Understanding Key Economic Indicators: GDP, GNP, and Income Distribution
Key Economic Indicators
Gross Domestic Product (GDP) Magnitude: Measures the value of final goods and services produced within an economy during a specific period. It’s expressed as GDP at market prices (GDPmp) or GDP at factor cost (PIBcf).
GDP at Factor Cost (PIBcf): Represents the cost of production, assessing the output of goods and services at factory prices. It excludes indirect taxes and includes subsidies received by companies.
GDP at Market Price (PIBmp): Values goods and services at their selling prices within national borders. It includes indirect taxes and excludes subsidies received by companies.
Gross National Product (GNP): Measures economic activity generated by domestic residents’ factors of production, both domestically and abroad.
PIBcf – Income Approach: Calculated by summing the remuneration of production factors, used to determine national product.
GDPmp – Demand Approach: Calculated by summing purchases of final goods and services produced within the country.
PIBcf – Supply Approach: Calculated by summing the value added in production by each sector or industry.
National Disposable Income: The sum of national product (PN), net current transfers received by the economy from the rest of the world (Tenrm), and net operating subsidies and import taxes related to production and imports (Sbei). Formula: RND = PN + Tenrm + Sbei.
Keynesian Consumption: Consumption is a stable function of income; changes in income lead to changes in consumption.
Income Per Capita: Relates a country’s income to its population, expressing the average income per inhabitant. It reflects the purchasing power of countries or regions and their standard of living. Formula: Income per capita = Total Income / Population.
Economic Indicators and Analysis
Economic Indicators: Variables that relate to economic magnitudes over time. They help determine short-term economic trends, reflecting economic developments and used for structural and cyclical economic analysis.
Ratios: Indicators that relate two or more variables, used to characterize an economy at a given time.
- Structural Indicators: Used for intertemporal and interspatial comparisons.
- Sectoral or External Indicators: Used to analyze the characteristics of the external sector and the relationships between macroeconomic magnitudes.
- Productivity: The economy’s productivity reflects the standard of living, measured by output per unit of employment or capital.
Income Distribution: Answers the question, “For whom to produce?” It influences the welfare and quality of life of a country’s inhabitants. The state plays a role in welfare, but the negative effects on economic efficiency must be assessed.
Personal Income Distribution: Shows how income is shared among different individuals within a society.
Spatial Income Distribution: Shows how income is distributed among different areas or spaces, whether geographic or economic. If per capita income is not equal, it can hinder economic and social development, requiring interventions to address disparities.