CHAPTER 10 Measuring a Nation’s Income Economics PRINCIPLES OF N. Gregory Mankiw Premium PowerPoint Slides by Ron Cronovich © 2009 South-Western, a part of Cengage Learning, all rights reserved In this chapter, look for the answers to these questions: What is Gross Domestic Product (GDP)? How is GDP related to a nation’s total income and spending? What are the components of GDP? How is GDP corrected for inflation? Does GDP measure society’s well-being? 1 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Micro vs. Macro Microeconomics: The study of how individual households and firms make decisions, interact with one another in markets. Macroeconomics: The study of the economy as a whole. We begin our study of macroeconomics with the country’s total income and expenditure. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 2 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Macroeconomics studies the structure of aggregate economies and the impact of policies on their performance. • What determines economic fluctuations? (business cycle) • Why some countries grow faster than others ? (economic growth) •What causes unemployment ? •What drives prices changes? (inflation) •What is the role of economic policies and the government? (monetary and fiscal policies) •How being part of a global economic system affects the economy of a country? ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 3 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. (1) Income and Expenditure Gross Domestic Product (GDP) measures total income of everyone in the economy. [later: more formal definition] GDP also measures total expenditure on the economy’s output of goods and services (g&s). For the economy as a whole, income equals expenditure because every dollar a buyer spends is a dollar of income for the seller. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 4 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. The Circular-Flow Diagram a simple depiction of the macroeconomy illustrates GDP as spending, revenue, factor payments, and income Preliminaries: Factors of production are inputs like labor, land, capital, and natural resources. Factor payments are payments to the factors of production (e.g., wages, rent). ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 5 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. The Circular-Flow Diagram Households: own the factors of production, sell/rent them to firms for income buy and consume goods & services Firms Households Firms: buy/hire factors of production, use them to produce goods and services sell goods & services ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 6 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. The Circular-Flow Diagram Revenue (=GDP) G&S sold Markets for Goods & Services Firms Factors of production Wages, rent, profit (=GDP) Spending (=GDP) G&S bought Households Markets for Factors of Production Labor, land, capital Income (=GDP) ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 7 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. What This Diagram Omits The government collects taxes, buys g&s The financial system matches savers’ supply of funds with borrowers’ demand for loans The foreign sector trades g&s, financial assets, and currencies with the country’s residents ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 8 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. (2) Gross Domestic Product To understand macroeconomic issues, we first need information (data). One very important (may be most important) concept: Gross domestic product (GDP) Paul Samuelson and William Nordhaus: “GDP … among the great inventions of the twentieth century” (cited in Survey of Current Business, Jan 2000, 6-14) http://www.bea.gov/scb/pdf/BEAWIDE/2000/0100od.pdf ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 9 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Gross Domestic Product (GDP) Is… …the market value of all final goods & services produced within a country in a given period of time. Goods are valued at their market prices, so: All goods measured in the same units (e.g., Hong Kong dollars, U.S. dollars) Things that don’t have a market value are excluded, e.g., housework you do for yourself. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 10 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Gross Domestic Product (GDP) Is… …the market value of all final goods & services produced within a country in a given period of time. Final goods: intended for the end user Intermediate goods: used as components or ingredients in the production of other goods GDP only includes final goods – they already embody the value of the intermediate goods used in their production. e.g., General Motors (GM) does not produce tires for its cars; it buys them from tire companies (such as Goodyear) Tire: intermediate good; GM car: final good Prevent double counting ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 11 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Gross Domestic Product (GDP) Is… …the market value of all final goods & services produced within a country in a given period of time. GDP includes tangible goods (like DVDs, mountain bikes, beer) and intangible services (dry cleaning, concerts, mobile phone service). ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 12 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Gross Domestic Product (GDP) Is… …the market value of all final goods & services produced within a country in a given period of time. GDP includes currently produced goods, not goods produced in the past. e.g. If you bought a Toyota Prius on January 2005, the purchase (say, at $200,000) was included in GDP (of 2005). If you sold it on December 2010, that transaction was not included in GDP (of 2010). Why? ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 13 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Gross Domestic Product (GDP) Is… …the market value of all final goods & services produced within a country in a given period of time. GDP measures the value of production that occurs within the borders of a country (an economy), whether done by its own citizens or by foreigners located there. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 14 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Gross Domestic Product (GDP) Is… …the market value of all final goods & services produced within a country in a given period of time. Usually a year or a quarter (3 months) ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 15 ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 16 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Gross Domestic Product Iran nominal GDP (2007/1389): Rials 4,304,264 billions (US$ 391 billion) GDP per capita: Rials 59.8 million (US$ 5,435) USA nominal GDP (2007): US$14,077.6 billions population (est.): 301,290,332 (US Census Bureau) GDP per capita: US$ 46,724 nominal GDP: measured at current prices ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 17 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Gross Domestic Product Data USA: Bureau of Economic Analysis (BEA), Department of Commerce http://www.bea.gov/ (http://www.bea.gov/national/xls/gdplev.xls) Iran: Central Bank http://www.cbi.ir (http://www.cbi.ir/simplelist/4454.aspx) releases the information every quarter ?!!! ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 18 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. (3) The Components of GDP Recall: GDP is total spending. Four components: Consumption (C) Investment (I) Government Purchases (G) Net Exports (NX) These components add up to GDP (denoted Y): Y = C + I + G + NX ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 19 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Consumption (C) is total spending by households on g&s. Note on housing costs: For renters, consumption includes rent payments. For homeowners, consumption includes the imputed rental value of the house, but not the purchase price or mortgage payments. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 20 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Investment (I) is total spending on goods that will be used in the future to produce more goods. includes spending on capital equipment (e.g., machines, tools) structures (factories, office buildings, houses) inventories (goods produced but not yet sold) Note: “Investment” does not mean the purchase of financial assets like stocks and bonds. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 21 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Government Purchases (G) is all spending on the g&s purchased by govt. at the federal, state, and local levels. G excludes transfer payments, such as Social Security or unemployment insurance benefits. They are not purchases of g&s. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 22 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Net Exports (NX) NX = exports – imports Exports represent foreign spending on the economy’s g&s. Imports are the portions of C, I, and G that are spent on g&s produced abroad. If HK consumers buy $10 million worth of watches made in Switzerland, that spending is included in consumption expenditure. However, the imports do not represent domestic production. Thus, the value of these imports is subtracted from GDP (see the next equation). ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 23 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. GDP and Its Components Adding up all the components of GDP gives: Y = C + I + G + NX ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 24 ACTIVE LEARNING 1 GDP and its components In each of the following cases, determine how much GDP and each of its components is affected (if at all). A. Debbie spends $200 to buy her husband dinner at the finest restaurant in the Central. B. Sarah spends $1800 on a new laptop to use in her publishing business. The laptop was built in Japan. C. Jane spends $1200 on a computer to use in her editing business. She got last year’s model on sale for a great price from a local manufacturer. D. A car company builds $500 million worth of cars, but consumers only buy $470 million worth of them. ACTIVE LEARNING 1 Answers A. Debbie spends $200 to buy her husband dinner at the finest restaurant in the Central. Consumption and GDP rise by $200. B. Sarah spends $1800 on a new laptop to use in her publishing business. The laptop was built in Japan. Investment rises by $1800, net exports fall by $1800, GDP is unchanged. 26 ACTIVE LEARNING 1 Answers C. Jane spends $1200 on a computer to use in her editing business. She got last year’s model on sale for a great price from a local manufacturer. Current GDP and investment do not change, because the computer was built last year. D. A car company builds $500 million worth of cars, but consumers only buy $470 million of them. Consumption rises by $470 million, inventory investment rises by $30 million, and GDP rises by $500 million. 27 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. U.S. GDP and Its Components, 2007 billions % of GDP per capita Y $13,841 100.0 $45,825 C 9,734 70.3 32,228 I 2,125 15.4 7,037 G 2,690 19.4 8,905 NX –708 –5.1 –2,344 ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 28 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Iran GDP and Its Components, 1389 Consumption = 1767 Trillion Rial (41%) Investment = 1785 T Rial (41%) - Gross domestic fixed capital formation = 1146 T Rial - Changes in inventories = 639 T Rial Government consumption = 481 T Rial Exports = 1194 T Rial Imports = 896 T Rial GDP = C + I + G + (X - M) = 4333 T Rial (11%) (100%) ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 29 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. GDP and Its Components USA vs. Iran (2007) • Consumption: 70.3% in USA; 41% in Iran. • Investment: 15.4% in USA; 41% in Iran. • Government purchases: 19.4% in USA; 11% in Iran. • Net exports: negative in USA; positive in Iran (7%). ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 30 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. (4) Real versus Nominal GDP Inflation can distort economic variables like GDP, so we have two versions of GDP: One is corrected for inflation, the other is not. Nominal GDP values output using current prices. It is not corrected for inflation. Real GDP values output using the prices of a base year. Real GDP is corrected for inflation. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 31 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Real versus Nominal GDP Nominal GDP of Iran, 1388 and 1389 Consumption 1540 Trillion Rial 1767 Trillion Rial Investment 1424 T Rial 1785 T Rial - Gross domestic fixed capital formation 949 T Rial 1146 T Rial - Changes in inventories 475 T Rial 639 T Rial Government consumption 445 T Rial 481 T Rial Exports 923 T Rial 1194 T Rial Imports 756 T Rial 896 T Rial GDP = C + I + G + (X - M) 3577 T Rial (2006) 4333 T Rial (1389) ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 32 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Real versus Nominal GDP Reason for Introducing Real GDP When GDP increases from one year (1388) to the next (1389) by 21%, can we conclude that the quantity of production increases by 21%? Because GDP is measured in value terms, it can be changed by changes in prices, not quantities. We should be careful about interpreting changes over time. To separate price changes from quantity changes, we introduce a concept called real GDP. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 33 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Real versus Nominal GDP Calculating Real GDP Nominal GDP The value of final goods and services evaluated at current-year prices. = P1Q1+ P2Q2+…+PnQn Real GDP The value of final goods and services evaluated at base-year prices. P Q1 P Q2 ... P Qn b 1 b 2 b n ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 34 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. EXAMPLE: Pizza Latte year P Q P Q 2005 $10 400 $2.00 1000 2006 $11 500 $2.50 1100 2007 $12 600 $3.00 1200 Compute nominal GDP in each year: 2005: $10 x 400 + $2 x 1000 = $6,000 Increase: 37.5% 2006: $11 x 500 + $2.50 x 1100 = $8,250 2007: $12 x 600 + $3 x 1200 = $10,800 30.9% ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 35 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. EXAMPLE: Pizza Latte year P Q P Q 2005 $10 400 1000 2006 $11 500 $2.00 $2.50 2007 $12 600 $3.00 1200 Compute real GDP in each year, using 2005 as the base year: 2005: $10 x 400 + $2 x 1000 = $6,000 1100 Increase: 20.0% 2006: $10 x 500 + $2 x 1100 = $7,200 2007: $10 x 600 + $2 x 1200 = $8,400 16.7% ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 36 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. EXAMPLE: year 2005 Nominal GDP $6000 Real GDP $6000 2006 $8250 $7200 2007 $10,800 $8400 In each year, nominal GDP is measured using the (then) current prices. real GDP is measured using constant prices from the base year (2005 in this example). ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 37 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. EXAMPLE: year 2005 Nominal GDP $6000 2006 $8250 2007 $10,800 37.5% 30.9% Real GDP $6000 $7200 $8400 20.0% 16.7% The change in nominal GDP reflects both prices and quantities. The change in real GDP is the amount that GDP would change if prices were constant (i.e., if zero inflation). Hence, real GDP is corrected for inflation. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 38 Nominal and Real GDP in the U.S., 1965-2007 Billions $12,000 $10,000 Real GDP $8,000 $6,000 $4,000 $2,000 (base year 2000) Nominal GDP $0 1965 1970 1975 1980 1985 1990 1995 2000 2005 39 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Which measure of GDP represents changes strictly in the quantity of goods and services produced in the economy, not the prices? a. Nominal GDP. b. Real GDP. c. The GDP measure that sums up the value of goods and services evaluated at current year prices. d. None of the above. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 40 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Which measure of GDP represents changes strictly in the quantity of goods and services produced in the economy, not the prices? a. Nominal GDP. b. Real GDP. c. The GDP measure that sums up the value of goods and services evaluated at current year prices. d. None of the above. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 41 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. The GDP Deflator One by-product of real GDP calculation is to compute the general price level. The GDP deflator is a measure of the overall level of prices. Definition: nominal GDP GDP deflator = 100 x real GDP One way to measure the economy’s inflation rate is to compute the percentage increase in the GDP deflator from one year to the next. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 42 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. EXAMPLE: year Nominal GDP Real GDP GDP Deflator 2005 $6000 $6000 100.0 2006 $8250 $7200 114.6 2007 $10,800 $8400 128.6 14.6% 12.2% Compute the GDP deflator in each year: 2005: 100 x (6000/6000) = 100.0 2006: 100 x (8250/7200) = 114.6 2007: 100 x (10,800/8400) = 128.6 ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 43 ACTIVE LEARNING 2 Computing GDP 2007 (base yr) P Good A Good B $30 $100 Q 2008 P 2009 Q 900 $31 1,000 192 $102 200 P Q $36 $100 1050 205 Use the above data to solve these problems: A. Compute nominal GDP in 2007. B. Compute real GDP in 2008. C. Compute the GDP deflator in 2009. 44 ACTIVE LEARNING 2 Answers 2007 (base yr) P Good A Good B $30 $100 Q 2008 P 2009 Q 900 $31 1,000 192 $102 200 P Q $36 $100 1050 205 A. Compute nominal GDP in 2007. $30 x 900 + $100 x 192 = $46,200 B. Compute real GDP in 2008. $30 x 1000 + $100 x 200 = $50,000 45 ACTIVE LEARNING 2 Answers 2007 (base yr) P Good A Good B $30 $100 Q 2008 P 2009 Q 900 $31 1,000 192 $102 200 P Q $36 $100 1050 205 C. Compute the GDP deflator in 2009. Nom GDP = $36 x 1050 + $100 x 205 = $58,300 Real GDP = $30 x 1050 + $100 x 205 = $52,000 GDP deflator = 100 x (Nom GDP)/(Real GDP) = 100 x ($58,300)/($52,000) = 112.1 46 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. (5) GDP and Economic Well-Being Real GDP per capita is the main indicator of the average person’s standard of living. But GDP is not a perfect measure of well-being. Robert Kennedy issued a very eloquent yet harsh criticism of GDP: ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 47 Gross Domestic Product… “… does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our courage, nor our wisdom, nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile, and it can tell us everything about America except why we are proud that we are Americans.” - Senator Robert Kennedy, 1968 48 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. GDP Does Not Value: the quality of the environment leisure time non-market activity, such as the child care a parent provides his or her child at home an equitable distribution of income ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 49 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Then Why Do We Care About GDP? Having a large GDP enables a country to afford better schools, a cleaner environment, health care, etc. Many indicators of the quality of life are positively correlated with GDP. For example… ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 50 Life expectancy (years) GDP and Life Expectancy in 12 countries Indonesia China Japan U.S. Mexico Germany Brazil Pakistan India Russia Bangladesh Nigeria Real GDP per capita 51 GDP and Literacy in 12 countries China Russia Germany Adult Literacy (% of population) Mexico Japan U.S. Brazil Indonesia Nigeria India Pakistan Bangladesh Real GDP per capita 52 GDP and Internet Usage in 12 countries Internet Usage (% of population) Japan Pakista n Nigeria U.S. Germany Brazil Indonesia Mexico Russia China India Bangladesh Real GDP per capita 53 CHAPTER SUMMARY Gross Domestic Product (GDP) measures a country’s total income and expenditure. The four spending components of GDP include: Consumption, Investment, Government Purchases, and Net Exports. Nominal GDP is measured using current prices. Real GDP is measured using the prices of a constant base year and is corrected for inflation. GDP is the main indicator of a country’s economic well-being, even though it is not perfect. 54 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Growth around the World Growth rates in developing countries (including China and India) are on average higher than those in developed countries. Does this mean convergence? During the last decade of the 20th century 54 developing countries had negative average growth rates, and most of those with positive growth rates were growing slower than high-income countries Even worse; due to much faster population, GDP per capita growth rates in most developing countries are relatively low or even negative ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 55 ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 56 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 57 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 58 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. 1338 1340 1342 1344 1346 1348 1350 1352 1354 1356 1358 1360 1362 1364 1366 1368 1370 1372 1374 1376 1378 1380 1382 1384 1386 1388 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Iran GDP (current prices) 5000000 4500000 500000 4304264 4000000 3500000 3000000 2500000 2000000 1500000 1000000 284 0 ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 59 1338 1340 1342 1344 1346 1348 1350 1352 1354 1356 1358 1360 1362 1364 1366 1368 1370 1372 1374 1376 1378 1380 1382 1384 1386 1388 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. Iran GDP (fixed prices, 1376) 600000 539219 500000 400000 300000 200000 100000 43911 0 ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 60 © 2009 South-Western Principles of Macroeconomics, by N. G. Mankiw. -0,05 1339 1341 1343 1345 1347 1349 1351 1353 1355 1357 1359 1361 1363 1365 1367 1369 1371 1373 1375 1377 1379 1381 1383 1385 1387 1389 Iran Economic Growth 0,2 0,15 0,1 0,05 0 -0,1 -0,15 -0,2 ECON1002 C/D (2011) Chapter 10: MEASURING A NATION’S INCOME 61