What is insititutional unit and give examples, in national account
In the context of national accounts, an institutional unit refers to an economic entity that can be either an individual person or a group of individuals acting together, a corporation, a nonprofit organization, or a government unit. These units are recognized as having separate legal or social responsibilities and accounting boundaries.
Examples of institutional units include:
1. Households: This refers to groups of people living together and sharing income and expenses, such as a family. Households are considered institutional units because they have separate economic decision-making capabilities and are responsible for the production and consumption of goods and services within the economy.
2. Non-financial corporations: These are corporations engaged in the production of goods and services for sale in the market. They have their own separate legal identities and are responsible for producing output, employing workers, and generating profits.
3. Financial corporations: These institutions include banks, insurance companies, and other financial intermediaries that provide various financial services to individuals and businesses. These units play a crucial role in mobilizing savings, providing credit, and facilitating financial transactions within the economy.
4. Government units: These include various levels of government, such as central, regional, and local governments. They are responsible for providing public goods and services, regulating economic activities, and implementing fiscal and monetary policies.
5. Nonprofit institutions: These include organizations that are not driven by profit motives and engage in activities to promote social, cultural, or educational causes. Examples include charities, universities, and hospitals.
In summary, institutional units in national accounts encompass various economic entities, including households, corporations, governments, and nonprofit organizations. They are considered separate economic decision-making units with distinct legal and accounting identities.
List components of gross capital formation
Gross capital formation refers to the total value of new investments made in fixed assets within an economy during a specific period of time. These investments contribute to increasing the country's capital stock and can include various components. The components of gross capital formation typically include:
1. Gross fixed capital formation: This refers to investments in the creation, acquisition, or improvement of physical assets that are used in production processes or are intended to last for more than one year. Examples include buildings, machinery, vehicles, equipment, and infrastructure.
2. Changes in inventories: This component captures the value of changes in the levels of inventories held by businesses during a specific period. It represents the difference between the value of goods produced and the value of goods consumed or sold. An increase in inventories contributes to gross capital formation, while a decrease would subtract from it.
3. Acquisitions less disposals of valuables: This component includes investments in non-produced, non-financial assets with high value relative to their volume or weight, such as art, antiques, and jewelry. These assets are typically held for purposes of storing value or as luxury items.
4. Net purchases of land: This component includes the net value of land purchases made during the period, accounting for any sales or disposals of land.
5. Net purchases of intangible assets: This component represents net investments in intangible assets like patents, copyrights, trademarks, and software. It captures the value of new additions to these assets, less any disposals or sales.
It is important to note that gross capital formation does not include replacement or maintenance investments, as it focuses solely on new investments made in fixed assets.
In the context of national accounts, an institutional unit refers to an economic entity that has the capacity to own goods or assets and engage in economic activities, either as a producer or a consumer. Institutional units are important for the analysis and measurement of economic activities within an economy.
There are various types of institutional units, including:
1. Non-Financial Corporations: These are entities engaged in production or distribution of goods and services. Examples include manufacturing companies, retail stores, and construction firms.
2. Financial Corporations: These are institutions that facilitate financial transactions and provide financial services. Examples include banks, insurance companies, and investment firms.
3. General Government: This includes central, state, and local government institutions, as well as social security schemes. It covers public administration, defense, education, healthcare, and other government-related activities.
4. Non-Profit Institutions Serving Households (NPISH): These are organizations that primarily serve households and communities, without aiming to generate profits. Examples include charities, educational institutions, and religious organizations.
5. Households: These are regarded as institutional units as they engage in economic activities, such as consumption, savings, and investments.
6. Rest of the World: This includes the external sector, such as foreign entities and international organizations with economic activities within a specific country.
It's important to note that institutional units are distinct from sectors in the national accounts. Sectors group together similar types of institutional units based on their primary economic activity or function, such as the financial sector or the government sector.
In national accounts, an institutional unit refers to an entity or organization that has economic and financial autonomy in the production of goods and services or in the use of income and wealth. In simpler terms, institutional units are the different entities or groups that participate in economic activities.
There are various types of institutional units, and some common examples include:
1. Households: These are groups of people living together and sharing resources. Household units are considered to be the basic consuming and saving units in an economy.
2. Corporations and Companies: Business enterprises, whether they are owned by individuals, partnerships, or shareholders, are considered institutional units. This includes both small businesses and large multinational corporations.
3. Government: The government sector, which includes agencies, ministries, and public institutions, is also considered an institutional unit. It includes both central and local governments.
4. Non-profit institutions serving households (NPISH): These are organizations that provide goods, services, or other benefits to households, such as charities, foundations, and religious institutions.
5. Financial Institutions: Banks, credit unions, insurance companies, and other financial intermediaries are also considered institutional units.
6. Foreign Permanent Establishments: In national accounts, foreign branches or subsidiaries of corporations that operate in another country are recognized as institutional units.
It's important to note that institutional units are defined based on their economic and financial autonomy rather than their legal form. For example, even if a small business is legally registered as a sole proprietorship, if it operates as an independent economic entity, it is considered an institutional unit.