Towards a national accounting system, Macroeconomics

Assignment Help:

 

TOWARDS A NATIONAL ACCOUNTING SYSTEM 

A real life modern economy is a very complex structure consisting of millions of units engaged in a variety of economic transactions. There are organizations which produce and distribute a variety of goods and services. There are households which consume goods and services, offer their labor services to productive organizations and make their savings available for investment. There are financial institutions which act as intermediaries between savers and investors. There are state and central governments who impose and collect taxes and provide a range of public services. Transactions take place among the units within an economy as well as with foreigners in the process of production and consumption of goods and services, creation and transfer of physical and financial assets, production of public goods and services, etc. National accounts attempt to provide a summary picture of the entire gamut of these economic transactions.

Obviously, to be useful at all, the national accounts cannot go down to the level of individual units. Substantial aggregation must be done over the units and detailed transactions so that national accounts can be cast in terms of a manageable number of macroeconomic aggregates. In the design and construction of these aggregates, the criterion is that the accounts must enable us to identify and estimate important economic relationships. A general principle is that economic activities subject to similar behavioral determinants should be aggregated together.

Corresponding to the corporate accounts, three types of accounts can be constructed for the national economy. The National Income Accounts deal with flows of goods and services during a year; the flow of funds accounts depict changes in financial assets and liabilities of the various sectors of the economy. (A sector is a collection of units engaged in similar economic activities.) Finally, the national balance sheet will reflect the nation's wealth at a point of time. A fourth type of accounts called Input-Output accounts depict the flows of goods and services between the various productive and household sectors of the economy.

In this note we will focus on National Income and Product Accounts often simply called 'National Accounts'. We will begin with a very simple hypothetical economy and add complications one at a time finally approaching an accounting system for a real-life economy. 


Related Discussions:- Towards a national accounting system

AD/AS Curve, Consider the following model of an economy that begins in a ma...

Consider the following model of an economy that begins in a macro equilibrium,

Monetary sector, If the reserve bank wants to pursue a contractionary polic...

If the reserve bank wants to pursue a contractionary policy, what should it do?

Composition and direction of trade, Composition and Direction of Trade: ...

Composition and Direction of Trade: The impact of trade reforms can be observed from the changing structure of India's  foreign  trade in  terms of diversity  of  production

The micro-finance institutions in india, Have the micro-finance institution...

Have the micro-finance institutions failed in their objectives?

Input combination if the price of capital decreased, In reference to the ab...

In reference to the above question, assume you know the combination of inputs that minimizes cost. What would happen to this input combination if the price of labor increased? What

Illustrate biological effects of ochratoxin, Q. Illustrate Biological effec...

Q. Illustrate Biological effects of Ochratoxin? Biological effects: It is associated with the chronic progressive kidney disease in humans known as Balkan endemic nephropathy.

Monetary policy, what is the importance of credit multiplier

what is the importance of credit multiplier

Enumerate the statement- interest rates with longer maturity, Enumerate the...

Enumerate the statement- Interest rates with longer maturity Since loans with longer maturities are substitutes for overnight loans, the central bank also has some control o

Calculate the cross price elasticity, Syesha loves to eat Sunday breakfast ...

Syesha loves to eat Sunday breakfast at her local Scrambles restaurant. She usually orders a la carte. Her usual breakfast consists of 2 scrambled eggs, 1 piece of bacon and 2 link

Description of inflation in detail, Description of Inflation in detail ...

Description of Inflation in detail Inflation is the rate at which average price level of services and goods rises in a given time period. In UK the Office for National Statist

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd