Page 4 - MINMAC E-NOTE-converted

COMPONENTS OF MACROECONOMICS

• HOUSEHOLD

• FIRM
• GOVERNMENT

• FOREIGN SECTOR

CIRCULAR FLOW OF INCOME
• TWO-SECTOR (SIMPLE ECONOMY) – HOUSEHOLD & FIRM
• THREE- SECTOR (CLOSED ECONOMY) – HOUSEHOLD, FIRM &
GOVERNEMNT
• FOUR-SECTOR (OPEN ECONOMY)- HOUSEHOLD, FIRM, GOVERNEMNT
AND FOREIGN SECTOR

APPROACHES TO MEASURE NATIONAL INCOME
• INCOME APPROACH
• EXPENDITURE APPROACH
• PRODUCT/OUTPUT APPROACH

FORMULAE

GDP fc (INCOME APPROACH) = COMPENSATION OF EMPLOYEES + NET INTEREST
+ RENTAL INCOME + CORPORATE PROFITS + PROPRIETOR’S INCOME +

DEPRECIATION

NDP fc = ALL of THE ITEMS ABOVE EXCEPT DEPRECIATION

GDP mp (EXPENDITURE APPROACH) = C + I + G + (X-M)

GDP mp (OUTPUT APPROACH) = VALUE OF FINAL PRODUCTS IN THE ECONOMY

GNP mp = GDP mp + {NET FACTOR INCOME FROM ABROAD (FACTOR INCOME

RECEIVED FROM ABROAD – FACTOR INCOME PAID ABROAD)}

GDP / GNP fc = GDP/GNP mp – INDIRECT TAXES + SUBSIDIES

NDP /NNP mp / NATIONAL INCOME = GDP/GNP mp – DEPRECIATION / CAPITAL

CONSUMPTION