National accounts

National accounts or national account systems (NAS) are the implementation of complete and consistent
accounting techniques for measuring the economic activity of a nation. These include detailed underlying
measures that rely on double-entry accounting. By design, such accounting makes the totals on both sides
of an account equal even though they each measure different characteristics, for example production and the
income from it. As a method, the subject is termed national accounting or, more generally, social
accounting.[1] Stated otherwise, national accounts as systems may be distinguished from the economic data
associated with those systems.[2] While sharing many common principles with business accounting,
national accounts are based on economic concepts.[3] One conceptual construct for representing flows of all
economic transactions that take place in an economy is a social accounting matrix with accounts in each
respective row-column entry.[4]

National accounting has developed in tandem with macroeconomics from the 1930s with its relation of
aggregate demand to total output through interaction of such broad expenditure categories as consumption
and investment.[5] Economic data from national accounts are also used for empirical analysis of economic
growth and development.[1][6]

Scope
National accounts broadly present output, expenditure, and income activities of the economic actors
(households, corporations, government) in an economy, including their relations with other countries'
economies, and their wealth (net worth). They present both flows (measured but it is over a period) and
stocks (measured at the end of a period), ensuring that the flows are reconciled with the stocks. As to flows,
the national income and product accounts (in U.S. terminology) provide estimates for the money value of
income and output per year or quarter, including GDP. As to stocks, the 'capital accounts' are a balance-
sheet approach that has assets on one side (including values of land, the capital stock, and financial assets)
and liabilities and net worth on the other, measured as of the end of the accounting period. National
accounts also include measures of the changes in assets, liabilities, and net worth per accounting period.
These may refer to flow of funds accounts or, again, capital accounts.[1]

There are a number of aggregate measures in the national accounts, notably including gross domestic
product or GDP, perhaps the most widely cited measure of aggregate economic activity. Ways of breaking
down GDP include as types of income (wages, profits, etc.) or expenditure (consumption,
investment/saving, etc.). Measures of these are examples of macro-economic data.[7][8][9][10] Such
aggregate measures and their change over time are generally of strongest interest to economic policymakers,
although the detailed national accounts contain a source of information for economic analysis, for example
in the input-output tables which show how industries interact with each other in the production process.

National accounts can be presented in nominal or real amounts, with real amounts adjusted to remove the
effects of price changes over time.[11] A corresponding price index can also be derived from national
output. Rates of change of the price level and output may also be of interest. An inflation rate (growth rate
of the price level) may be calculated for national output or its expenditure components. Economic growth
rates (most commonly the growth rate of GDP) are generally measured in real (constant-price) terms. One
use of economic-growth data from the national accounts is in growth accounting across longer periods of
time for a country or across to estimate different sources of growth, whether from growth of factor inputs or
technological change.[12]

The accounts are derived from a wide variety of statistical source data including surveys, administrative and
census data, and regulatory data, which are integrated and harmonized in the conceptual framework. They
are usually compiled by national statistical offices and/or central banks in each country, though this is not
always the case, and may be released on both an annual and (less detailed) quarterly frequency. Practical
issues include inaccuracies from differences between economic and accounting methodologies, lack of
controlled experiments on quality of data from diverse sources, and measurement of intangibles and services
of the banking and financial sectors.[13]

Two developments relevant to the national accounts since the 1980s include the following. Generational
accounting is a method for measuring redistribution of lifetime tax burdens across generations from social
insurance, including social security and social health insurance. It has been proposed as a better guide to the
sustainability of a fiscal policy than budget deficits, which reflect only taxes minus spending in the current
year.[14] Environmental or green national accounting is the method of valuing environmental assets, which
are usually not counted in measuring national wealth, in part due to the difficulty of valuing them. The
method has been proposed as an alternative to an implied zero valuation of environmental assets and as a
way of measuring the sustainability of welfare levels in the presence of environmental degradation.[15]

Macroeconomic data not derived from the national accounts are also of wide interest, for example some
cost-of-living indexes, the unemployment rate, and the labor force participation rate.[16] In some cases, a
national-accounts counterpart of these may be estimated, such as a price index computed from the personal
consumption expenditures and the GDP gap (the difference between observed GDP and potential
GDP).[17]

Main elements
The presentation of national accounts data may vary by country (commonly, aggregate measures are given
greatest prominence), however the main national accounts include the following accounts for the economy
as a whole and its main economic actors.

Current accounts:

production accounts which record the value of domestic output and the goods and
services used up in producing that output. The balancing item of the accounts is
value added, which is equal to GDP when expressed for the whole economy at
market prices and in gross terms;
income accounts, which show primary and secondary income flows—both the
income generated in production (e.g. wages and salaries) and distributive income
flows (predominantly the redistributive effects of government taxes and social benefit
payments). The balancing item of the accounts is disposable income ("National
Income" when measured for the whole economy);
expenditure accounts, which show how disposable income is either consumed or
saved. The balancing item of these accounts is saving.
 Capital accounts, which record the net accumulation, as the result of transactions, of non-
financial assets; and the financing, by way of saving and capital transfers, of the
accumulation. Net lending/borrowing is the balancing item for these accounts
Financial accounts, which show the net acquisition of financial assets and the net incurrence
of liabilities. The balance on these accounts is the net change in financial position.
Balance sheets, which record the stock of assets, both financial and non-financial, and
liabilities at a particular point in time. Net worth is the balance from the balance sheets
(United Nations, 1993).
The accounts may be measured as gross or net of consumption of fixed capital (a concept in national
accounts similar to depreciation in business accounts).

Notably absent from these components, however, is unpaid work, because its value is not included in any of
the aforementioned categories of accounts, just as it is not included in calculating gross domestic product
(GDP). An Australian study has shown the value of this uncounted work to be approximately 50% of GDP,
making its exclusion rather significant.[18] As GDP is tied closely to the national accounts system,[19] this
may lead to a distorted view of national accounts. Because national accounts are widely used by
governmental policy-makers in implementing controllable economic agendas,[20] some analysts have
advocated for either a change in the makeup of national accounts or adjustments in the formulation of public
policy.[21]

History
The original motivation for the development of national accounts and the systematic measurement of
employment was the need for accurate measures of aggregate economic activity. This was made more
pressing by the Great Depression and as a basis for Keynesian macroeconomic stabilisation policy and
wartime economic planning. The first efforts to develop such measures were undertaken in the late 1920s
and 1930s, notably by Colin Clark and Simon Kuznets. Kuznets building on a project that was underway
https://www.nber.org/system/files/chapters/c4231/c4231.pdf, Lillian Epstein had been involved in earlier
studies. Richard Stone of the U.K. led later contributions during World War II and thereafter. The first
formal national accounts were published by the United States in 1947. Many European countries followed
shortly thereafter, and the United Nations published A System of National Accounts and Supporting Tables
in 1952.[1][22] International standards for national accounting are defined by the United Nations System of
National Accounts, with the most recent version released for 2008.[23]

Even before that in early 1920s there were national economic accounts tables. One of such systems was
called Balance of national economy and was used in USSR and other socialistic countries to measure the
efficiency of socialistic production.[24]

In Europe, the worldwide System of National Accounts has been adapted in the European System of
Accounts (ESA), which is applied by members of the European Union and many other European countries.
Research on the subject continues from its beginnings through today.[25]

See also
Accounting identity
Aggregation problem
 European System of Accounts
Measures of national income and output
Material Product System
National Income and Product Accounts (US)
Official statistics
Penn World Table
Savings identity
Sectoral balances
Social accounting
United Nations System of National Accounts

References
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Economics, v. 4, pp. 377–82.
2. United Nations, The System of National Accounts (http://unstats.un.org/unsd/nationalaccoun
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6. Mankiw, N. Gregory; Romer, David; Weil, David N. (1992). "A Contribution to the Empirics of
Economic Growth". Quarterly Journal of Economics. 107 (2): 407–437.
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000196&edition=current&q=environment&topicid=&result_number=5)" by Sjak Smulders
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External links
Media related to National accounts at Wikimedia Commons

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