1. National Income Accounts
CHAPTER
22 Appendix
© 2003 South-Western/Thomson Learning

2. National Income
Captures all income earned by American-owned resources, whether located in the United States or abroad
Results from several adjustments to net domestic product
Adds net earnings from American resources abroad
Subtracts indirect business taxes, net of subsidies

3. Exhibit 6: Deriving Net Domestic Product and National Income Using 2001 Data (in trillions of dollars)
Gross domestic product (GDP) $10.20 Minus depreciation –1.34
Net domestic product 8.86
Plus net earnings of American resources abroad minus indirect business taxes (net of subsidies) –0.65
National income $8.21

4. Personal Income
Personal income adds to national income the income received but not earned and subtracts the income earned but not received
Income earned by not received in the current period includes
The employer’s share of Social Security taxes
Corporate income taxes
Undistributed corporate profits
Income received but not earned in the current period includes
Government transfer payments
Receipts from private pension plans
Interest paid by government and by consumers

5. Exhibit 7: Deriving Personal Income and Disposable Income Using 2001 Data (in trillions of dollars)
National income $8.21
Minus income earned but not received (Social Security taxes, corporate income taxes, undistributed corporate profits) –2.05
Plus income received but not earned (government and business transfers, net personal interest income) 2.56
Personal income 8.72
Minus personal tax and nontax charges –1.35
Disposable income $6.02

6. Disposable Income
Subtracting personal taxes and other government charges from personal income yields disposable income
Disposable income is the amount available for spending or saving
Take-home pay

7. Summary Income Statement
Exhibit 8 presents an annual income statement for the entire economy
The upper portion lists aggregate expenditure which consists of
Consumption
Gross investment
Government purchases
Net exports

8. Exhibit 8a: Expenditure and Income Statement for the U. S
Exhibit 8a: Expenditure and Income Statement for the U.S. Economy Using 2001 data ($ trillions)
Aggregate Expenditure
Consumption (C) $7.05
Gross investment (I) 1.67
Government purchases (G) 1.84
Net exports (X – M) –0.36
GDP $10.20

9. Summary Income Statement
The income from this expenditure is allocated in the lower portion of Exhibit
Employee compensation
Largest income source
Includes money wages and employer contribution to cover Social Security taxes, medical insurance and other fringe benefits
Proprietors’ income includes the earnings of unincorporated businesses
Corporate profits are the net revenues received by businesses before subtracting corporate income taxes

10. Exhibit 8b: Expenditure and Income Statement for the U. S
Exhibit 8b: Expenditure and Income Statement for the U.S. Economy Using 1998 Data ($ trillions)
Allocation of Income
Depreciation $1.34
Net earnings of American resources abroad –0.02
Net indirect business taxes 0.63
Compensation of employees 6.01
Proprietors’ income 0.75
Corporate profits 0.76
Net interest 0.55
Rental income of persons 0.18
GDP $10.20

11. Summary Income Statement
Net interest is the interest received by individuals, excluding interest paid by consumers to businesses and interest paid by government
Rental income of persons consists primarily of the imputed rental value of owner-occupied housing minus the cost of owning that property