Measures of national income and output - Wikipedia
Nominal and Real GDP - Measuring Real National Income. Nominal income measures income at current prices with no adjustment for the effects of inflation e.g. Gross National Income (GNI) is the income earned by a country's citizens and companies. Difference between GNI and GDP Gross domestic product measures the income of anyone within a country's boundaries. though, is that it converts all goods and services in a country to what it would cost in the United States. Gross Domestic Product (GDP) is the total value of all goods and services produced by economic activity in an economy. GDP is equal to the.
The attempt to determine in money the wealth of a nation or the whole mankind are as childish as the mystic efforts to solve the riddles of the universe by worrying about the dimension of the pyramid of Cheops.
Shostak elaborated in his own criticism: The GDP framework cannot tell us whether final goods and services that were produced during a particular period of time are a reflection of real wealth expansion, or a reflection of capital consumption. In reality, however, the building of the pyramid will divert real funding from wealth-generating activities, thereby stifling the production of wealth Shostak However, using these strictly economic statistics GNP, GDP as attempts to capture the standard of living trends and their mapping in any particular country, has serious problems.
Even more problematic is their use in assessing quality of life or "well-being" of the citizens, which is far from a purely economic measure.
Measures of national income and output - New World Encyclopedia
There are two reasons why these economic statistics tell little or nothing about the well-being of the society, even if taken on a per capita basis. True, we can infer that if GDP or GNP per capita series in constant dollars grows within the short period of years, the standard of living may increase as well; but that is all we can say.
As the Austrian economist Frank Shostak stated, as noted above, if any government starts building pyramids, GDP will be growing, yet—as the pyramids have no use for anybody—the standard of living will not Shostak The other reason is that we cannot compare or statistically infer anything regarding two or more environments that are independent from each other.
In this case, on the one hand is the economy, and on the other is sociology combined with psychology. While there are factors that affect both, there is not a correlation, let alone a causal relationship, between them. For example, the distribution of income, not just the aggregate or per capita average, is important in determining the standard of living and sense of well-being of individuals within the country. Imagine an oil -rich developing country where all the monetary growth mapped by GDP, GNP per capita, and so forth goes to a ruling clique and virtually nothing to the rest of the society.
In Eastern Europe under the Communist regimes everybody, with the exception of a few elites, was equally poor no matter what job they didyet the mood, and to large extent even their expression of being content with the situation, and morality though not necessarily ethics were quite high.
This can be explained by the fact that the income distribution mapped by the Gini Index showed incredibly high social stratification which, in Europe, historically has led to the society's doldrums Karasek These conditions require the following: Using Marxist principles, those countries sometimes exclude from aggregate output the value of a wide range of services, such as government administration and transportation.
Difference Between GDP and National Income
Attention is instead concentrated on output of goods. The exclusion understates GNP and influences planning, which tend to neglect transport, distribution and services. Aggregate growth rates are overstated since productivity increases more rapidly in the counter goods-producing sectors than in neglected service sectors Herrick and Kindleberger In analysis of historical trends, comparisons with other countrys' trends and, above all, modeling and forecasts, work only with constant data series.
This means that inflation or deflation must be left out of all the data-series Karasek Still a significant problem remains with regard to the question of comparison of the standards of living among several countries.
Then and only then we can have a more precise international comparison of living standards for the given countries.
Economics GDP growth, per capita income rise and how it affects us
To conclude the almost impossible task of international comparisons of income and output statistics, the warning of Oskar Morgenstern must also be heeded: If the GDP is up, why is America down? Retrieved December 10, Herrick, Bruce, and Charles P. CAG Portal Forum Karasek, Mirek, Waddah K. Alem, and Wasfy B. The Book Guild Ltd. The Review of Economics and Statistics. Quantitative Aspects of the Economic Growth of Nations.
Levels and Variability of Rates of Growth. Economic Development and Cultural Change. How To Judge Quality. So what exactly should we expect from our Govt? Well, we know the Govt needs to focus on health, education, infrastructure etc. But apart from doing social good, these things are going to have a bearing on our economics. The entire population must see improved incomes.
For that to happen, health and education levels of the people has to be improved; the environment for agriculture as well as business needs to be aggresively improved; India needs a big thrust. The US got that thrust in the s through rapid growth in industry and infrastructure. It has to act, fast and in one direction.
A lot of the recent inflation has been from food inflation.
Economics 101: GDP growth, per capita income rise and how it affects us
The Govt needs to match demand and supply by increasing productivity in agriculture. How does black money impact GDP? Well, the Government calculates GDP only on the basis of declared figures. Undeclared revenues, black money, do not get counted in the GDP. Bringing all that money into the system will increase GDP; make funds available for reinvestment; will enable higher tax collection and give more money in the hands of the Govt for developmental spending.
Of course, a lot of the data from HSBC is based on several assumptions and arithmetics. Nobody knows the future. Even if China grows aggressively, it might face a slow down because of the one-child policy.