We can also call gross domestic product as national income. Of course, when we hear the word national income, we must know that this is very important. This is also widely discussed in economics lessons.
Of course, if the value of this gross domestic product is high, the level of a country must also be considered higher. This high value also means that there are many export and import transactions as well as high domestic production. Here is more information about gross domestic product so that you can better understand what this means.
Gross Domestic Product at a Glance
Gross domestic product or national income is something very important for a country to know. Usually this will be calculated to be a reference for several things in a country. To find out more, you can read the explanation below about gross domestic product.
Definition of GDP/National Income
One of the important things so that we can know the
economic condition of a country in a certain time is to use gross domestic product or GDP data. We can use it on a valid price basis or a constant price basis. GDP is actually the amount of added value that comes from all businesses within a given country and or the amount of the final value of services and goods produced by all economic units. GDP based on prevailing prices will describe the added value of goods and services calculated at the prevailing price every year, while GDP based on constant prices will show the added value of goods and services calculated using the prevailing price in 1 given year as the basis for its calculation. GDP using the prevailing price basis can be used to see the structure and shifts of the economy, while GDP with constant prices can be used so that we can know the country's economic growth from year to year.
Economic Indicators Related to GDP
There are several economic indicators that can affect or relate to gross domestic product. Here are some economic indicators related to gross domestic product.
Gross National Product
Gross National Product is GDP added to net income from abroad. Net income is the income from the production factors (labor and capital) of the Indonesian population that the state receives from abroad and is deducted from the same income of foreign residents obtained by the Indonesian state.
Net National Product on a Market Price Basis
The net national product on the basis of market prices is GDP minus all depreciation of fixed capital goods used for production over a period of 1 year.
Net National Product on the basis of Cost of Production Factors
The net national product based on the cost of production factors is the net national product based on market prices minus the net indirect tax. Net indirect tax is a tax that is not directly collected by the government minus subsidies provided by the government. Indirect taxes and subsidies will be imposed on goods and services produced or sold by sellers. This indirect tax has the property of increasing the selling price, while the subsidy will reduce the selling price. Net national product based on the cost of production factors can also be said to be national income.
Figures per Capita
Figures per capita are measures of economic indicators that have been described above, then divided by the number of people in the middle of the year.
Uses of National Income Statistics
National income data is a macro indicator that can show the condition of the national economy every year. The benefits that can be obtained from this data are as follows. The nominal price GDP can show the ability of economic resources owned or produced by a country. If the GDP value is large, it means that the economic resources are also large, and the opposite will be true. The prevailing price PNB will show the income that can be enjoyed by residents in a particular country. Constant or real price GDP can be used to determine the economic growth rate of a country as a whole or a sector from year to year. The distribution of GDP in the prevailing price by sector can show the role of each economic sector or economic structure within a country. The economic sector will be the basis of a country's economy if it makes a large contribution. The price GDP applied based on use can show products, services and goods that are commonly used for consumption, investment, and traded abroad. The distribution of GDP based on use can show the role of an institution in using the services and goods produced by many sectors of the economy. GDP used on a constant price basis can measure the growth rate of consumption, foreign trade, and investment. GDP and GDP per capita on the basis of prevailing prices can show the value of GDP and GDP per head or per 1 population. GDP and GNP per capita on the basis of constant prices can be used to determine the real economic growth per capita of the population in a country.
Concept of GDP Expenditure
Before learning more about the types of gross domestic product expenditure, we need to understand the concept first. Here are the concepts we can learn from gross domestic product.
Definition of Household Consumption Expenditure
Household consumption expenditure is expenditure on goods and services used by households for consumption. Households aim to be the end users of the many kinds of services and goods in the economy. A household is an individual and/or group of individuals who live together in a residential building. They will accumulate income, have obligations and property, and consume their goods and services together, let alone food and homes. What is meant by final consumption in this case is the consumption of goods and services so that their household needs can be met.
Coverage of Household Final Consumption
Household final consumption consists of:
- The value of goods and services obtained through purchase.
- Estimated value of goods and services obtained from barter transactions.
- Estimated value of goods and services obtained from the employer as compensation for labor.
- Estimated value of goods and services produced for consumption by the household itself.
Definition of Consumption Expenditure of Non-Profit Institutions Serving RT
Non-profit institutions that serve households are institutions that provide goods and services for free or at prices that are not economically meaningful to members or parts of the household, and are not controlled by the government.
Types of Non-Profit Institutions
Non-profit institutions that serve households have 6 types of institutions, which are as follows.
- Community organizations
- Social organization
- Professional organizations and trade unions
- Cultural, sports and leisure organizations
- Political party
- Religious institutions
Definition of Government Consumption Expenditure
The general government has an institutional unit that can fulfill the responsibilities and roles of politics and economic regulation, can also provide goods and services for individual or collective consumption, especially those that use the base and market, and then also provide the redistribution of income and wealth. This general government sector has several central government units, local governments such as provinces, districts or cities, and villages, as well as all non-profit institutions monitored by the government. Government consumption expenditure is an expenditure to obtain goods and services carried out by the government for final consumption. PKP, which is a producer and market, is approached using costs incurred by the government. For example, the value of goods and services obtained from market producers so that they can be distributed to households at prices that are not raised too much, and Bank Indonesia's output will be reduced by receipts from the sale of these goods and services.
Definition of Gross Fixed Capital Formation
Gross fixed capital formation is the reduction and addition of fixed assets to a specific production unit. The addition of these capital goods is such as the procurement and purchase of new capital goods from within the country as well as new and used capital goods originating from abroad, such as major improvements in the transfer or barter of capital goods, manufacturing, hire purchase, and the growth of planted biological resource assets. If the reduction of capital goods is such as the transfer or barter of capital goods to other parties, hire purchase, and sale. The reduction will not be made if the loss occurs due to a natural disaster.
Definition of Inventory Change
Inventory is an asset in the form of goods and services that are stored so that they can be sold and can be used for production activities or other things in the future. Inventory has 5 types, which are as follows.
- Raw materials and auxiliaries;
- Goods in settlement;
- Finished goods;
- Goods/services for resale;
- Military inventory.
Changes in the inventory indicate that there are already transactions that have occurred in the inventory. This change explains a change in the position of goods in the warehouse that may increase or decrease. Changes in this warehouse can be measured by calculating the value of goods that enter the warehouse and then subtract it by the value of the goods that come out of the warehouse, as well as the losses that occur when storing goods in a certain period.
Definition of Import Export
Export-import is a transaction of changing the ownership of goods and services between residents in an economy and non-residents. An institution can be described as a resident in the economic area of a country, if this institutional unit has a major economic interest center within the economic area and this institutional unit is involved in economic transactions or activities for a long time, at least 1 year. Exports and imports use the principle of recording on an accrual basis where when there is a change of ownership whose approach uses the time of recording in customs documents, the goods will be recorded, while for services will be calculated when services are provided or provided.
Gross Domestic Product Methodology of Expenditure
Gross domestic product production is any expenditure used to produce products in a country. There are several types of expenses from this. Here are the types.
Household Consumption Expenditure Methodology
Household consumption expenditure is part of the gross domestic product. To find out how much household consumption expenditure a country has, we can use several ways below.
On the basis of applicable prices
Household consumption expenditure on the basis of prevailing prices can be estimated with the following steps.
- Per capita consumption expenditure when viewed with Susenas consumption commodities multiplied by the projected population number, will produce the initial estimated value and household consumption according to Susenas' consumption commodities.
- The results of the initial estimate of household consumption expenditure through Susenas consumption commodities will be included in the Classification of Individual Consumption According to Purpose, which will give rise to the initial estimated value of household consumption expenditure according to the Classification of Individual Consumption According to Purpose.
- The results of the initial estimate of the Classification of Individual Consumption According to Purpose can be double-checked with the ratio of household consumption expenditure from the Supply and Use Table, the Cost of Living Survey, and secondary data to obtain household consumption expenditure on the basis of prevailing prices.
On the basis of constant prices
To be able to obtain the results of household consumption expenditure on the basis of constant prices, we can calculate household consumption expenditure on the basis of prevailing prices and then we pay attention to the appropriate consumer price index.
Methodology of Consumption Expenditure of Non-Profit Institutions Serving RT
Consumption expenditure of non-profit institutions serving households is part of gross domestic product. There are several ways that can be used to calculate consumption expenditure from non-profit institutions that serve households, here are how.
On the basis of applicable prices
We can estimate the consumption expenditure of non-profit institutions that serve households by using the results of a special survey of non-profit institutions using the following steps. First, we can calculate the average expenditure according to the type of institution, then from that average we will get the results of a special survey of non-profit institutions that are carried out every year. Then, we will flow the average value according to the type of institution and population of non-profit institutions that serve households in order to get the value of consumption expenditure of non-profit institutions that serve households.
On the basis of constant prices
The constant annual consumption expenditure of non-profit institutions serving households can be calculated by adding the consumption expenditure of non-profit institutions serving households per quarter. The value per 3 months will be obtained by dividing the prevailing quarterly value by the general consumer price index per 3 months.
Government Consumption Expenditure Methodology
Government consumption expenditure is part of the gross domestic product. If you want to know how to calculate government consumption expenditure, you can use several methods such as on the basis of prevailing prices and on the basis of constant prices. These two methods will give different information results because the basis used will be different.
On the basis of applicable prices
Government consumption expenditure on the basis of prevailing prices is the result of non-market results by the government, then subtracted by revenues from the sale of goods and services, plus the proceeds from Bank Indonesia's output, as well as the value of goods and services purchased from producers so that they can be distributed to households at prices that are not economically increased. We get this output by calculating through the cost approach incurred such as employee spending, social assistance and other spending, goods spending, and estimated consumption of fixed capital goods.
On the basis of constant prices
Government consumption expenditure on the basis of constant prices can be calculated using deflation. We will use the wage index of goods expenditure and social assistance expenditure which are deflationary using the general large trade price index of consumption of fixed capital goods, then deflationary using the implicit gross fixed capital formation, receipts from the sale of goods and services that are deflationary using the general consumer price index to calculate deflation of employee expenditure.
Gross Fixed Capital Formation Methodology
Gross fixed capital formation is part of gross domestic product. To calculate gross fixed capital formation, there are several ways that can be done. The first is a direct approach and the second is an indirect approach. Both of these approaches can be used according to needs or circumstances.
On the basis of applicable prices
On the basis of prevailing prices is one way of calculating gross domestic product. An approach that uses an applied price basis will use the price in the year in which the activity is calculated. That's why it's important to know the price in the current year so that you can calculate this approach easily.
Direct Approach
The calculation of gross fixed capital formation can be done directly by adding up all the gross fixed capital formation values in each industry. These capital goods will be assessed on the basis of the purchase price which includes the costs incurred. Examples include installation costs, taxes, transportation costs, and other costs related to producing capital goods. For imported goods, we must also include other costs such as import duties and taxes related to the transfer of ownership of the capital goods.
Indirect Approach
The calculation of gross fixed capital formation can also be indirectly called the commodity flow approach. This approach can be done by calculating the inventory value of goods produced by many industries, then we allocate part of these goods to capital goods. The approach that needs to be taken if output data is not available is to use extrapolation or multiply the formation of gross fixed capital on the basis of constant prices with the production index of the appropriate type of capital goods. We must start by calculating the gross fixed capital formation on the basis of constant prices. Then we must transfer the value of gross fixed capital formation on the basis of constant price with the price index of each type of capital goods that are appropriate to obtain the gross fixed capital formation on the basis of prevailing prices.
On the basis of constant price
To get value on the basis of constant prices, we can deflate the formation of gross fixed capital on the basis of applicable prices with the corresponding type of capital goods IHPB.
Inventory Change Methodology
Changes in inventories are part of gross domestic product. Changes in the position of the warehouse are indeed very important to know. To get information about these changes, there are 3 ways that we can use. The methods are on the basis of prevailing prices, the corporate side approach, and the commodity side approach.
On the basis of applicable prices
On the basis of prevailing prices is one way of calculating gross domestic product. To calculate changes in the warehouse, there are two approaches that we can do, such as a direct approach from the side of a corporation or business unit and an indirect approach from the side of commodities or types of goods.
Corporate Side Approach
We can calculate changes in the warehouse from the company's financial statements and also the annual reports of medium and large industry survey results with this approach. We can calculate the value of the warehouse position on the basis of constant prices, by dividing the value of the warehouse book by the price deflator in the last month of the current year. To calculate the value of the warehouse change on a constant price basis, we can subtract the value of the constant price base inventory position in the current year from the previous year. The result is an estimate of the change in the warehouse at the base year price used. We can subtract the value of inventory change on a constant price basis with the average price index in the current year to get the warehouse change value on the basis of the prevailing price.
Commodity-Side Approach
We can calculate changes in warehouses by multiplying prices and changes in commodity volumes. This method of estimation requires data on all goods entering and exiting the warehouse. The entry and exit of goods from the warehouse can be assessed by the price at which the transaction is made. We can calculate the estimated value of warehouse changes with the following steps. Calculate the number of goods in the warehouse according to their type. We need to multiply the number of goods that are part of the warehouse by the price of the goods in the current year in units that have been determined to get the value of the inventory position of each type of goods. We can subtract the value of the warehouse position in the current year and the previous year and the result will be the value of the inventory change on the basis of the prevailing price. We can multiply the number of goods that are inventories by the price of the goods in the base year in units that have been determined to get the value of the inventory position on the basis of constant prices. We can subtract the value of the inventory position on a constant price basis in the current year from the previous year to get the value of the inventory change on a constant price basis.
Import Export Methodology
Exports and imports are part of the gross domestic product. The way to calculate the forecast from exports and imports has a special way. There are two ways that we can use to calculate it, namely on the basis of the prevailing price and on the basis of constant prices. Here's how to calculate it.
On the basis of applicable prices
Export and import activities consist of all goods that are transacted through barter, grant, and trade. Goods transacted through export and import will be assessed according to the free on board price and using rupiah units, then added with an estimated transaction that has not been documented in order to be able to get the export and import of goods on the basis of the applicable price. There are 12 types of services that can be transacted through export and import: Physical input processing services owned by other parties; Maintenance and repair services; Transportation services; Travel services; Construction services; Insurance services and pension funds; Financial services; Intellectual property usage fees; Telecommunications, computer and information services; Other business services; Personal, cultural, and recreational services; and Government services. Service import and export data obtained from Tourism Statistics by BPS and Indonesia's Balance of Payments Statistics produced by BI will be changed with a weighted average transaction rate in order to obtain an estimate of service import and export on the basis of applicable prices.
On the basis of constant prices
We can get an estimate of exports and imports on the basis of constant prices by using the deflationary method. We need to divide exports or imports on the basis of the prevailing price by the corresponding price index. The international trade price index of exports and imports of goods according to the 2-digit HS is a deflator of exports and imports of goods, while the domestic and international consumer price indices are deflators of exports and imports of services. Those are some of the things related to gross domestic product. By reading this article, hopefully you can understand more about the gross domestic product and find out more about its usefulness for the country. This the explanation of the gross domestic product of
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