National accounts
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National accounts or national account systems (NAS) are the implementation of complete and consistent accounting
technique Technique or techniques may refer to: Music * The Techniques, a Jamaican rocksteady vocal group of the 1960s *Technique (band), a British female synth pop band in the 1990s *Technique (album), ''Technique'' (album), by New Order, 1989 *Techniques ( ...
s for measuring the economic activity of a nation. These include detailed underlying measures that rely on
double-entry accounting Double-entry bookkeeping, in accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporations. Acco ...
. By design, such accounting makes the totals on both sides of an account equal even though they each measure different characteristics, for example production and the income from it. As a
method Method ( grc, μέθοδος, methodos) literally means a pursuit of knowledge, investigation, mode of prosecuting such inquiry, or system. In recent centuries it more often means a prescribed process for completing a task. It may refer to: *Scient ...
, the subject is termed national accounting or, more generally,
social accountingSocial accounting (also known as '' social accounting and auditing'', '' social accountability'', ''social and environmental accounting'', ''corporate social reporting'', ''corporate social responsibility reporting'', ''non-financial reporting'' or ' ...
.Nancy D. Ruggles, 1987. "social accounting," ''
The New Palgrave: A Dictionary of Economics ''The New Palgrave Dictionary of Economics'' (2018), 3rd ed., is an twenty-volume reference work on economics published by Palgrave Macmillan. It contains around 3,000 entries, including many classic essays from the original Inglis Palgrave Dictiona ...
'', v. 4, pp. 377–82.
Stated otherwise, national accounts as ''systems'' may be distinguished from the
economic data Economic data or economic statistics are data Data are units of information Information can be thought of as the resolution of uncertainty; it answers the question of "What an entity is" and thus defines both its essence and the nature ...
associated with those systems. While sharing many common principles with business accounting, national accounts are based on economic concepts. One conceptual construct for representing flows of all economic transactions that take place in an economy is a
social accounting matrixA social accounting matrix (SAM) represents flows of all economic transactions that take place within an economy (regional or national). It is at the core, a matrix representation of the national accounts National accounts or national account s ...
with accounts in each respective row-column entry. National accounting has developed in tandem with
macroeconomics Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, and ...
from the 1930s with its relation of
aggregate demand In macroeconomics, aggregate demand (AD) or domestic final demand (DFD) is the total demand for final goods and services in an economy at a given time. It is often called effective demand, though at other times this term is distinguished. This i ...
to total output through interaction of such broad expenditure categories as consumption and investment.
Economic data Economic data or economic statistics are data Data are units of information Information can be thought of as the resolution of uncertainty; it answers the question of "What an entity is" and thus defines both its essence and the nature ...
from national accounts are also used for empirical analysis of
economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value Market value or OMV (Open Market Valuation) is the price A price is the (usually not negative) quantity Quantity is a property tha ...

economic growth
and
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.


Scope

National accounts broadly present output, expenditure, and income activities of the economic actors (households, corporations, government) in an economy, including their relations with other countries' economies, and their wealth (net worth). They present both flows (measured but it is over a period) and ''
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'' (measured at the end of a period), ensuring that the flows are reconciled with the stocks. As to flows, the
national income and product accounts The national income and product accounts (NIPA) are part of the national accounts of the United States. They are produced by the Bureau of Economic Analysis of the Department of Commerce. They are one of the main sources of data on general econo ...
(in U.S. terminology) provide estimates for the money value of income and output per year or quarter, including
GDP Gross domestic product (GDP) is a monetary In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left corner">174x174px Money is any ...
. As to stocks, the 'capital accounts' are a approach that has assets on one side (including values of land, the
capital Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the letters that are in larger uppercase or capitals (or more formally ''majuscule'') and smaller lowercase (or more formally ''minusc ...
stock, and financial assets) and liabilities and
net worth Net worth is the value of all the non-financial and financial asset In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that c ...
on the other, measured as of the end of the accounting period. National accounts also include measures of the changes in assets, liabilities, and net worth per accounting period. These may refer to accounts or, again,
capital account In macroeconomics and international finance, the capital account records the net flow of investment transaction into an economy. It is one of the two primary components of the balance of payments, the other being the Current account (balance of pa ...
s. There are a number of aggregate measures in the national accounts, notably including gross domestic product or
GDP Gross domestic product (GDP) is a monetary In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left corner">174x174px Money is any ...
, perhaps the most widely cited measure of aggregate economic activity. Ways of breaking down GDP include as types of
income In microeconomics, income is the Consumption (economics), consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms.Smith's financial dictionary. Smith, Howard Irving. 190 ...
(wages, profits, etc.) or
expenditureExpenditure is an outflow of money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left corner, 174 ...
(consumption, investment/saving, etc.). Measures of these are examples of
macro Macro (or MACRO) may refer to: Science and technology * Macroscopic The macroscopic scale is the length scale on which objects or phenomena are large enough to be visible with the naked eye, without magnifying optical instruments. It is the o ...
-
economic data Economic data or economic statistics are data Data are units of information Information can be thought of as the resolution of uncertainty; it answers the question of "What an entity is" and thus defines both its essence and the nature ...
. Such aggregate measures and their change over time are generally of strongest interest to economic policymakers, although the detailed national accounts contain a source of information for economic analysis, for example in the input-output tables which show how industries interact with each other in the production process. National accounts can be presented in nominal or real amounts, with real amounts adjusted to remove the effects of price changes over time. A corresponding
price index A price index (''plural'': "price indices" or "price indexes") is a normalized average (typically a weighted average) of price A price is the (usually not negative) quantity of payment or compensation given by one party to another in re ...
can also be derived from national output. Rates of change of the price level and output may also be of interest. An
inflation rate In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of go ...
(growth rate of the price level) may be calculated for national output or its expenditure components.
Economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value Market value or OMV (Open Market Valuation) is the price A price is the (usually not negative) quantity Quantity is a property tha ...

Economic growth
rates (most commonly the growth rate of GDP) are generally measured in real (constant-price) terms. One use of economic-growth data from the national accounts is in
growth accountingGrowth accounting is a procedure used in economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption ...
across longer periods of time for a country or across to estimate different sources of growth, whether from growth of factors of production, factor inputs or technological change. The accounts are derived from a wide variety of statistics, statistical source data including Statistical survey, surveys, administrative and census data, and regulatory data, which are integrated and harmonized in the conceptual framework. They are usually compiled by national statistical offices and/or central banks in each country, though this is not always the case, and may be released on both an annual and (less detailed) quarterly frequency. Practical issues include inaccuracies from differences between economic and accounting methodologies, lack of controlled experiments on quality of data from diverse sources, and measurement of Intangible asset, intangibles and services of the banking and financial sectors. Two developments relevant to the national accounts since the 1980s include the following. Generational accounting is a method for measuring redistribution of lifetime tax burdens across generations from social insurance, including social security and social health insurance. It has been proposed as a better guide to the sustainability of a fiscal policy than budget deficits, which reflect only taxes minus spending in the current year. Environmental accounting, Environmental or green national accounting is the method of valuing environmental assets, which are usually not counted in measuring national wealth, in part due to the difficulty of valuing them. The method has been proposed as an alternative to an implied zero valuation of environmental assets and as a way of measuring the Sustainable economy, sustainability of welfare levels in the presence of environmental degradation. Macro
economic data Economic data or economic statistics are data Data are units of information Information can be thought of as the resolution of uncertainty; it answers the question of "What an entity is" and thus defines both its essence and the nature ...
not derived from the national accounts are also of wide interest, for example some cost-of-living indexes, the unemployment rate, and the labor force participation rate. In some cases, a national-accounts counterpart of these may be estimated, such as a Personal consumption expenditures price index, price index computed from the personal consumption expenditures and the GDP gap (the difference between observed GDP and potential GDP).


Main elements

The presentation of national accounts data may vary by country (commonly, aggregate measures are given greatest prominence), however the main national accounts include the following accounts for the economy as a whole and its main economic actors. *Current accounts: ::production accounts which record the value of domestic output and the goods and services used up in producing that output. The balancing item of the accounts is value added, which is equal to GDP when expressed for the whole economy at market prices and in gross terms; ::income accounts, which show primary and secondary income flows - both the income generated in production (e.g. wages and salaries) and distributive income flows (predominantly the redistributive effects of government taxes and social benefit payments). The balancing item of the accounts is disposable income ("National Income" when measured for the whole economy); ::expenditure accounts, which show how disposable income is either consumed or saved. The balancing item of these accounts is saving. *Capital accounts, which record the net accumulation, as the result of transactions, of non-financial assets; and the financing, by way of saving and capital transfers, of the accumulation. Net lending/borrowing is the balancing item for these accounts *Financial accounts, which show the net acquisition of financial assets and the net incurrence of liabilities. The balance on these accounts is the net change in financial position. *Balance sheets, which record the stock of assets, both financial and non-financial, and liabilities at a particular point in time. Net worth is the balance from the balance sheets (United Nations, 1993). The accounts may be measured as gross or net of consumption of fixed capital (a concept in national accounts similar to depreciation in business accounts). Notably absent from these components, however, is unpaid work, because its value is not included in any of the aforementioned categories of accounts, just as it is not included in calculating gross domestic product (GDP). An Australian study has shown the value of this uncounted work to be approximately 50% of GDP, making its exclusion rather significant. As GDP is tied closely to the national accounts system, this may lead to a distorted view of national accounts. Because national accounts are widely used by governmental policy-makers in implementing controllable economic agendas, some analysts have advocated for either a change in the makeup of national accounts or adjustments in the formulation of public policy.


History

The original motivation for the development of national accounts and the systematic measurement of employment was the need for accurate measures of aggregate economic activity. This was made more pressing by the Great Depression and as a basis for Keynesian macroeconomic stabilisation policy and wartime economic planning. The first efforts to develop such measures were undertaken in the late 1920s and 1930s, notably by Colin Clark (economist), Colin Clark and Simon Kuznets. Richard Stone of the U.K. led later contributions during World War II and thereafter. The first formal national accounts were published by the United States in 1947. Many European countries followed shortly thereafter, and the United Nations published ''A System of National Accounts and Supporting Tables'' in 1952. International standards for national accounting are defined by the United Nations System of National Accounts, with the most recent version released for 2008. Even before that in early 1920s there were national economic accounts tables. One of such systems was called Balance of national economy and was used in USSR and other socialistic countries to measure the efficiency of socialistic production. In Europe, the worldwide System of National Accounts has been adapted in the European System of Accounts (ESA), which is applied by members of the European Union and many other European countries. Research on the subject continues from its beginnings through today.National Bureau of Economic Research Book Series, 1937-2010.
Studies in Income and Wealth
', 71 v.


See also

* Accounting identity * Aggregation problem * European System of Accounts * Measures of national income and output * Material Product System * National Income and Product Accounts (US) * Official statistics * Penn World Table * Savings identity * Sectoral balances * Social accounting * United Nations System of National Accounts


References


External links

* {{Authority control National accounts, Economic data Official statistics