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Real GNP реальний валовий

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Unit 4. National-income accounting

Active Vocabulary

national-income accounting облік національного доходу

gross national product (GNP) валовий національний

GNP per capita валовий національний

intermediate goods проміжний продукт

nominal GNP номінальний валовий

національний продукт

національний продукт

production possibilities можливості виробництва

depreciation амортизація

net national product (NNP) чистий національний

gross investment валові капіталовкладення

net investment чисті інвестиції

exports експортовані товари

imports імпортовані товари

National-income accounting is the measurement of aggregate economic activity, particularly national income and its com­ponents. The measurement of aggregate economic activity by national-income accounting serves two basic functions. First, it enables us to identify economic problems. The second function of national-income accounting is to provide an objective basis for evaluating policy.

National-income accounts help us not only to measure the economy but also to understand how it functions.

Gross national product (GNP) is the total market value of all final goods and services produced in a given time period.

GNP per capita is total population: average GNP, GNP per capita relates the total value of annual output to the number of people who share that output; it refers to the average GHP per person.

Even when we focus on domestic market activity we encounter problems in calculating GNP. A very basic problem arises from the fact the production of output typically involves a series of distinct stages. Consider the production of bread, for example. For bread to reach the supermarket, the farmer must grow some wheat, the miller must convert it to flour, and the baker must make bread with it.

We must focus on the value of final goods and services and exclude intermediate goods from our calculation.

Intermediate goods are goods or services purchased for use as input in the production of final goods or services.

Nominal GNP is the value of final output produced in a given period, measured in the prices of that period (current prices).

To distinguish increases in the quantity of goods and services from increases in their prices, we must construct a measure of GNP that takes into account price level changes. We do so by distinguishing between real GNP and nominal GNP. Nominal GNP is the value of final output measured in that year's prices, whereas calculating real GNP, we value goods and services at constant prices.

Inflation is an increase in the average level of prices of goods and services.

Production possibilities are the alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology.

Depreciation is the consumption of capital in the production process; the wearing out of plant and equipment. This cal­culation leaves us with yet another measure of output; net na­tional product (NNP). This is the amount of output we could consume without reducing our stock of capital.

The distinction between GNP and NNP is thus mirrored in a distinction between gross investment and net investment. Gross investment is positive as long as some new plants and equipment are being produced. But our stock of capital — our total collection of plant and equipment — will not grow unless gross investment exceeds depreciation. That is, the flow of new capital must exceed depreciation, or our stock of capital will decline. Whenever gross investment exceeds depreciation, net investment is positive.

Exports are goods and services sold to foreign buyers.

Imports are goods and services purchased from foreign countries.

Exercise 1. Give the English equivalents:

облік національного доходу, чистий національний продукт, валовий національний продукт, брати до уваги зміни в рівні цін, перекручувати розуміння, можливості виробництва, вимірювати в цінах, додана вартість, виробництво готових товарів та послуг, валовий національний продукт, у розрахунку на душу населення.

Exercise 2. Write an appropriate word-combination:

GNP per capita, nominal GNP, national-income accounting, intermediate goods, inflation, depreciation, imports, encounter problem.

1.... is the measurement of aggregate economic activity, particularly natio­nal

income and its components.

2.... is total population: average GNP.

3. When we focus on domestic market activity we... in calculating GNP.

4.... are goods or services purchased for use as input in the production of final

goods or services.

5.... is the value of final output pro­duced in a given period, measured in the

prices of that period.

6.... is an increase in the average level of prices of goods and services.

7.... is the consumption of capital in the production process.

8.... are goods and services purchased from foreign countries.

Exercise 3. Translate the following sentences:

1. Облік національного доходу допомагає нам не тіль­ки оцінити економіку, а й зрозуміти, як вона функціо­нує.

2. Додана вартість — це збільшення ринкової варто­сті продукції, яке відбувається на кожній стадії виробни­чого процесу.

3. Як зміни цін впливатимуть цього року на валовий національний продукт?

4. Для того щоб обчисли­ти реальний валовий національний продукт, необхідно оцінити товари та послуги за постійними цінами.

5. Для того щоб підтримати наші виробничі можливості, ми повинні повернути капітал, який ми витрачаємо.

6. Щоразу, коли валові капіталовкладення перевищують амортизацію, чисті інвестиції є позитивними.

7. Виробничі можливості зале­жать від кількості землі, праці, капіталу та наших знань, як використати нову технологію.

8. Кількість імпортних това­рів на українському ринку впродовж кількох останніх років зросла.

Exercise 4. Answer the following questions:

1. Whatare the two basic functions of national-income accounting?

2. How can we determine last year's GNP?

3. What is GNP per capita used for?

4. What is the easiest way to calculate GNP?

5. What is the difference between nominal GNP and real GNP?

6. What is inflation?

7 What do our production possibilities depend on?

8. Where is the distinction between GNP and NNP mirrored?

9. What represents net exports?

Exercise 5. Read and translate the following dialogue:

S.: As a future economist you ought to know certain things about gross national

product.

В.: That's what I want. I hope to make my career in economics.

S.: What do you know about GNP?

B.: GNP is the total market value of all final goods and services produced in a

given time period.

S.: It is something. But you should distinguish between nominal GNP and real

GNP.

B.: What do you mean by that?

S.: Nominal GNP is the value of final output produced in a given period,

measured in the prices of that period, whe­reas real GNP is the value of

output measured in constant prices.

В.: Although prices serve as a convenient measure of market value, they can

also distort our perceptions of real output.

S.: You are right. Imagine what would happen to our cal­culations of GNP if all

prices were to double from one year to the next. Suppose, for example, that

the price of oranges rose from 20 cents to 40 cents, the price of bicycles to

100 dollars and the price of airplanes to 2 million dollars each.

В.: How would such price changes affect this year's GNP?

S.: Obviously, the price increases would double the value of final output.

Measured GNP would rise from 1.400 million dollars to 2.800 million

dollars. Such a rise in GNP does not reflect an increase in the quantity of

goods and services available to us. We are still producing the same

quantities only the prices of those goods have changed.

В.: Now I understand, changes in GNP brought about by changes in the price

level can give us a distorted view of economic reality.

S.: Surely we would not want to assert that our standard of living had improved

just because price increases raised measured GNP from 1.400 million

dollars to 2.800 million dollars.

В.: Thank you very much for your help. It's very useful in­formation.

S.: Not at all. See you later.

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