Macroeconomic Concepts and National Income Calculation
Key Economic Terms
Externalities
Positive or negative effects on third parties not included in the costs of a company without compensation.
Macroeconomics
The study of the economy as a whole for all economic agents in the country. Key variables include CPI, GDP, GNP, aggregate spending, consumption, investment, and unemployment.
Gross Domestic Product (GDP)
The monetary value of the production of final goods and services produced within an economy of a country in a specific time period, usually one year.
Gross National Product (GNP)
Value of final production of goods and services made by firms and production factors for a year.
Economic Policy Instruments
Fiscal Policy
Uses the state budget.
Monetary Policy
Concerns the amount and price of money (interest rates). Implemented by central banks (e.g., Spanish Central Bank, ECB).
Policy Goals
Aims to improve efficiency, productivity, and competitiveness.
Methods for Calculating National Income
1. Production or Value Added Method
Value of production - Cost factors (reflects company benefit)
2. Expenditure Method
Private Consumption + Investment + Business and Family Spending + (Exports - Imports)
3. Income Method
Salary + Company Benefits + Rentals + Subsidies + Official Transfers
National Income Identities
- PIBpm = Consumption + Investment + Public Spending + (Exports - Imports)
- PNBpm = PIBpm + National Income from Overseas - Rentals Abroad
- PNNpm = PNBpm - Depreciation
- PNNcf = RN = PNNpm - Indirect Taxes + Grants
- RP = RN + Undistributed Profits - Social Security Contributions - Corporate Tax + State Transfers + External Transfers
- RPD = RP - Income Tax (Excise)