- collection, threshing and sorting of grain in agriculture;
- cleaning, drying and storage in elevators;
- grinding grain in mills;
- baking bread at bakeries.
FINAL PRODUCTS (final products) - goods and services used by final consumers, as opposed to intermediate products used as resources in the production of other goods and services. Thus, the purchase of bread is taken into account as part of the final demand, which cannot be said about the flour used to prepare this bread.
The total market value of all final products (corresponding to the total amount of expenditure in calculating national income) equals the total amount of value added at each stage of production for all products in the economy.
UNFINISHED PRODUCTION (work in progress) - any items that are still in the process of being transformed into final products. Work in progress, together with inventories of materials and final products, form
INTERMEDIATE PAYMENTS (progress payments ) - a specific agreement usually concluded at the beginning of the implementation of large construction projects, according to which payments for work done are made at certain stages until the completion of the work.
INTERMEDIATE PRODUCTS (intermediate products) - goods and services that are used by a firm as factors of production in the process of producing other goods and services. Steel, for example, is an intermediate product with many end uses including car and washing machine bodies, nuts and bolts, etc.
Intermediate products are not taken into account when determining gross national product in terms of national income, since this indicator takes into account only the value of final goods and services.
See final products, added value, Pyotr Ilyich Grebennikov.
GOODS, or GOODS (goods or commodities) - any material economic products (cars, washing machines, tools, units, etc.) that contribute directly (see) or indirectly (see) to the satisfaction of human needs. Consumer goods and industrial goods are important components.
see also
P.I.Grebennikov. Macroeconomics (electronic textbook), Pyotr Ilyich Grebennikov.
P.I.Grebennikov.
SERVICES (services) - any intangible types economic activity(hairdressing salons, catering, insurance, banking, etc.) that directly (see) or indirectly (see) contribute to the satisfaction of human needs. Services are an important component of the gross national product.
ADDED VALUE (value added) - the difference between the value of a company's or industry's products (i.e., the total revenue received from the sale of these products) and the cost of raw materials, components and services purchased to ensure the production of these products. “Value added” is the value that a firm adds to purchased materials and services in the process of producing and selling products.
See value added tax
TOTAL INTERNAL COSTS (total domestic expenditures ) - general expenses residents of a given country for final products (costs are not taken into account). If we subtract from this sum the costs of imports and add to it the costs of foreigners on goods and services produced within that country, we obtain an estimate of the gross national product.
NATIONAL INCOME or FACTOR INCOME(national income or factor income) - the total cash income received by households in exchange for supplying factors of production to businesses over a specified period of time. National income is equal to the net national product and consists of the total monetary value of goods and services produced over a certain period of time (gross national product) minus capital consumption.
See, national income circulation model, Pyotr Ilyich Grebennikov.
NATIONAL PRODUCT (national product) - the monetary expression of the value of all goods and services produced in the country during a certain period of time (gross national product). Gross national product minus capital consumption or depreciation is net national product, which is equal to national income.
See national income calculation
PURE DOMESTIC PRODUCT (net domestic product) is the monetary expression of the value of all goods and services produced by a country in a year, minus the consumption of capital in the process of this production.
Cm.
PURE NATIONAL PRODUCT (CNP) (net national product) - gross national product minus capital consumption or depreciation of fixed assets, taking into account the fact that the country's capital stock is consumed in the production process per year.
CALCULATION OF NATIONAL INCOME (national income accounts) - a statistical description of the national economy, reflecting its state in a certain period of time (usually a year), national income represents the net value of all goods and services (national product) produced by the country during the year: it is a convenient monetary measure of economic activity . National income per capita serves as an indicator of the standard of living over different periods of time and in different countries Oh.
National income can be measured in three ways (see diagram below):
(a) domestic product/output of goods and services produced at enterprises within the country (method of calculating GDP by value added), which does not include the cost of imported goods and services. If the value of intermediate goods and services included in the final product is added to the cost of the final product, then due to this “double counting” the value of output is overestimated. To avoid this, only the added value produced at each intermediate stage is taken into account. The total value added in various sectors of the economy (agriculture, industry) is the gross domestic product. If we add to this the net income received by individuals abroad (the net income in the form of interest, rent, profits or dividends that comes to citizens of a country from holding assets abroad), the result is gross national product;
(b) the total income of residents of the country received from the current production of goods and services (distribution method of calculating GDP). Such incomes are called factor incomes, since they are received for the provision of factors of production. It does not include transfer payments, such as unemployment or sickness benefits, since these payments do not correspond to the production of any goods or services. The sum of all factor incomes (wages, salaries, income of the self-employed) must exactly coincide with the gross domestic product, since each monetary unit of the price of goods and services produced simultaneously represents a monetary unit of income of the producer of these goods or services. To obtain from gross domestic factor income (= gross domestic product) gross national income (= gross national product), it is necessary to add the net income of individuals from the ownership of foreign assets;
(c) total domestic expenditures of the country's residents on consumption and investment (method of calculating GDP by expenditure). This indicator includes expenditure on goods and services (excluding expenditure on intermediate goods and services), including unsold goods and services transferred to inventories (investment in inventories). However, on the one hand, part of residents' expenses is allocated to imported goods and services; on the other hand, expenditures by non-residents on goods and services produced by residents will be included in the factor income of these residents. Thus, to obtain total national expenditure (= gross national product) from total domestic expenditure, it is necessary to subtract imports and add exports.
All of the methods described above measure the gross monetary value of goods and services produced - the gross national product. However, in the process of producing these goods and services, the country's stock of fixed capital is subject to wear and tear. Thus, it is also necessary to take into account the net monetary value of goods and services produced (taking into account depreciation of fixed capital or consumption of capital) - the net national product. The net national product is called national income.
In practice, due to the difficulties of collecting reliable data, the three specified methods of calculating national income give different results, so the calculation must be supplemented by determining the error that would explain these discrepancies. In addition, in order to reflect the difference between monetary (nominal) and real values (see real values) of national income, it is necessary to take into account the impact of inflation on GNP by using a price index calculated on the basis of all final goods and services produced in the economy, so called the GNP deflator.
CAPITAL ACCOUNT (capital account) is a section of the national income account that records government investment in infrastructure (for example, roads, hospitals, schools) and private sector investment, for example, in machinery and equipment.
GROSS DOMESTIC PRODUCT (GDP) (gross domestic product (GDP)) - the total cost of all final goods and services,
produced in the economy during the year. Gross domestic product can be expressed as:
(a) the sum of values added in each industry during the production process during the year (production method);
(b) the amount of factor income received in the production of annual output (distribution method);
(c) the amount of expenditure on goods and services produced by a given country during the year (end-use method).
See national income calculation,Pyotr Ilyich Grebennikov.
GROSS NATIONAL PRODUCT (GNP) (gross national product (GNP)) - the value of all final goods and services produced by the economy during the year (gross domestic product), plus net income from property abroad (interest rent, dividends and profits).
See national income calculus.
GNP is an important indicator of a country's overall economic prosperity, while GNP per capita (see per capita income) gives an idea of the average standard of living of a population. By expressing the GNP of several countries in some common currency (for example, US dollars), it becomes possible to compare the overall economic welfare of different countries, as shown below (from World Development Report, World Bank, 1992). (Central Statistical Office (CSO)) is a UK government agency responsible for the collection, analysis and publication of national economic statistics, in particular national accounts and balance of payments.
Cm. Office for National Statistics
SELF-SUPPORT (self-sufficiency ) - limiting one’s consumption by an individual (or household) at the expense of products produced on one’s own. Developing countries with large agricultural sectors are characterized by more high level self-sufficiency than industrialized countries, for which specialization of labor is the norm.
Cm.
NON-MARKET ECONOMIC ACTIVITIES (nonmarketed economic activity ) - any activity, usually legal, not reflected in the national accounts of a country (see ). Labor and other resources used in such activities are not paid and thus their employment is not recorded. Examples of such activities include housework for a housewife (cooking, laundry) or unpaid work for charity workers. Such omissions distort comparisons of gross national income across countries. An important role here is played by the fact that rural areas are largely self-sufficient, while urbanized countries prefer to purchase rather than produce the products they need (milk, bread, etc.).
NON-MARKET PRODUCT (non-traded product)
1 . A product that cannot be traded under any circumstances because there are no markets for its sale. These products include, for example, collective goods such as defense.
2 . An unsalable product is a product that cannot be traded outside a limited zone, since its volume or weight makes it very expensive to transport and trade outside the borders of this zone. Examples of such products include gravel and bricks.
Search for terminology, biographical materials, textbooks andscientific works on the websites of the School of Economics:
+ Indirect taxes
Materials and results of contract work are purchased ready-made, they are created by suppliers and contractors, so material costs are not included in the added value.
Indirect taxes are added to the price, for example Value Added Tax, excise taxes, customs duties.
Value added is the difference between total sales revenue and the cost of intermediate products (the cost of raw materials that each manufacturer (firm) buys from other firms). In this case, all internal costs of the company (for wages, depreciation, rental of capital, etc.), as well as the company’s profit, are included in added value.
see also
Wikimedia Foundation. 2010.
See what “Added Value” is in other dictionaries:
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Income is a regular cash replenishment of the budget of an economic entity. Expenses, Expenses, Costs reduction of economic benefits as a result of disposal of funds and other property; Income >
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All products produced by the economy are divided into final and intermediate. Final products- these are products that are used for final consumption and are not intended for further industrial processing or resale. Intermediate products goes into the further production process or resale. As a rule, intermediate products include raw materials, materials, semi-finished products, etc. However, depending on the method of use, the same product can be both an intermediate product and a final product. So, for example, meat bought by a housewife for borscht is a final product, since it went into final consumption, and meat bought by a McDonald's restaurant is an intermediate product, since it will be processed and put into a cheeseburger, which will be in this case the final product. All resales (sales of used items) are also not included in GDP, since their value has already been taken into account once when they were first purchased by the end consumer.
GDP includes only the value of final products in order to avoid repeated (double) counting. The fact is that, for example, the cost of a car includes the cost of the iron from which steel is made; steel from which rolled products are produced; rolled metal from which the car is made. The cost of the final product is therefore calculated at added value. Let's look at this with an example. Suppose a farmer grew grain, sold it to a miller for $5, who ground the grain into flour. He sold the flour to a baker for $8, who made dough from the flour and baked bread. The baker sold the baked goods to a baker for $17, who sold the bread to a buyer for $25. Grain for the miller, flour for the baker, pastries for the baker are intermediate products, and the bread that the baker sold to the buyer is the final product.
Table 1. Value added
The first column represents the cost of all sales (total revenue from sales of all economic agents), equal to $55 (total output). In the second - the cost of intermediate products ($30), and in the third - the sum of added values ($25). Thus, value added represents the net contribution of each producer (firm) to total production. The amount of added value ($25) is equal to the cost of the final product, i.e. the amount that the end consumer paid ($25). Therefore, in order to avoid repeated calculations, only value added equal to the value of final products is included in GNP. Value added is the difference between total sales revenue and the cost of intermediate products (that is, the cost of raw materials that each manufacturer (firm) buys from other firms). In our example: 55 - 30 = 25 ($). At the same time, all internal costs of the company (for wages, depreciation, rental of capital, etc.), as well as the profit of the company included in added value.
Gross domestic product (GDP) is the sum of the market value of all final products produced in the country during a calendar year. All spheres of the economy are taken into account, as well as goods produced both for domestic consumption and for export.
The size of GDP for different periods can be found on the Rosstat website. The calculations are carried out by the State Statistics Committee, updating the data monthly. Based on them, conclusions are drawn not only about production volumes and purchasing activity of the population, but also about the distribution of GDP.
Calculations are made by three main methods, which will be discussed below. Knowing the calculation methods, you can understand how GDP is formed, what it includes, and what the relationship is between production development, economic development and the standard of living of the population.
Each of the three types of calculations should lead to the same result, but along the way, each of them solves additional problems, so the choice depends on the tasks at hand.
The payment currency may be different:
- national;
- foreign at the current exchange rate;
- US dollars (used when it is necessary to compare the GDP of different countries)
Value added method (production)
To calculate GDP, only final goods and services are taken to avoid double calculations and overstatement of GDP. Intermediate goods, which are raw materials for the production of final products, are not taken into account.
For example, a carpentry shop produces chairs.
Photo: 2gis
The market value of the chair will be included in the calculation of GDP, but the boards from which the chairs were made will not, since this is an intermediate product and its price is already included in the final cost of the chair.
Final goods and services:
- Appliances;
- services to the population;
- products and consumer goods.
Intermediate:
- flour for baking bread at a bakery;
- cement for building houses;
- milk for making kefir.
To avoid duplication, the added value method is used in the calculations. That is, they calculate the difference between the price of a product and the costs of its production (materials, tools, fuel, electricity, services of other companies). A country's GDP is the sum of the added values of all firms from all industries. The value will be affected by the size of the markup and costs. You can increase the added value by increasing the markup, which will affect the final cost, or by reducing the cost part.
Formula for calculating GDP using the production method:
GDP = sum of GVA + NNP, where
- GVA - gross value added;
- NNP - net taxes on products (taxes on products minus subsidies.)
Let's give a simple example.
Initial data:
- Income from the sale of manufactured products - 200 million rubles.
- Expenses for the purchase of materials and services used in production - 60 million rubles.
- Taxes - 10 million rubles.
- Subsidies - 4 million rubles.
Substitute the data into the formula:
GDP = (1 - 2) + (3 - 4)
GDP = (200 - 60) + (10 - 4) = 146 million rubles.
Cost calculation method
In this method of expenses, the expenses of all economic entities for the purchase of final products are summed up. Logically this method follows from the previous one. There we counted by the final products produced, and here by the consumed ones. This takes into account the provision of the budgetary and military spheres, innovations in production, etc.
The calculations include:
- consumer expenditures of the population - all expenses of citizens of the country for the purchase of clothing, products, services, durable goods;
- gross private investment - net investment or increase in durable capital goods (buildings, machinery, equipment). This does not include investments from an economic point of view - stocks, bonds and other securities. When calculating GDP, private investments include only those that form capital;
- government procurement - money spent by government agencies and authorities on the purchase of goods and services. This does not include benefits (transfer payments), since they are paid free of charge and not in exchange for services or goods;
- net exports are the difference between exports and imports.
Source: gks
Income calculation method
The method is based on summing up the income of all entities (salaries, other income, rent, etc.) that operate in the country. It turns out that with this method it is necessary to take into account the income of non-residents if they are received within the geographical boundaries of the state. In addition to the main task, this method shows production deficits or supply surpluses.
After the sale of products, the added value goes to the company and forms factor income.
To organize production, companies must purchase various factors production. Thanks to this, hired workers receive wages, owners of premises receive rent, owners of money receive a percentage, which becomes income for them.
Photo: inftaiga
Incomes used in calculating GDP:
- wages are the price of labor. The calculation takes into account the accrued salary, not the paid salary. It turns out that this also includes income tax, insurance payments, bonuses and additional payments. This does not include the salaries of civil servants, since they are paid from the state budget from the GDP distribution;
- interest on household and business loans. This does not include government debt;
- rent - income from any type of real estate, including conditional rent (estimated income);
- net indirect tax (taxes on production minus imports and minus subsidies - payment to the state for its services). Direct taxes (received salary - paid 13%) are not included in the calculation, since they simply pass from the hands of private individuals to the hands of the state. Indirect taxes are formed differently; they are included in the price of the product. For example, VAT and excise taxes. These taxes increase the final price of products and are included in GDP;
- profit - income of legal entities, which includes dividends, retained earnings, taxes;
- The income of a small business that does not use hired labor is counted as single factor income.
In addition to everything listed, the calculation of GDP by income includes depreciation charges, which relate to added value and not to factor income.
So, the calculation formula looks like this: GDP = salary + interest + rent + income of owners + indirect taxes + profit + depreciation
Each method has a number of indicators that are not used in calculations:
- Transactions with securities, since they are not related to production.
- Transactions for the purchase of second-hand items, since they were already included in the GDP of previous years.
- Private gifts because they are a redistribution of funds.
- Government transfers - social assistance and benefits.
All three methods should ultimately produce the same results. GDP estimates are revised, reflecting the cyclical calculation method. At the first stage, primary reports and forecasts are analyzed to quickly assess the situation in the country, development dynamics and production volumes. Then the data is clarified. The most important indicator is the annual assessment. For this purpose, “Regulations for the development and presentation of data on gross domestic product” have been created, which define calculation methods and deadlines for submitting data.
