National income accounting

National income accounting is a framework for measuring an economy’s production, income, and expenditure over a defined period. Its accounts connect these three views of economic activity.

Gross domestic product: The market value of final goods and services produced within a country during a period. GDP is the central measure of domestic production in the accounts.
Expenditure approach: A method of calculating GDP by adding spending on final goods and services. It measures production through the purchases that absorb final output.
Real GDP: Gross domestic product adjusted for price changes to measure changes in production volume. It isolates output growth from changes in the general price level.
Gross national income: Total income earned by a country’s residents, including net income from abroad. Unlike GDP, it follows residents’ income rather than production within national borders.
Value added: The value of a producer’s output minus the value of intermediate goods and services it uses. Summing value added measures production without counting intermediate goods repeatedly.
Income approach: A method of estimating GDP by adding incomes generated in production. It records production as wages, profits, and other factor incomes.
GDP deflator: A price index comparing nominal GDP with real GDP. It converts current-price output into a measure adjusted for inflation.
Net domestic product: Gross domestic product minus depreciation of fixed capital. It accounts for capital consumed while producing current output.
Final good: A good purchased for final use rather than for resale or incorporation into another product. Counting final goods prevents double counting in production totals.
Production approach: A method of calculating GDP by summing value added across producing industries. It measures output directly while avoiding intermediate-input double counting.

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