Transcript App 7

National Income Accounts
CHAPTER
22 Appendix
© 2003 South-Western/Thomson Learning
National Income
Captures all income earned by
American-owned resources, whether
located in the United States or abroad
Results from several adjustments to net
domestic product
Adds net earnings from American resources
abroad
Subtracts indirect business taxes, net of
subsidies
Exhibit 6: Deriving Net Domestic Product and
National Income Using 2001 Data
(in trillions of dollars)
Gross domestic product (GDP)
Minus depreciation
Net domestic product
Plus net earnings of American
resources abroad minus indirect
business taxes (net of subsidies)
National income
$10.20
–1.34
8.86
–0.65
$8.21
Personal Income
Personal income adds to national
income the income received but not
earned and subtracts the income earned
but not received
Income earned by not received in the
current period includes
• The employer’s share of Social Security taxes
• Corporate income taxes
• Undistributed corporate profits
Income received but not earned in the
current period includes
• Government transfer payments
• Receipts from private pension plans
• Interest paid by government and by consumers
Exhibit 7: Deriving Personal Income
and Disposable Income Using 2001 Data
(in trillions of dollars)
National income
Minus income earned but not received
(Social Security taxes, corporate income
taxes, undistributed corporate profits)
Plus income received but not earned
(government and business transfers,
net personal interest income)
Personal income
Minus personal tax and
nontax charges
Disposable income
$8.21
–2.05
2.56
8.72
–1.35
$6.02
Disposable Income
Subtracting personal taxes and other
government charges from personal
income yields disposable income
Disposable income is the amount
available for spending or saving
Take-home pay
Summary Income Statement
Exhibit 8 presents an annual income
statement for the entire economy
The upper portion lists aggregate
expenditure which consists of
Consumption
Gross investment
Government purchases
Net exports
Exhibit 8a: Expenditure and Income Statement for
the U.S. Economy Using 2001 data ($ trillions)
Aggregate Expenditure
Consumption (C)
$7.05
Gross investment (I)
1.67
Government purchases (G)
1.84
Net exports (X – M)
GDP
–0.36
$10.20
Summary Income Statement
The income from this expenditure is
allocated in the lower portion of Exhibit
Employee compensation
Largest income source
Includes money wages and employer
contribution to cover Social Security taxes,
medical insurance and other fringe benefits
Proprietors’ income includes the earnings of
unincorporated businesses
Corporate profits are the net revenues
received by businesses before subtracting
corporate income taxes
Exhibit 8b: Expenditure and Income Statement
for the U.S. Economy Using 1998 Data ($ trillions)
Allocation of Income
Depreciation
$1.34
Net earnings of American
resources abroad
–0.02
Net indirect business taxes
0.63
Compensation of employees
6.01
Proprietors’ income
0.75
Corporate profits
0.76
Net interest
0.55
Rental income of persons
0.18
GDP
$10.20
Summary Income Statement
Net interest is the interest received by
individuals, excluding interest paid by
consumers to businesses and interest
paid by government
Rental income of persons consists
primarily of the imputed rental value of
owner-occupied housing minus the cost
of owning that property