a.National income differs from NNP by excluding indirect business taxes and including business subsidies. b.NNP and national income also differ due to"statistical discrepancy." 4.Personal income is the income that households and noncorporate businesses receive. 5.Disposable personal income is the income that households and noncorporate businesses have left after taxes and other obligations to the government IV.The Components of GDP A.GDP(Y)can be divided into four components:consumption(C).investment(/). govern ent purchases(G),and net exports(NX). Y-C+I+G+NX B.Definition of consumption:spending by households on goods and services,with the exception of purchases of new housing. structures,including houser hold purchases of new housing 1.GDP accounting uses the word"investment"differently from how we use the term in everyday conversation. 2.When a student hears the word"investment,"he or she thinks of financial instruments such a as stocks and bonds 3.In GDP accounting,investment means purchases of investment goods such as capital equipment,inventories,or structures. D.Definition of government purchases:spending on goods and services by local, state,and federal governments. 1.Salaries of government workers are counted as part of the government purchases component of GDP. 2.Transfer payments are not included as part of the government purchases component of GDP 8 8 a. National income differs from NNP by excluding indirect business taxes and including business subsidies. b. NNP and national income also differ due to “statistical discrepancy.” 4. Personal income is the income that households and noncorporate businesses receive. 5. Disposable personal income is the income that households and noncorporate businesses have left after taxes and other obligations to the government. IV. The Components of GDP A. GDP (Y ) can be divided into four components: consumption (C), investment (I), government purchases (G ), and net exports (NX ). B. Definition of consumption: spending by households on goods and services, with the exception of purchases of new housing. C. Definition of investment: spending on capital equipment, inventories, and structures, including household purchases of new housing. 1. GDP accounting uses the word “investment” differently from how we use the term in everyday conversation. 2. When a student hears the word “investment,” he or she thinks of financial instruments such as stocks and bonds. 3. In GDP accounting, investment means purchases of investment goods such as capital equipment, inventories, or structures. D. Definition of government purchases: spending on goods and services by local, state, and federal governments. 1. Salaries of government workers are counted as part of the government purchases component of GDP. 2. Transfer payments are not included as part of the government purchases component of GDP. Y  C  I G  NX