1. Measurement of Macroeconomic Aggregates

5. Concept of Value Addition 06/07/09 Stage: 1 Stage: 2 Stage: 3 Stage: 4 Stage: 5 Value added by Farmer = Rs.0.6 Value added by Miller = Rs.1.30 Value added by Baker = Rs.1.80 Value added by Retailer = Rs.0.20 Final value of Baked Bread = Rs.3.90 Value of storing and handling by retailer Value of storing and handling by retailer Value of baking operation Value of baking operation Value of baking operation Value of milling wheat into flour Value of milling wheat into flour Value of milling wheat into flour Value of milling wheat into flour Value of wheat from farmer Value of wheat from farmer Value of wheat from farmer Value of wheat from farmer Value of wheat from farmer Value added in different stages of bread production

6. National Aggregates 06/07/09 1. Gross Domestic Product (GDP) a) at market price (MP) b) at factor cost (FC) 2. Gross National Product (GNP) a) at market price (MP) b) at factor cost (FC) 3. Net Domestic Product (NDP) a) at market price (MP) b) at factor cost (FC) 4. Net National Product (NNP) a) at market price (MP) b) at factor cost (FC)

7. Relationship between Gross & Net; MP & FC; and National & Domestic Concepts 06/07/09 Gross = Net + Depreciation Market Prices = Factor Cost + [Indirect Taxes – Subsidies] National = Domestic + Net Factor Income from Abroad

8. Real and Nominal GNP 06/07/09 Real GNP (Current Year) = Nominal GNP (current year) x GNP deflator (base year) GNP deflator ( current year)

11. Output (Value Added) Approach The Output (Value Added) Method The agricultural and extractive industries Plus Manufacturing industries Plus Services and construction Equals Gross Domestic Product at Factor Cost Plus Net factor income from abroad ( = income received from abroad – income paid abroad) Equals Gross National Product at Factor Cost Less Capital consumption or depreciation Equals Net National Product at Factor Cost or National Income

12. Expenditure Method 1. Consumption (C) 2. Gross private domestic investment (I g ) [i.e. Net private domestic investment + depreciation] 3. Government purchases (G) 4. Net exports (NX) Gross domestic product (GDP) at Market Prices

13. Income Method 1. Compensation of employees 2. Rents 3. Interest 4. Proprietors’ income 5. Corporate income taxes 6. Dividends 7. Undistributed corporate profits 8. Depreciation Gross National Product (GNP) at Factor Cost 9. Add: Indirect taxes 10. Less: Subsidies Gross National Product (GNP) at Market Price 11. Less: Net income earned abroad Gross Domestic Product (GDP) at Market Price

14. Expenditure Method Income Method Consumption © Income from employment Add: Government Spending (G) Add: Income from self-employment Add: Gross Investment (Ig) Add: Gross profits of companies (= Dividend + Corporate income tax + Undistributed corporate profits) Add: Exports (E) Add: Interest Less: Imports (M) Add: Rent Gross National Product (GNP) at Factor Cost Add: Indirect taxes Less: Subsidies Gross National Product (GNP) at Market Price Less: Net factor income from abroad Gross Domestic Product (GDP) at Market Price Gross Domestic Product (GDP) at Market Price

15. Gross Domestic Product (GDP) at Market Price Less: Indirect taxes Add: Subsidies Gross Domestic Product (GDP) at Factor Cost Add: Net factor income from abroad Gross National Product (GNP) at Factor Cost Depreciation Net National Product (NNP) at Factor Cost (= National Income) Less: (Corporate income tax + Social security contributions) Add: Transfer payments Personal Income Less: Personal taxes Disposable Income