GR 12 PRESENTATIONS NATIONAL INCOME

TELEMATICS - 2021 ECONOMICS GR 12 NATIONAL INCOME

The circular flow Goods and services Factors of prod. Households Income Spending Taxes Public G + S FINANCIAL SECTOR Factor services Spending S Factor Market STATE L a Product Market o v Spending a i G + S Public G + S n Entrepreneur n s g Taxes s rent profit int wages Income land, labour, capitsl Businesses Goods and services Spending Income Exports Real flow Imports Money flow L=S + T + M Foreign J= I + G + X sector

National Account grand totals and conversions from Domestic grand totals to National grand totals National Account Aggregates Basic Price Factor cost Market price GDP(P) GDP(I) GDP(E) Primary sector Compensation C Secondary sector Net surplus G Tertiary sector Consumption of I fixed capital Residual item The compilation of National Accounts Grand Totals takes place according to internationally accepted standards

Important concepts when calculating national accounts aggregates: 1. Factor cost cost of employing factors of production 2. Basic price includes the cost of production 3. Market price price paid by the consumer 4. Taxes a compulsory payment for all residents Direct tax - tax on income Indirect tax - tax on expenditure 5. Tax on products tax charged for product or service (VAT) 6. Tax on production tax not linked to product or service (business licence) 7. Subsidy on products subsidy on specific good (bread) 8. Subsidy financial assistance from government to sell at a lower price to consumer 9. Subsidy on production not linked to a specific product 10. Double counting Where a transaction is counted more than once

GDP (P): Calculation method is based on the addition of value added at each stage in the production process. PRODUCTION Basic Price Primary Sector Agriculture, Mining, Forestry, Fishing +Secondary Sector Manufacturing, Construction, Elecricity, Gas,Water +Tertiary Sector Retailers, Insurance, Property =GDP @ basic price Price BEFORE tax such as VAT, Import tax and subsidies on products are calculated. +Taxes on products GDP @ basic price includes taxes on production -Subsidies on products and subsidies on production. GDP @ basic price is linked to Production Method. =GDP @ market price To convert GDP @ market price to GDP @ basic price: GDP @ market price + subsidies - taxes on products To convert GDP to GNP: GDP @ market prices PLUS primary income from the rest of the world LESS primary income to the rest of the world

Exercise 1: Study the information below and answer the questions that follow. GDP according to economic activity R million Primary sector 246 380 Secondary sector 317 965 Tertiary sector 2 750 633 Taxes on products 309 486 Subsidies on products 17 558 1. Which method is used to calculate GDP? (1) 2. Calculate GDP at basic price. Show all calculations. (3) 3. Calculate GDP at market price. Show all calculations. (4)

GDP (I): Calculation method is based on income within the land borders earned by the factors of production. INCOME Factor cost Compensation paid to employees (salaries and wages) +Net surplus (net profit after tax) +Consumption of fixed capital (depreciation) =GDP @ factor cost linked to Income Method +Taxes on production taxes such as SITE, PAYE -Subsidies on production employment subsidies =GDP @ basic price +Taxes on products -Subsidies on products =GDP@market prices

Exercise 2: Study the information below and answer the questions that follow. GROSS DOMESTIC INCOME R MILLION Compensation of employees 1 600 475 Net surplus 985 634 Consumption of fixed capital 656 328 A B Other taxes on production 86 923 Other subsidies on production 14 382 C D Taxes on products 309 486 Subsidies on products 17 558 GDP @ market price E Primary income from the rest of the world 84 566 Primary income to the rest of the world 103 788

1. Define the concept Gross Domestic Income. (2) 2. Which entries are represented by the letters A and C? (2) 3. Describe the following concepts: 3.1 Compensation of employees (2) 3.2 Net surplus (2) 3.3 Consumption of fixed capital (2) 4. Differentiate between taxes on products and other taxes on production. Provide an example for each one. (6) 5. Differentiated between subsidies on products and subsidies on production. (6) 6. Calculate the values of the letters B, D and E. Show all your calculations. (10) 7. Calculate Gross National Income and show all calculations. (3)

GDP (E) is calculated by the total expenditure on all final goods and services within the national borders EXPENDITURE Consumer spending +Investment spending +Government spending +Residual item balancing figure =GDE +Exports -Imports =GDP @ market price

Exercise 3: Study the table below and answer the questions that follow. NATIONAL EXPENDITURE R MILLIONS Final consumption expenditure by households 2 088 532 Final consumption expenditure by government 780 496 Gross capital formation 620 531 Residual item 38 288 Spending by foreigners on South African goods 975 441 Spending by South Africans on foreign goods 896 382 3.1 Which method was used to calculate GDP? (1) 3.2 Define the term residual item. (2) 3.3 Provide the correct symbols for the following: a. Final consumption expenditure by households (1) b. Final consumption expenditure by government (1) c. Gross capital formation (1) d. Spending by foreigners on South African goods (1) e. Spending by South Africans on foreign goods (1) 2.2.4 Provide synonyms for the following: a. Gross capital formation (1) b. Spending by foreigners on South African goods (1) c. Spending by South Africans on foreign goods (1)

Exercise 4: Refer to the table below and the answer the questions that follow. 4.1 Provide the formulae for converting the following: a. GNI at market prices to GDP at market prices (3) b. GDP at market prices to GDP at basic prices (3) c. GDP at basic prices to GDP at factor cost (3) 4.2 Calculate the following: (Show all calculations) a. GDP at market prices (3) b. GDP at basic prices (3) c. GDP at factor cost (3) d. Letter A

END OF PRESENTATION