National Income and Product Accounts
(NIPA)
Accounting system for the U.S. to measure aggregate
economic activity
www.bea.gov
United Nations System of National Accounts
International standard system of national accounts
unstats.un.org
Gross Domestic Product (GDP)
Market value of final goods and services newly produced within
a nation during a fixed period of time
– Market value
– Newly produced final goods and services
– Fixed period of time
GDP per capita is an economy’s GDP divided by its population
U.S. GDP
Chained 2005 Dollars
per-capita real GDP
real GDP
www.economagic.com
The Income-Expenditure Identity
Y = C+I+G+NX
–
–
–
–
–
Y = GDP (Income)
C = consumption
I = investment
G = government purchases
NX = net exports
What is produced is spent somewhere
The Income-Expenditure Identity
Expenditures in 1996
Billions of dollars
Percent of GDP
Personal Consumption Expenditures (C)
Gross private domestic investment (I)
Government purchases of goods and services (G)
Net exports (NX)
Exports
Imports
5151
1117
1406
-99
855
954
68.0
14.7
18.6
-1.3
11.3
12.6
Total (equals GDP) (Y)
7576
100.0
GDP is same as National Income
GDP =
National Income
+ Indirect taxes
+Depreciation
- Net Factor Payments (NFP)
The income approach says that what is produced
is income to someone
National Income
Income in 1996
Billions of dollars
Percent of GDP
Compensation of employees
Proprietors' income
Rental income of persons
Corporate profits
Net interest
4449
518
127
654
403
58.7
6.8
1.7
8.6
5.3
Total (equals National Income)
6151
81.2
National Saving
S = Y+NFP-(C+G)
Savings rate is savings as a percent of GDP
Current Account
CA = NX+NFP = S-I
Budget Deficit
Sg = (T-TR-INT)-G
•
•
•
•
•
T = Tax Receipts
TR = Transfers to private sector
INT = interest on national debt
G = Government purchases
Sg=Budget (surplus if positive, deficit if negative)
U.S. Budget Deficit
Some Fundamental Prices
The General Price Level
Y = nominal GDP
Y=P*y
• P = GDP deflator or simply market price
• y = real GDP or quantity of goods produced
The General Price Level
• Price growth = inflation:
 Pt 1 
 t 1  
 1 100
 Pt

• Real GDP growth:
 yt 1 
g t 1  
 1 100
 yt

Consumer Price Inflation
research.stlouisfed.org/fred2
Nominal Interest Rate
• The (short-term) interest rate is the risk-free rate of return
that can be earned in the market.
• R = Dollar interest rate
• Invest $1 today at the rate R
• Receive $(1+R) in one period (day, week, month, year,
etc.).
Ex Post Real Interest Rate
• The (ex post) real interest rate, r, is the rate of
return in units of goods.
r=R-
• (Ex post) real interest rate is nominal interest
rate minus (realized) inflation.
Ex Ante Real Interest Rate:
The Fisher Equation
• The inflation rate is typically not known
• Expected (ex ante) real interest rate = nominal interest
rate - expected inflation
re = R -  e
• The expected real interest rate is the nominal interest
rate less expected inflation – the Fisher equation
Inflation and Nominal Interest Rate in the United States
Interest Rate
R
Nominal
Interest Rate
Inflation
Inflation
Glossary of Terms
GDP
NFP
GNP
C
I
G
X
M
NX
S
T
TR
INT

Pt
R
r
Gross Domestic Product (also Y)
Net Factor Payments
Gross National Product = GDP + NFP
National Consumption
National Investment
Government Expenditure
Exports
Imports
Net exports = X - M
National Saving = Spvt + Sgovt
Total taxes
Transfer payments
Interest payments
Inflation
General price level at time t
Nominal interest rate
Real interest rate (ex post)