National income and its calculation

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  1. By: M.Bilal Miraki 2. OUTLINE  Definition of National Income  Calculation of National income  Expenditure approach  Income approach …
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  • 1. By: M.Bilal Miraki
  • 2. OUTLINE  Definition of National Income  Calculation of National income  Expenditure approach  Income approach  Production approach  National Income of UAE (united Arab Emirates)  Major components of national income of UAE  Bilateral trade relation of UAE
  • 3. NATIONAL INCOME  Definition: National income is the total value of a country’s final output of all new goods and services produced in one year.  Understanding how national income is created is the starting point of macroeconomics
  • 4. CALCULATION OF NATION INCOME  Any transaction of product has three phases; 1. Expenditure for purchaser 2. Income to seller 3. The value of product Ex: I buy a pen on 5 afs so 5 afs is expenditure for me, income for seller, and the value of pen. So we have three methods for accounting national income
  • 5. CALCULATION OF NATIONAL INCOME 1. Expenditure method In this method all spending of households and firms in an economy on new goods and services are summed up and arrived at the point of national income  Consumption  Investment  Government expenditures  Net exports (exports – imports)
  • 6. CALCULATING NATIONAL INCOME  Income method In this method all the income of four factor of production are calculated. In the shape of Land Labor Capital organization Rent Wage Interest Profit
  • 7. CALCULATION OF NATIONAL INCOME 3. Production approach  In this method all new production carried out by organizations and individuals in an economy are summed and the monetary value of all is called to be national income of that country at that year.  In order to measure we should divide whole economy into sectors
  • 8. NATIONAL INCOME OF UAE Let’s see how National Income of UAE (United Arab Emirates) is calculated
  • 9. NATIONAL INCOME OF UAE  UAE calculate their National Income through three methods in all these three methods the value is not the same, because of  Change in data source  Change in timing  Change in estimate techniques
  • 10. NATIONAL INCOME OF UAE  UAE is the world sixth large oil and gas reserve country and one of major player of energy in the world  UAE is the second large economy after Saudi Arabia in Middle East
  • 11. NATIONAL INCOME OF UAE  Gross national income: $ 360,245,074,960 (2011)  Gross national expenditure: $270,333,567,967 (2011)  National income – national expenditure = $ 89,911,506,993 (Profit)
  • 12. NATIONAL INCOME OF UAE  Exports = $ 265,300,000,000  Imports = $ 158,600,000,000  Net exports = $ 106,700,000,000
  • 13. NATIONAL INCOME OF UAE Major components of National income of UAE  The great player in National Income of UAE is crude oil and gas and it is one third of all GDP  Foreign investment  Trade include transport, business and port service (Jebel Ali port is host of large number of navy ships of US and the big port of US in all over the world)  Construction specially prestige hotels and so on
  • 14. NATIONAL INCOME OF UAE Bilateral Trade Relation  UAE largest bilateral trade country is Australia, in 2009 mutual trade between these two countries was $ 4.25 billion from this UAE export $2.11 billion to Australia and import was $2.14 billion.  Exports: oil & gas etc  Imports: PMV, processed zinc, iron, gold, industrial machinery, office machinery, for Australia UAE is a very good educational market too.
  • 15. NATIONAL INCOME OF UAE  300 large Australian companies are engage in the economy of UAE  The free trade agreement between UAE and Australia in 2005 helped both countries to increase their National Income
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