national income accounting

national income accounting

Set of principles and methods used to measure a country's income and production. There are two ways of measuring national economic activity: the expenditure approach, which measures the money value of the total output of goods and services in a given period (usually a year); and the income approach, which measures the total income derived from economic activity after allowing for capital consumption. The most commonly used indicator of national output is the gross domestic product (GDP). National income may be derived from gross national product (GNP) by making allowances for certain non-income costs included in the GNP, such as indirect taxes, subsidies, and depreciation. National income thus calculated represents the aggregate income of the owners of the factors of production; it is the sum of wages, salaries, profits, interest, dividends, rent, and so on. The data accumulated for calculating the GDP and national income may be manipulated in various ways to show various relationships in the economy. Common uses of the data include breakdowns of GDP according to type of product, breakdowns of national income by type of income, and analyses of the sources of financing (e.g., personal savings, company funds, or national deficits).