GROSS DOMESTIC INCOME: The total market value of all final goods and services produced within the political boundaries of an economy during a given period of time, usually a year, as calculated using the income approach to measuring gross domestic product. Gross domestic income, abbreviated GDI, is virtually identical to gross domestic product (GDP), with one minor difference, the statistical discrepancy. As a matter of fact, the statistical discrepancy is identified as the difference between GDP and GDI.
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NATIONAL INCOME AND PRODUCT ACCOUNTS:
The official government system of collecting, processing, and reporting assorted production and income measures used to track aggregate activity in the macroeconomy. This system of accounts, maintained by the Bureau of Economic Analysis in the Department of Commerce, is the source of official estimates of gross domestic product, net domestic product, national income, personal income, disposable income, gross national product, and related measures. The National Income and Product Accounts are one of the more important sources of information economists have available to track the performance of the aggregate economy. Two other key data sources are unemployment and inflation',500,400)">inflation information provided by the Bureau of Labor Statistics and leading, lagging, and coincident economic indicators compiled by The Conference Board.
A Little HistoryThe U.S. system of National Income and Product Accounts is virtually synonymous with the study of macroeconomics, both were an outgrowth of the Great Depression of the 1930s.
Economists, lead by John Maynard Keynes, sought to understand the Great Depression by developing theories of the macroeconomics. However, macroeconomic data was needed to test these theories. In fact, some economists attribute the severity of the Great Depression in part to the lack of accurate macroeconomic data. While people knew the economy was in bad shape, no one really knew how bad it was--IN TOTAL. As such, they had no idea if or when correct action was needed.
Simon Kuznets, a future Noble Prize laureate, was largely responsible for developing the first set of National Income and Product Accounts released in 1934 when he was associated with the National Bureau of Economic Research. This system has been refined, enhanced, and improved over the decades. The U.S. system of National Income and Product Accounts has been the model for similar systems developed by other nations throughout the world.
The Big Five MeasuresThe current National Income and Product Accounts is an enormous data collection and processing task. Detailed data used to estimate aggregate economic activity are collected throughout the country. The five primary measures of production and income contained in the National Income and Product Accounts are gross domestic product, net domestic product, national income, personal income, and disposable income.
In addition to these primary five measures, a couple of additional production measures are also available. These include gross national product, total production of resources owned by citizens of the country regardless of location, and real gross domestic product, the value of total production after adjusting for inflation.
- Gross Domestic Product: The total market value of all final goods and services produced within the political boundaries of an economy during a given period of time, usually one year. This is the official measure of the total output produced by the economy.
- Net Domestic Product: The total market value of all final goods and services produced within the political boundaries of an economy during a given period of time, usually a year, after adjusting for the depreciation of capital.
- National Income: The total income earned by the citizens of the national economy as a result of their ownership the resources used in the production of final goods and services during a given period of time, usually one year. This is the official measure of the total income generated by the economy.
- Personal Income: The total income received by the members of the domestic household sector, which may or may not be earned from productive activities during a given period of time, usually one year.
- Disposable Income: The total income that can be used by the household sector for either consumption or saving during a given period of time, usually one year.
And a Host of OthersWhile much of the focus of the National Income and Product Accounts is on the five primary measures of production and income, the list of additional, supportive measures is almost endless. Consider a short list of the more important "supplemental" measures:
- The Four Aggregate Expenditures: Gross domestic product is divided among expenditures by the four macroeconomic sectors, including personal consumption expenditures (household sector), gross private domestic investment (business sector), government consumption expenditures and gross investment (government sector), and net exports of goods and services (foreign sector).
- Expenditure Components: These four aggregate expenditures are divided into different components. Household consumption expenditures are separated into durable goods, nondurable goods, and services. They are further subdivided into specific categories such as medical care, intercity airline transportation, shoes, legal services, and tobacco products. Business investment expenditures are separated into fixed investment and changes in inventories. Government purchases are separated into federal defense, federal non-defense, and state and local. Net exports are separated into exports and imports.
- Income Sources: National income is divided among the major sources that are more or less associated with the four factors of production. These sources are wages (labor), interest (capital), rent (land), corporate profit (entrepreneurship), and proprietors' income (all four combined).
- Industrial Production: Gross domestic product is also compiled for major industries, including agriculture, mining, construction, manufacturing, transportation, wholesale trade, retail trade, finance, and services. Data are further compiled for divisions of these major industries, such as lumber and wood products (manufacturing), railroad (transportation), banking (finance), and hotel and lodging (services).
- Assorted Adjustments: A key feature of the National Income and Product Accounts is the various items separating the five primary production and income measures. A few of the more notable ones are capital consumption adjustment, indirect business taxes, net foreign factor income, undistributed corporate profits, and personal taxes--all of which are important in their own right.
- Price Deflators: The adjustment of gross domestic product and other measures for inflation generates a series of price indexes, or price deflators. These are exceptionally useful for calculating inflation, especially inflation rates for specific components of production and income, such as the inflation rate of personal consumption expenditures on durable goods.
NATIONAL INCOME AND PRODUCT ACCOUNTS, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: February 27, 2024].
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