What are national accounts

What are national accounts?


According to polyhobbies, the national accounts (VGR) are a statistical view of the overall economic situation, which is particularly important in the area of macroeconomics. The task of the national accounts is to retrospectively record and document the entire economic performance of an economy within a period (usually a calendar year). This is done taking into account taxes, duties, subsidies and depreciation.

In this lesson we explain to you the components of the national accounts, their meaning and the calculation of individual components. At the end of the lesson, we offer you a series of practice questions that you can use to check your knowledge.

English: National account system

Why is national accounts important?

With the help of the national accounts you can get a detailed overview of the performance of an economy. The focus is on important key figures such as gross domestic product (GDP), gross national income (GNI) and national income.

The national accounts therefore represent an important basis for economic decisions. For example, the trade unions and employers’ associations use the figures on the development of price levels, income and productivity as a basis for new collective bargaining.

Components of the national accounts

The aim of the national accounts is to provide a quantitative description of economic activity for a previous period, which is usually the last calendar year. The values ​​determined in this context are recorded using an account system and then presented in tables.

The national accounts are made up of two major sub-areas:

The calculation of gross domestic product (GDP) and gross national income (GNI) as well as the ancillary calculations of the national accounts.

Calculations of GDP and GNI

The national accounts are based on the cycle theory, according to which all exchange processes in the form of goods and money flows between households and companies are recorded.

Manufactured goods and services represent the value added, if they are not intermediate consumption. The development of an economy is measured by the change in value added over several periods.

When preparing the national accounts, several key figures from economics are calculated. These primarily include gross domestic product, gross national income and national income.

In the following, this is shown using the distribution calculation as an example:

Compensation of employees
+ Corporate and property income
= National Income (VS)
+ Production and import taxes to the state
+ Depreciation
= Gross national income
Balance of primary income from the rest of the world
= gross domestic product

The gross domestic product (GDP) is the most important variable to be calculated in this context, because it allows the economic performance of an economy to be represented within a billing period:

GDP contains the values ​​of all goods and services produced and sold during this period. Here, however, a distinction must be made between real and nominal GDP.

If one wants to look at the change in GDP between different periods of time, this can only be done using real GDP. Because only when real GDP rises does an economy produce more or better goods and services than in the previous year.

On the other hand, if only nominal GDP rises, this means that only the prices of the goods and services produced have risen, which in turn indicates inflation.

Ancillary calculations of the national accounts

The ancillary calculations of the national accounts consist of the following calculations:

Ancillary accounts of the national accounts

Input and output calculation

The calculation of input and output is directly related to the calculation of gross domestic product. In it, the production and goods-related interdependencies of an economy are presented in detail.

Added to this are the flows of goods between the economy in question and the rest of the world. The focus is primarily on the movement of goods as part of the production process. The input-output calculation and analysis was developed by Wassily Leontief, for which he received the 1973 Nobel Prize in Economics.

Asset accounting

The aim of the asset accounting is to record all stocks of tangible goods, receivables and liabilities. In addition, the asset account provides an insight into the composition of assets.

Above all, fixed assets and household assets are recorded. In addition, the financial assets of the Deutsche Bundesbank are determined. This is documented in the form of sectoral and macroeconomic balance sheets.

Finance bill

The financial accounts look back at the changes in financial assets in the individual economic sectors in a period.

These changes include:

  • Changes in net money claims
  • Changes in net financial liabilities

The sectors include:

  • private households
  • company
  • Financial institutions
  • the State
  • the foreign country

The central bank of the respective country is responsible for the implementation of the financial accounts.

Assuming a closed economy, net financial assets cannot change due to a lack of inflows and outflows from or to other countries. In this purely theoretical model, the deficits of one sector are balanced out by the surpluses of the other sector. Thus the claims of one sector are the liabilities of the other.

In the context of the macroeconomic financial accounting, those deficits in foreign countries are included that have led to a domestic surplus within the period examined. The balances of the individual sectors must be exactly zero. According to the current interpretation, surplus expenditure is financed by surplus income.

Foreign trade accounts

In the foreign trade accounting, all flows of goods and capital between residents and foreigners are recorded. Furthermore, the development of exchange rates, export and import prices as well as the real exchange conditions (terms of trade) are taken into account.

The most important component of this ancillary calculation of the national accounts is the balance of payments, as it shows the changes in credit relationships with other countries.

Work volume calculation

The work volume calculation is used to determine and document the number of employees and self-employed within an economy.

Household income

This calculation shows the income distribution of private households. The households are divided into employees, self-employed and inactive households.

What are national accounts