Macroeconomic indicators are aggregated (total) values that characterize the movement of the economy as a whole. One of the main such indicators is economic efficiency, understood as ratio of beneficial effect (result) to costs. Economic efficiency in relation to the activities of an individual economic unit is not identical to efficiency on a societal scale.
Economic efficiency of the national economy- this is a condition in which it is impossible to increase the degree of satisfaction of the needs of at least one member of society without worsening the situation of another. This state is called Pareto efficiency (named after the Italian economist V. Pareto).
Efficiency should not be understood only as a result achieved by a national economy or an individual industry over a certain period of time, it is rather an effect. The effect can be significant, but if it is achieved at great cost, the effectiveness will remain unchanged or even decrease. Thus, efficiency is not an absolute value, but a relative one, indicating not only an increase in production indicators, but also the price (due to what costs) of the gains achieved.
World experience shows that efficiency growth is an objective, natural, sustainable, repeatable and causally determined process. The more civilized the society, the more important it becomes to improve production efficiency, as the need and understanding of the need to save the social costs of excessively increased production increases. Increasing the efficiency of social production takes on the features of an economic law, which can be formulated as law of increasing production efficiency.
Greatest increase production efficiency is achieved with an intensive type of expanded reproduction, which is characteristic of modern stage development of society and economy of developed countries.
The main indicators of the efficiency of social production are: social labor productivity(the ratio of the national product to the number of workers in the sphere of material production); return on assets(the ratio of national income to the average annual value of fixed assets and working capital); capital intensity(an indicator inverse to capital productivity), etc.
The result of the functioning of the national economy is national product, which is measured using various macroeconomic indicators, such as gross domestic product, gross national income.
Gross Domestic Product (GDP)– a summary indicator representing the total value of goods and services at market prices created by resident and non-resident institutional units within a country, using the factors of production of a given country for a certain period.
Its dynamics are used to assess the overall performance of the economy, and therefore to determine the relative success or failure of government policies.
The GDP indicator measures the value only final products(products used for final consumption, accumulation and export) and does not take into account the cost intermediate goods and services consumed in the production process (raw materials, materials, fuel, energy, etc.). Otherwise, there would be double counting since the cost of intermediate products is included in the cost of final goods and services.
There are three ways to measure GDP:
By income (distribution method) – as the sum of primary incomes of individuals, joint-stock companies, private enterprises, as well as state income from entrepreneurial activity and organs government controlled in the form of taxes on production and imports;
By expenses (end use method) – as the sum of expenditures on personal consumption, government consumption (purchase of goods and services), capital investment and the foreign trade balance.
GDP= C + I + G + X,
where C – personal consumer expenses;
I – gross investment;
G – government expenses;
X – net exports (as the difference between exports and imports).
By value added (production method) – as the sum of the added value of all producers at each stage of production of the final product. This calculation method allows us to take into account the contribution of various firms and industries to the creation of GDP. Eliminating intermediate products solves the problem of double counting.
For the economy as a whole, the sum of all value added must be equal to the sum of final goods and services. In Russia, currently the most accessible and timely information is data on the production of goods and services collected by the State Committee on Statistics on the basis of statistical reporting of enterprises, therefore the main method of calculating GDP is the production method.
Gross National Income (GNI)– serves to account for the totality of primary income received by residents of a given country in connection with their participation in the production of national enterprises located both on the territory of a given country and abroad. When calculated, this indicator differs from the GDP indicator by an amount equal to the balance of settlements with foreign countries. If we add to the GDP indicator the difference between receipts from factors of production (factor income) from abroad and factor income received by foreign investors in the territory of a given country, we get the GNI indicator.
Thus, both GDP and GNI refer to the entire economy, but one measures output (GDP) and the other measures income (GNI). GNI is the totality of primary income received by residents as a result of their participation in production and from property.*
GNI=GDP + Balance of primary income from abroad
The indicators of GDP and GNI can be calculated not only on a gross basis, but also on a net basis, without taking into account the cost of products that are used to restore consumed fixed capital.
Net Domestic Product (NPP)– is a measure of net production in given year.
NVP=GDP – Depreciation
It shows the annual output that an economy can consume without reducing future production possibilities. If we subtract the consumption of fixed capital from the GNI indicator, we get the indicator net national income (NNI).
National income (NI)- this is the income produced by factors of production in the process of their participation in the creation of GNP, or the cost of resources used in this case, or the totality of income received by all economic agents. Since all factors of production take part in the production of ND, it is distributed among their owners in accordance with their prices. From the point of view of resource suppliers, ND is a measure of their income from participation in a given production, and from the point of view of entrepreneurs, ND reflects the market prices of the factors of production used.
The SNA divides national income into five components depending on how income is generated: wages, wage and bonuses; owners' income; rental income; corporate profits; net interest.
Therefore, in economic theory and practice, nominal and real GDP indicators are calculated.
Nominal GDP calculated in prices of the current year (at the time of calculation). Its value is influenced by the dynamics of real production volume and the dynamics of the price level.
Real GDP is calculated in comparable (constant, basic) prices, which makes it possible to estimate changes in the physical volume of output over a certain period of time. Real GDP is calculated by adjusting nominal GDP by the price index:
Nominal GDP
Real GDP = Price Index (GDP deflator)
), national income ( ND), personal income ( LD), disposable income ( RD).
Gross National Product (GNP)) is the total market value of the entire volume of final production of goods and services created by national enterprises in their country or abroad during the year using factors of production owned by a given country Gross Domestic Product (GDP) ) is the total value of the total final production of goods and services created in the territory of a given country during the year using factors of production owned both by that country and other countries. GNP is equal to GDP plus net property income received from abroad.
The difference between GNP and GDP is insignificant and in developed countries with market economies fluctuates within 1%. The volume of GNP shows the economic potential of the national economy. GNP per capita shows the level of well-being. The GNP indicator takes into account only final products, i.e. goods and services that are purchased by consumers for final use rather than for processing.
GNP (GDP) is calculated three methods: production, distribution and end-use method.
Production method(value added) is the summation of the values added at each stage of production of the final product. This method allows us to take into account the contribution of various firms and industries to the creation of GNP. Eliminating intermediate products solves the problem of double counting.
Distribution method(by income) consists of summing up the income received as a result of production in a given year.
The company's income includes:
Deductions for capital consumption (depreciation);
Indirect business taxes (the difference between the price a consumer pays for a product and the firm's selling price);
Income of owners of production factors (wages of employees, rental income, interest income, income of private owners and corporations).
End use method(by expenses) includes the summation of all expenses necessary to purchase the entire volume of products produced in a given year, i.e. personal consumption expenditures of the population, investments, government purchases of goods and services, net exports. The total expenditures of GNP can be written as the formula: GNP (Y = C + I + G + NX), where:
Personal consumption expenditure (C) is household expenditure on current consumption goods, consumer durables, and consumption expenditure on services.
Investments (I) include industrial capital investments or investments in primary production, costs of new construction (including housing) and increases in inventories.
Government purchases of goods and services (G) include all government expenditures on the final products of enterprises and on all direct purchases of resources (maintenance of the army and the state apparatus, costs of construction and maintenance of schools, kindergartens, clinics, museums, roads, etc.) .
Net exports (NX) is the difference in the value of exports and imports of goods and services, reflecting the results of trade with other countries.
When calculating GNP, the production of goods and services permitted by law is taken into account. However, at present, the problem of including the shadow and informal economy in the GNP has arisen. Its size is calculated as the difference between actual and recorded GNP. Accounted GNP is the income of households and firms. Actual GNP contains unaccounted for undeclared income.
The size of the shadow economy = GNP (actual) - GNP (accounted).
Let's consider the concepts of nominal and real, potential and actual GNP.
Nominal GNP includes the sum of all goods and services produced in a year, measured at current prices. Real GNP is assessed in comparable prices, that is, when assessing it, price increases due to inflation are subtracted. The ratio of nominal GNP to real GNP multiplied by 100% is called the GNP deflator. The deflator is a price index that characterizes changes in inflation. Using a deflator, you can calculate any macroeconomic indicator in nominal and real terms.
GNP DEFLATOR = Nominal GNP / Real GNP x 100%
The GNP deflator (calculated as the Paasche index) is compiled as a weighted average estimate of changes in the cost of a set of goods for both consumer and industrial purposes included in the current year basket:
The consumer (retail) price index (calculated as the Laspeyres index) is compiled as a weighted average estimate of changes in the cost of a set of consumer goods included in the base year basket:
The Laspeyres index (CPI) does not take into account the effect of substituting highly expensive goods with relatively cheaper ones and overestimates the increase in the price level.
The Paasche index takes into account the substitution effect, but does not take into account the decline in welfare caused by price increases. Therefore, the Paasche index underestimates the increase in the price level. To more adequately reflect the dynamics of the price level, the Fisher index is calculated:
Potential GNP refers to the possible national output obtained at full employment and a stable price level.
Actual GNP is the national output created under cyclical unemployment
National product (NPP) - the total annual output of goods and services produced and consumed in the country; determined by subtracting depreciation charges from GNP.
National income (NI)- net income of society, characterizing the welfare of society, i.e. the sum of wages, rent, interest and profit; determined by subtracting indirect taxes on business from the value of NNP
Personal income (LD) is the amount of income actually received by the population after deducting corporate profits and contributions to social insurance, pure interest, but with the addition of transfer payments and dividends.
Disposable income (Disposable income)- income that remains at the disposal of members of society after paying all taxes and non-tax payments; determined by subtracting individual taxes from the LD.
Net Economic Welfare (NEW)= GNP + self-service + free time+ improved quality of goods and services + rational selection of consumer goods - illegal activities - pollution environment- crime. Addition and subtraction signs show which of the factors can increase or decrease welfare in a country.
National wealth (NB) - a set of material and intangible goods that society has at a certain date and which were created by the labor of people over the entire previous period. NB includes both tangible and intangible results of human activity. Material assets include: fixed assets, working capital, inventory, government reserves (including insurance, defense, gold reserves, etc.), durable goods, natural resources involved in economic turnover. Intangible ones include scientific, educational, qualification, cultural potential, and the health of the nation.
The most important starting concepts of macroeconomics are national product (NP) and national income (NI). These are general indicators. The methods of national recording of these indicators here and abroad differed significantly. In a planned economy, our statistical bodies carried out this calculation based on Marx’s provisions on the division of sectors of the national economy into production and non-production spheres.
In modern economics there is no division between productive and unproductive labor. The cost of services is also included in the NP. With the transition to a market economy, the concept of national economic balances was replaced by the SNA (system of national accounts), used in the West on the recommendation of international bodies.
The main macroeconomic indicator of the SNA for real statistical measurement of production and consumption of NP is Gross Domestic Product (GDP). GDP is the value of final goods and services produced on the territory of a given country over a certain period of time (most often a year).
In this definition, you need to pay attention to the word “final” (to exclude repeated counting). That is, GDP is the sum of all value added. This does not include the cost of raw materials, materials, semi-finished products purchased externally, since the cost of final goods takes into account all intermediate operations. Intermediate products- goods that are subject to further processing or resale.
GDP does not include transactions for the resale of goods. This does not include some financial transactions (gifts, endowments, purchase and sale of securities, transfer payments).
GDP can be measured in two ways: by summing up all of society's expenditures on goods and services produced in a given year, or by adding up the monetary income received as a result of production in the same year. The equality of income and expenses follows from the accounting rule: all expenses for the purchase of products are necessarily the income of the producers of these products.
GDP by income stream is defined as the sum of three components:
1) income of owners of production factors;
2) depreciation charges;
3) indirect income.
GDP = W + i + R + P + A + KN, where
W – wages of employees (wages, including bonuses, additional payments, allowances, etc., calculated before taxes);
i – interest for the use of capital;
R – rent payments;
P – profit and income;
A – depreciation;
KN – indirect taxes (primary state income).
Expenses in composition of GDP are divided into four large groups:
Consumption (C)
Investments (I)
Government Procurement (G)
Net exports (Xn)
GDP = C + I + G + Xn.
This formula not only characterizes consumption, but also describes the structure of macroeconomic demand.
The largest component in the consumption structure is personal consumption (C). This is the demand from households for consumer goods.
I – gross private investment.
I = A + In, where
A – depreciation (investments used to restore capital)
In – net private investment (investment used to expand capital).
G – Government procurement of goods and services is associated with the implementation of those political, economic and social functions that a modern state carries out.
Xn – foreign trade balance.
The relationship between macroeconomic indicators.
The most important indicators used in modern SNA are:
1. GDP and GNI;
2. PVP and PND;
3. ND (not calculated in modern Russian statistics);
GDP is the baseline indicator for the entire SNA. Other indicators are obtained from GDP in a calculated way: by adding to it or subtracting certain components from it. It is also used for international comparisons, usually per capita.
GNI (gross national income) is a very close, although not identical, indicator to GDP. The fact is that there is a difference between in which country the NP was created and in which country it belongs. IN Lately Many workers from the CIS countries come to Russia. Part of the product they create is paid to them in the form of wages and is further divided into two parts: one is consumed in Russia, and the other is exported to their homeland. GDP answers the question of where the product was created, and GNI answers the question of which country it belongs to.
GNI = GDP + balance of income from abroad.
NDP (net domestic product) is obtained by subtracting depreciation charges from GDP, i.e. differs from the latter in that it is reduced by the amount of consumption (wear and tear) of fixed capital. Because of this, NVP shows more accurately than GDP the value of the goods created this year. Those. PVP cleared from double counting of GDP.
NNI (net national income) is determined by subtracting depreciation from GNI.
The next stage of purification is achieved using the indicator ND(national income). ND equals NVP minus CN. These state revenues are not associated with the introduction of any resources into the production process. CNs increase prices but do not create any economic benefits.
This important macroeconomic indicator is not calculated in modern statistics.
PD (personal income) is calculated by subtracting direct and indirect taxes from NNI and adding the balance of private and government transfers.
Among all SNA indicators, it describes the level and structure of income better than others individuals before taxes.
RD (disposable income) equals LD minus individual taxes and shows how much households can actually manage.
RD is divided into two parts – final consumption (part of income allocated for the purchase of final goods and services) and savings.
Control questions:
1. What were the differences between the calculation of IR in domestic and foreign statistics?
2. Define GDP. By what methods can it be calculated? Expand the content of these methods.
3. List the main macroeconomic indicators. What is the relationship between them?
The SNA is a system of macroeconomic indicators that reflect the most important and general aspects of economic development in their interrelation and interaction. The main indicators of national accounts are: gross national product (GNP), gross domestic product (GDP), net national product (NNP), national income (NI), personal income (PI).
Gross output represents the value of all goods and services produced in an economy over a given period of time. Gross output includes absolutely all goods produced in the economy, including those intended for the production of other goods and services, the latter making up intermediate consumption.
Gross National Product (GNP) is the total market value of all goods and services intended for final consumption and produced by factors owned by a given country during a specified period of time (usually a year). GNP, unlike gross output, is cleared of intermediate consumption.
The concept of “market value” means that the valuation of goods and services included in GNP is carried out at market prices. The market price includes indirect taxes (excise taxes, VAT, sales taxes, etc.). It differs from the factor prices received by sellers of goods. The market price minus indirect taxes is equal to the factor cost. When calculating GNP, only the value of products produced by factors of production owned by a given country is measured.
Characterizing GNP as “the most accurate total measure of goods and services that a country can produce” (P. Samuelson), Western economic thought has developed three methods of measuring it: by expenditures on products created in the country, by income received as a result of production, and also using the value added method.
The first method is the cost method. The value of GNP is defined as the monetary value of the final products and services produced during the year. In other words, it is necessary to sum up all expenses for the acquisition (consumption) of the final product. The GNP indicator includes: consumer income of the population (C); gross private investment in the national economy (Ig); public procurement of goods and services (G); net exports (Xn), which represents the difference between a given country's exports and imports. Thus, the calculation of GNP by expenditure can be represented by the following equation:
C + Ig + G + Xn = GNP
The second method is the method of calculating GNP by income. GNP, on the other hand, is the sum of the incomes of individuals and businesses (wages, interest, profits) and is generally defined as the sum of the remunerations of the owners of the factors of production. This indicator also includes indirect taxes on enterprises, depreciation, and property income. GNP can also be defined as the sum of the incomes of sectors of the national economy. Both methods are considered equivalent and give the same GNP result.
Along with calculations of expenses and income, there is a third method of calculating it, based on the concept of added value. Value added is the difference between revenue from sales of products (of an individual company or industry as a whole) and the cost of raw materials consumed in the production of these products. By summing up the added value created in all sectors of the economy, it is possible to determine the values of indicators characterizing the market value of all final goods and services produced either through the use of the resources of a given country or on its territory.
Gross national product is calculated at current market prices, which represents its nominal value. To obtain the true value of this indicator, it is necessary to clear prices from the influence of inflation and apply a price index, which will give the real value of the gross national product. The ratio of nominal GNP to real GNP shows the increase in GNP due to rising prices and is called the GNP deflator.
Gross Domestic Product (GDP) is the monetary value of all final goods and services produced in an economy over a given period. This takes into account the annual volume of final goods and services created by economic units that are residents of a given country. The gross domestic product is obtained if the value of net exports is subtracted from the total amount of GNP:
GDP=GNP-ChE
Net exports are the difference between the cost of exporting goods and services and the cost of importing products from abroad. The difference between the GNP and GPP indicators is insignificant; it ranges from - 1% to 1.5% of GDP. Based on GNP and GDP indicators, a number of other important macroeconomic indicators that are part of the System of National Accounts (SNA) can be calculated.
Net national product or NNP. It is defined as follows:
NNP = GNP - Depreciation
It is known that buildings, equipment, machines, which constitute one of the main elements of production, last for several years.
Therefore, each unit of goods will contain part of their value. The state legally establishes the service life of such assets, and thereby determines what part of their value will be contained monthly and daily in the produced commodity mass. Thus, the proceeds received from the sale will contain in cash the consumed (transferred) part of the cost of equipment and machinery. Every year, this part is withdrawn, accumulated and, when the service life of the equipment ends, is used to purchase a new one. The considered mechanism for renewing consumed factors of production is called depreciation. Obviously, in order to find out the true volume of final products that can be used to improve the well-being of the population, depreciation must be subtracted from GNP, i.e. that part of the cost that goes to renew worn-out factors of production.
The next indicator is national income (NI):
ND = NNP - indirect taxes on entrepreneurs.
In this case, indirect taxes act as a macroeconomic regulator between the prices at which consumers buy goods and the sales prices that are set by firms. National income is the total income earned by the owners of factors of production: owners of labor (wages of hired workers), owners of capital (profit and interest), owners of land (land rent). The meaning of this is that the state, by levying taxes, does not invest anything in production, so it cannot be considered as a supplier economic resources. From the point of view of resource owners, ND is a measure of their income from participation in production for the current period.
So, the relationship between macroeconomic indicators can be represented by the following diagram:
GNP = GDP - Depreciation (A) = PVP - Indirect taxes = ND - Corporate income taxes - social security contributions - individual income taxes - retained earnings of enterprises + transfer payments = RD (LD).
The considered macroeconomic indicators are calculated on the basis of GNP and are closely interrelated, characterizing various aspects of the country’s economic life. Macroeconomic indicators act as a way to display the state of affairs in the reporting national economy. There are the most general (GNP, GDP) and more specific forms of indicators of macroeconomic activity. There are absolute and relative indicators, among which great importance belongs to macroeconomic indices. The main flows in the SNA are assessed at market prices, that is, at the prices at which transactions are carried out (prices of the manufacturer and the final buyer).
Products and services that do not take commodity-monetary form are valued at market prices for similar goods that are sold on the market, or at cost if there is no market price (services government agencies, public organizations, etc.). The SNA makes it possible to create an information base for studying the real processes that occur in a market economy, such as production development, the scale of inflation, unemployment, privatization, tax and customs activities.
The most important starting concepts of macroeconomics are national product (NP) and national income (NI). These are general indicators. The methods of national recording of these indicators here and abroad differed significantly. In a planned economy, our statistical bodies carried out this calculation based on Marx’s provisions on the division of sectors of the national economy into production and non-production spheres.
In modern economics there is no division between productive and unproductive labor. The cost of services is also included in the NP. With the transition to a market economy, the concept of national economic balances was replaced by the SNA (system of national accounts), used in the West on the recommendation of international bodies.
The main macroeconomic indicator of the SNA for real statistical measurement of production and consumption of NP is Gross Domestic Product (GDP). GDP 2 is the value of final goods and services produced on the territory of a given country over a certain period of time (most often a year).
In this definition, you need to pay attention to the word “final” (to exclude repeated counting). That is, GDP is the sum of all value added. This does not include the cost of raw materials, materials, semi-finished products purchased externally, since the cost of final goods takes into account all intermediate operations. Intermediate products- goods that are subject to further processing or resale.
GDP does not include transactions for the resale of goods. This does not include some financial transactions (gifts, endowments, purchase and sale of securities, transfer payments).
GDP can be measured in two ways: by summing up all of society's expenditures on goods and services produced in a given year, or by adding up the monetary income received as a result of production in the same year. The equality of income and expenses follows from the accounting rule: all expenses for the purchase of products are necessarily the income of the producers of these products.
GDP by income stream is defined as the sum of three components:
1) income of owners of production factors;
2) depreciation charges;
3) indirect income.
GDP = W + i + R + P + A + KN, where
W – wages of employees (wages, including bonuses, additional payments, allowances, etc., calculated before taxes);
i – interest for the use of capital;
R – rent payments;
P – profit and income;
A – depreciation;
KN – indirect taxes (primary state income).
Expenditures as part of GDP are divided into four large groups:
Consumption (C)
Investments (I)
Government Procurement (G)
Net exports (Xn)
GDP = C + I + G + Xn.
This formula not only characterizes consumption, but also describes the structure of macroeconomic demand.
The largest component in the consumption structure is personal consumption (C). This is the demand from households for consumer goods.
I – gross private investment.
I = A + In, where
A – depreciation (investments used to restore capital)
In – net private investment (investment used to expand capital).
G – Government procurement of goods and services is associated with the implementation of those political, economic and social functions that a modern state carries out.
Xn – foreign trade balance.
The relationship between macroeconomic indicators.
The most important indicators used in modern SNA are:
1. GDP and GNI;
2. PVP and PND;
3. ND (not calculated in modern Russian statistics);
GDP is the baseline indicator for the entire SNA. Other indicators are obtained from GDP in a calculated way: by adding to it or subtracting certain components from it. It is also used for international comparisons, usually per capita.
GNI (gross national income) is a very close, although not identical, indicator to GDP. The fact is that there is a difference between in which country the NP was created and in which country it belongs. Recently, many workers from the CIS countries have been coming to Russia. Part of the product they create is paid to them in the form of wages and is further divided into two parts: one is consumed in Russia, and the other is exported to their homeland. GDP answers the question of where the product was created, and GNI answers the question of which country it belongs to.
GNI = GDP + balance of income from abroad.
NDP (net domestic product) is obtained by subtracting depreciation charges from GDP, i.e. differs from the latter in that it is reduced by the amount of consumption (wear and tear) of fixed capital. Because of this, NVP shows more accurately than GDP the value of the goods created this year. Those. PVP cleared from double counting of GDP.
NNI (net national income) is determined by subtracting depreciation from GNI.
The next stage of purification is achieved using the indicator ND(national income). ND equals NVP minus CN. These state revenues are not associated with the introduction of any resources into the production process. CNs increase prices but do not create any economic benefits.
This important macroeconomic indicator is not calculated in modern statistics.
LD is calculated by subtracting direct and indirect taxes from NNI and adding the balance of private and government transfers.
Among all SNA indicators, it better than others describes the level and structure of income of individuals before taxes.
RD equals LD minus individual taxes and shows how much households can actually manage.
Control questions:
1. What were the differences between the calculation of IR in domestic and foreign statistics?
2. Define GDP. By what methods can it be calculated? Expand the content of these methods.
3. List the main macroeconomic indicators. What is the relationship between them?
