (GNP) is GNP measured on a fixed
price or base year.
Nominal GNP measured in current price
Can convert the nominal GNP to Real GNP by using a GNP deflator

GNP deflator: obtained by comparing the base year index

with the current year price index
GNP deflator =

Current year price index

Base year price index

To find the Real Income or real GNP, the following formula can be used:
Real GNP =

Base year price index

Current year price index

Nominal GNP
GNP deflator

X Nominal GNP

Per Capita Income & Growth Rate

Per Capita Income
Per Capita Income refers to the average income per head of population.
Per Capita Income as index of change in the standard of living of a country

Per Capita Income =

National Income
Total Population

Growth Rate
The economic growth rate of a country can be measured as a gross domestic
product (GDP) or gross national product (GNP) based on real income.
Growth Rate percentage change in the quantity of good and services
produced from one year to another.
Growth Rate =

Real GNP this year Real GNP last year

Real GNP last year

X 100

* This formula can also be used to calculate Real GDP

PRACTISE[02]

Question 3-1

The National Income for country X for the year 2013 is

84000 million with 30 million of population.

:: Calculate per capita income for country X

Question 3-2

The National Income for country ABC for the year 2012 is

78500 million with 20 million of population.

:: Calculate per capita income for country X

Question 3-3

The real per capita income for the years 2012 and 2013 are
RM4268and RM4375 respectively.
:: Calculate the growth rate of the economy between 2012 and
2013.

Question 3-4
Year

Contribution to GDP by
the industrial sector
(RM million)

2005

24307

2006

26859

2007

30324

2008

34458

:: Calculate the average growth rate of the contribution of the

manufacturing sector to Malaysians GDP between 2005 \
and 2008

PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING

Calculation of National Income

Double counting
Accuracy of information
Unpaid activities
Transfer Payment
Activities that are illegal but productive
Depreciation

Comparison of National Income between countries

Comparison of National Income between time periods

PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING

Calculation of National Income

Comparison of National Income between countries
Concepts of national income
Different treatments of items
Pattern of income distribution
Unpaid productive activities
General Price Levels
Working Hours
Foreign exchange rate

Comparison of National Income between time periods

PROBLEMS RELATED TO NATIONAL INCOME ACCOUNTING

Calculation of National Income

Comparison of National Income between countries
Comparison of National Income between time periods
General Price Level
Quality of goods and services
Population composition and total population
Pattern of income distribution

FACTORS AFFECTING NATIONAL INCOME

Internal
Quality and quantity of factors of population
Level of technical knowledge and usage of modern technology
Level of specialization
Political stability

External

FACTORS AFFECTING NATIONAL INCOME

Internal
External
Foreign investment
Terms of trade
Receiving assistance

USAGE OF NATIONAL INCOME DATA

Measure countrys rate of economic growth

Measure total contribution of economic sectors to total national production
Economic planning
Measure countrys general standard of living
Show or indicate the success or failure of government policies

USAGE OF NATIONAL INCOME DATA

Measure countrys rate of economic growth

Measure total contribution of economic sectors to total national production
Economic planning
Measure countrys general standard of living
Show or indicate the success or failure of government policies

USAGE OF NATIONAL INCOME DATA

Measure countrys rate of economic growth

Measure total contribution of economic sectors to total national production
Economic planning
Measure countrys general standard of living
Show or indicate the success or failure of government policies

USAGE OF NATIONAL INCOME DATA

Measure countrys rate of economic growth

Measure total contribution of economic sectors to total national production
Economic planning
Measure countrys general standard of living
Show or indicate the success or failure of government policies

USAGE OF NATIONAL INCOME DATA

Measure countrys rate of economic growth

Measure total contribution of economic sectors to total national production
Economic planning
Measure countrys general standard of living
Show or indicate the success or failure of government policies

Finish Chapter 2