The National Income Accounts • GNP (Gross National Product) is the value of all goods and services produced by the country’s factors of production and sold on the market in a given time period • Calculated by adding market value of all expenditures on final output • Includes the value of goods as well as services • Output is produced with the aid of factor inputs • The expenditures that make up the GNP are linked to the employment of labor, capital and other factors of production • National income accounts divided GNP among four possibly uses for which a country’s final output is purchased o Consumption o Investment o Government purchases o Current account balance • The term national income accounts are used instead of national output accounts because income is dependent upon output • We need the four categories above because we cannot understand a recession without understanding which account of spending has changed National Product and National Income Gross National Product • The GNP a country generates over time must equal its national income, the income earned in that period of tie by its factors of production • Output and income are the same applies to goods and services • To avoid double counting we only allow the sale of the final goods and services to enter the definition of GNP • The definition only counts final goods and services that are produced • National Income= GNP – depreciation + net unilateral transfers • We use terms GNP and national income interchangeably Gross Domestic Product • GDP is supposed to measure the volume of contribution within a country’s borders • GNP = GDP + net receipts of factor income form the rest of the world • These net receipts are primarily the incom