Source: U.S. Bureau of Economic Analysis, National Income and ProductNational Income and Product Accounts of the United States, 1929-97, vol. 2, forthcoming;and Survey of Current Business, May 2000.

http://www.bea.doc.gov/bea/dn1.htm

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Gross domestic product (GDP), the featured measure of U.S. output, is the market value of the goods and services produced bylabor and property located in the United States. Because the labor and property are located in the United States, the suppliers (thatis, the workers and, for property, the owners) may be either U.S. residents or residents of the rest of the world.

Gross national product (GNP) is the market value of the goods and services produced by labor and property supplied by U.S.residents. Because the labor and property are supplied by U.S. residents, they may be located either in the UnitedStates or abroad. The difference between GDP and GNP is net receipts of factor income from the rest of the world. These netreceipts represent income from the goods and services produced abroad using the labor and property supplied by U.S. residentsless payments to the rest of the world for the goods and services produced in the United States using the labor and propertysupplied by foreign residents. Factor incomes are measured as compensation of employees, corporate profits (dividends, earningsof unincorporated affiliates, and reinvested earnings of incorporated affiliates), and interest.

Personal income is the income received by persons from all sourcesthat is, from participation in production, from bothgovernment and business transfer payments, and from government interest (which is treated like a transfer payment). "Persons"consists of individuals, nonprofit institutions that primarily serve individuals, private noninsured welfare funds, and private trustfunds. Personal income is calculated as the sum of wage and salary disbursements, other labor income, proprietors' income withinventory valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment, personaldividend income, personal interest income, and transfer payments to persons, less personal contributions for social insurance.

Disposable personal income is personal income less personal tax and nontax payments. It is the income available to persons forspending or saving.

National income and product account

GDP is measured as the sum of personal consumption expenditures, gross private domestic investment (including change inbusiness inventories and before deduction of charges for CFC), net exports of goods and services (exports less imports), andgovernment consumption expenditures and gross investment. GDP excludes intermediate purchases of goods and services bybusiness.

Personal consumption expenditures is goods and services purchased by persons resident in the United States. Personalconsumption expenditures (PCE) consists mainly of purchases of new goods and of services by individuals from business. Inaddition, PCE includes purchases of new goods and of services by nonprofit institutions (including compensation of employees),net purchases of used goods by individuals and nonprofit institutions, and purchases abroad of goods and services by U.S.residents.PCE also includes purchases for certain goods and services provided by government agenciesprimarily tuitionpayments for higher education, charges for medical care, and charges for water and sanitary services. Finally, PCE includes imputedpurchases that keep PCE invariant to changes in the way that certain activities are carried outfor example, whether housing isrented or owned, whether financial services are explicitly charged, or whether employees are paid in cash or in kind.

Chained-dollar measures

BEA also prepares measures of real GDP and its components in a dollar-denominated form, designated "chained (1992) dollarestimates." For GDP and most other series, these estimates are computed by multiplying the 1996 current-dollar value by acorresponding quantity index number and then dividing by 100.

For analyses of changes over time in an aggregate or in a component, the percentage changes calculated from the chained-dollarestimates and from the chain-type quantity indexes are the same; any differences will be small and due to rounding. However,because the relative prices used as weights for any period other than the base period differ from those used for the base period, thechained-dollar values for the detailed GDP components do not necessarily sum to the chained-dollar estimate of GDP or to anyintermediate aggregate. A measure of the extent of such differences is provided in most chained-dollar tables by a "residual" line,which indicates the difference between GDP (or an other major aggregate) and the sum of the most detailed components in the table.

For periods close to the base year, when there usually has not been much change in the relative prices that are used as the weightsfor the chain-type index, the residuals tend to be small, and the chained (1996) dollar estimates can be used to approximate thecontributions to growth and to aggregate the detailed estimates.

As one moves further from the base year, the residual tends to become larger, and the chained-dollar estimates become less usefulfor analyses of contributions to growth. In general, the use of chained-dollar estimates to calculate component shares or componentcontributions to real growth may be misleading for periods away from the base year. In particular, for components for which relativeprices are changing rapidly, these calculations may be misleading even just a few years from the base year.

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