Using the three approaches in conjunction also helps to alleviate their individual, inherent weaknesses. In practice, national accounts compilation is often a patchwork, with some elements estimated from the production approach, others from the expenditure approach, and still others from the income approach.Ģ.3. The distinction between these three approaches is somewhat artificial because they are seldom used completely independently from each other as they often share the same basic data. The income approach directly measures the income arising from production – largely the wages paid to employees and the operating surplus/mixed income coming from productive activities. In the expenditure approach, GDP is measured as the sum of expenditure components (namely, final consumption expenditure, gross capital formation and net exports). In the production approach the starting point is to measure output and intermediate consumption of goods and services, obtain value added as the difference between output and intermediate consumption, and sum the values added by different producers to obtain GDP. Three approaches to measuring GDP can be distinguished: the production approach, the expenditure approach and the income approach. In the context of the NOE, the most relevant elements of the 1993 SNA concern the measurement of GDP. The chapter describes the concepts, definitions, classifications, and accounting rules of the 1993 SNA and other international standards that enable the NOE problem areas to be systematically defined and analysed in Chapter 3.Ģ.2. This chapter provides the basic knowledge to support the first line of action in the strategy for NOE measurement, namely establishing an appropriate conceptual framework.
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