The System of National Income Account (SNIA)

Abstarct This Chapter 1 discusses absorption (A) which is GDP minus net exports of goods and services. It also discusses GDP, which is the sum of all goods and services produced in the country each year, from perspectives of production, income, and expenditure. We employed the value-added concept in calculating the GDP to correct any double counting problem which is associated with the GDP account. The GDP is split into consumption (C), gross domestic private investments (I), government expenditure (G), and net exports (NX). The gross domestic private investment is split into its components such as fixed investments, and changes in inventory stock. The GDP is also examined from the context of closed economy, closed economy with the role of government, and open economy. We perused the GDP to obtain the gross national product (GNP) by including net foreign assets (NFAs). The role of government which introduces taxation and fiscal spending in the economy is also covered. We also split the GNP by deducting depreciation to obtain net national income (or product) (NNI or NNP). We then added net unilateral transfers and excluded indirect business taxes to the NNI to obtain national income (NI). We differentiated GDP from GNP, NX from current account balances (CAB), primary income from secondary income, and net-factor income from abroad (NFIFA) from net-current transfer from abroad (NCTFA).