National Accounting

National accounting is the method to measure the aggregate economic activity of a nation, including production, income, and expenditure, and shares many common principles with business accounting. National accounts are usually compiled by national statistical offices or central banks, and are used in empirical analysis of economic growth and development.

Economic growth rates most commonly refer to the growth rate of real GDP. National accounts cannot service as a measure of economic welfare.

The first formal national accounts were published by the United States in 1947. Many European countries followed shortly thereafter. An international standard for national accounting is the System of National Accounts (SNA), first published in 1953 by the United Nations.

Gross domestic product (GDP): the total value of goods and services produced in a country in a specific time period.

Price index: the price level of a representative collection of goods (commodity bundle). Consumer Price Index (CPI): applicable to consumers to measure real wages. GDP price index: applicable to measure real GDP.

Inflation: growth rate of a price index. Nominal value: moneytary value at the time of measurement. Real value: nominal value adjusted for inflation.

Exchange rate: the ratio at which (the principal unit of) two countries' currencies may be traded. Purchasing power parity (PPP): the ratio between two countries' currencies such that either will purchase the same commodity bundle at home excluding customs duties and costs of transport. Compared with PPP, the law of one price such as the Big Mac Index applies to individual commodities.

Interest rate: the amount of interest paid per unit of time as a fraction of the loan. The interest rate actually charged depends on the maturity of the loan, the credit-worthiness of the borrower, the amount of collateral, tax treatment of interest payments for both parties, etc.

Prime interest rate: an interest rate formally announced by a commercial bank to be the lowest available to its most creditworthy customers, usually corporations.

Gross national income (GNI)

References: 1. Nancy D. Ruggles, 1987. Social Accounting. In: The New Palgrave Dictionary of Economics. 2. André Vanoli, 2008. History of National Accounting. In: The New Palgrave Dictionary of Economics.