National Income Accounting & Economic Indicators

National Income Accounting (NIA) prepared by our JC Economics Tutor Simon Ng from Economicsfocus is a topic that involves the study of wide-ranging economic indicators that are used to assess the health of economies. Many indicators are used, such as Gross Domestic Product (GDP), Human Development Index (HDI) and even Gross National Happines (GNH). By doing so, governments can determine the standard of living for various economies and derive appropriate policy responses to achieve further progress.

economics tuition notes definition

Definition

What is nominal Gross Domestic Product (GDP)?

-The monetary value of all final goods and services produced within a country within a given period of time, expressed in current price level before corrected for inflation. Measures from a territorial perspective.

What is real Gross Domestic Product (GDP)?

- Real GDP refers to the total monetary value of goods and services produced by within a country expressed at base year price level after discounting for inflation.

What is nominal Gross National Product (GNP)?

-The monetary value of all final goods and services produced by nationals within a given period of time, expressed in current price level before corrected for inflation -Measures in term of income of all citizens in and outside of the country. (Citizen and resident perspective)

What is real Gross National Product (GNP)?

- The real value of all final goods and services produced by nationals within a given period of time, expressed in bare year price level after it is corrected for inflation

What is nominal Gross National Product (GNP)?

- The monetary value of all final goods and services produced by nationals within a given period of time, expressed in current price level before corrected for inflation

-Measures in term of income of all citizens in and outside of the country. (Citizen and resident perspective)

What is Base Year Price Index’?

- It refers to the year that is calculated in which an index number series begins. This will invariably have a starting value of 100.

What is Net Property Income from Abroad?

- Income earned by local firms and individuals abroad less income earned by foreign firms and individuals locally

What is personal income?

- The flow of income that is earned by the individual after compulsory deduction (CPF) but before deduction for income tax.

What is personal disposable income?

-The flow of income available to individuals for spending and saving (CPF) after compulsory deduction and deduction for income tax and additions from transfer payments such as child benefits or subsidy. 

What is standard of living?

- Measures the average quality of life of a population which includes the material and non-material aspects of life.

What is qualitative standard of living?

- Standard of living measured in term of the quality of life, which will reflect the intangible aspect of comfort of the life of the people and this is commonly represented by the mortality rate, birth rate, level of working hours and stress and the level of externalities in the country consumption and production.

What is quantitative standard of living?

- Standard of living measured in term of the purchasing power which will reflect the level of material comforts and this is commonly represented by the real per capita income.

What is real per capita income?

- Real income of an individual in an economy

(Formula: Real GDP/Population figure or Real GNP/Population Figure)

What is Human Development Index (HDI)?

- HDI measures the standard of living, seen in terms of the progress of the well-being of the individuals.

What is Measurement of Economic Welfare (MEW)?

- The MEW measures the standard of living in term of the monetized value of the qualitative aspect of standard of living.

What is Consumer Price Index (CPI)?

- Measures the change in price of a fixed basket of goods and services commonly purchased by households in a given time period.

What is labor participation rate?

- Proportion of labour force that are employed. The percentage of unemployed people to the labour force. Unemployed people are individuals aged 15 and above who are unemployed but are willing and able to work.

What is cost of living?

- The amount that is spent in order to maintain a certain way of life/standard of living.

What is cost of living index?

- A theoretical price index that measures the amount one needs to spend in order to maintain a certain level of satisfaction.

What is labor force?

- It refers to both employed and unemployed individuals (aged 15 and above) that are willing and able to work.

What is working population?

- It refers to the proportion of population who are available for employment, inclusive of the economically inactive.

What is GDP growth rate?

- The amount at which GDP increases/decreases (usually measured annually)

What real GDP growth rate?

- The rate at which real GDP increases or decreases

How to calculate real GDP growth rate?

- Economic Growth Rate – Inflation Rate = Real Economic Growth Rate

What is balance of trade?

- Revenue from exports less expenses spent on imports (of goods and services)

What is balance of payment?

- Inflow of money from abroad less outflow of money from the country. Divided into current account and capital account.

- Current account records monetary transfer for exports and imports of goods and services, income flows and net transfers in and out of the country.

- Capital account records all inflows and outflows of funds due to financial activities like acquisition and disposal of fixed assets, shares, government grants for overseas project, etc.

What is current account?

- Records monetary transfer for exports and imports of goods and services, income flows and net transfers in and out of the country.

What is capital account?

- It records all inflows and outflows of funds due to financial activities like acquisition and disposal of fixed assets, shares, government grants for overseas project.

What is financial account?

- Records flow of funds due to transfer of saving and equity transaction (hot money)

What is exchange rate?

- The measure of one country’s currency in another country’s currency.

What is nominal effective exchange rate?

- Value of an individual country's currency relative to a basket of major currencies in the index, before adjusting for the effects of inflation.

What is real effective exchange rate?

- Value of an individual country's currency relative to a basket of major currencies in the index, after adjusting for the effects of inflation.

What is Gini Co-efficient ratio?

- Measure of inequality of wealth/income distribution. It is measure as a ratio between 0 and 1. A low Gini co-efficient indicates more equitable income.

What is wage-to-GDP ratio?

- Proportion of total wage earned individuals employed to GDP - Ratio – 0 to 1. Higher the ratio, the more even the income distribution.

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