Glossary of Terms by tyndale


									Glossary of Terms

The vocabulary of national income ac-                       Benchmarking
counting has been developed and refined
                                               The practice of adjusting a series of num-
considerably over the years. The defini-
                      1                        bers to match either the total or
tions in this glossary are consistent with
                                               proportions of another series of numbers.
standards established by Statistics Can-
                                               BCEA totals are often benchmarked to
ada and are based on international
                                               Statistics Canada totals.
conventions set by the United Nations in
1968. In 1993, a consortium of the United                     Book value
Nations, the Commission of the European
                                               The value of inventories in the reporting
Community, the Organisation for Eco-
nomic Cooperation and Development, the
International Monetary Fund, and the                       Business sector
World Bank, published a joint report with
suggested improvements to the defini-          All transactors who produce goods and
tions. These will be adopted by Statistics     services for sale at a price that is intended
Canada in the next set of historical revi-     to cover the cost of production. Includes
sions to the System of National Accounts,      corporations, unincorporated business
scheduled to be published in 1997.             enterprises, independent professional
                                               practitioners, and government business
                                               enterprises that operate on a for-profit ba-
             Adjusting entry                   sis.
A statistical technique for preserving the                       Capital
growth patterns of consecutive periods
                                               A factor of production comprising all ar-
of data when constant dollar estimates
                                               tificial aids to production, such as
of GDP are made. For instance, if the
                                               machinery and equipment, as well as
base year for the series is 1986, the
                                               buildings and other structures.
new weights are applied from 1986 for-
ward. Previous years' series retain the        Capital consumption allowance (CCA)
weights previously used and are linked
                                               An allowance for the loss of value of
with the new base year. The results are
                                               capital goods over time as a result of
forced to add up using residuals called
                                               aging or use. Also referred to as depre-
adjusting entries.
  Adjustment for grain transactions
                                                           Capital formation
An entry reflecting an estimate of Cana-
                                               See Investment in fixed capital
dian Wheat Board (CWB) payments to
farmers for the current year’s crop, since                 Constant dollars
the CWB’s actual payments are one year
                                               The value of goods or services at prices
behind. The estimate also includes an
                                               prevailing in a specified base year. Es-
adjustment to report changes in grain in-
                                               timates are deflated to remove the
ventories using national accounting
                                               effects of price changes over time so
                                               that they only measure changes in
                Allocator                      quantities produced. Also called "real
A series of numbers used to distribute a
related series, usually to estimate data             Consumer price index (CPI)
at a lower level of aggregation, e.g. na-
                                               A measure of changes in consumer prices
tional series allocated provincially or
                                               obtained by comparing, over time, the
annual series allocated quarterly. May
                                               cost of a basket of commodities, specified
also be used to extrapolate a related
                                               according to purchases made by the tar-
                                               get population in a reference period.

BC STATS: British Columbia Economic Accounts                                              1
Glossary of Terms

          Consumer services                                  Dividends
Services such as rent, recreation, trans-    Income payable and receivable for vari-
portation, personal care and business        ous forms of equity participation in
support that are purchased by the per-       corporate enterprises.
sonal sector.
                                                          Durable goods
Corporate and government business
                                             Items which have an expected lifetime
         enterprise sector
                                             of well over one year and are relatively
A sector including all legally incorp-       costly. Examples: automobiles, major
orated entities, whether they are pri-       appliances.
vately or publicly owned.
                                                      Expenditure Account
    Corporation profits before taxes
                                             An economic account which records
Net earnings from economic activity of       total spending on goods and services by
legally-defined corporations. Profits are    persons, businesses, governments and
measured after deducting the cost of         non-residents. The other two accounts
depreciation in the current period.          in the BCEA are the Income Account
                                             and the Industry Account.
            Current dollars
                                               Exports and imports of goods and
The value of goods or services in the
dollars of the period in which it was pro-
duced i.e. unadjusted for inflation. See     Current receipts from exports or imports of
also constant dollars and deflation.         merchandise, freight and shipping credits
                                             earned on account, travel expenditures of
                                             non-residents in British Columbia, and
See Price Index                              other receipts from services rendered to
                                                            Factor cost
The process of producing constant dol-
lar estimates using appropriate price        A value which includes those costs
indexes.                                     borne by the producer of a good or
                                             service but excludes indirect taxes net
                                             of subsidies. Indirect taxes are usually
See Capital Consumption Allowance            passed on to the consumer, and are not
                                             viewed as a cost of production.
       Derived book value (DBV)
                                                  Factor of production; factors
DBV or the derived book value is the
capital gain accruing from price changes     Productive agents that, when combined,
in inventories which are recorded in         create economic activity. Traditionally
business ledgers and which are subse-        there are three factors of production:
quently removed: the inventory valu-         land, labour, and capital.
ation adjustment.
                                                       Final demand matrix
              Direct taxes
                                             See Input-output accounts
Current transfers to government from
                                                     Final domestic demand
persons, unincorporated businesses,
corporations and government business         Total demand for goods and services by
enterprises in the form of taxes levied on   residents of the province. It is equal to the
income from employment, property, hold-      sum of personal expenditure on goods
ing gains or any other source. Personal      and services, government current expen-
direct taxes also include contributions to   diture on goods and services, and
social security programs and government      government and business investment in
pension funds.                               fixed capital.

2                                            BC STATS: British Columbia Economic Accounts
Glossary of Terms

                   GDP                                        Gross; net
See Gross Domestic Product                     In the BCEA, these terms are most often
                                               used in the context of production. Pro-
                                               duction may be expressed on a "gross"
See Gross National Product                     or "net" basis depending upon whether
                                               it is measured before (i.e. "gross of") or
  Government business enterprises
                                               after ("net of") allowances for capital
Government corporations which operate          consumption. Gross and net measures
on a profit or cost recovery basis similar     can also be applied to other concepts
to private enterprises. See also Corpo-        like income and profits, where these
rate and government business enter-            values are measured before or after
prise sector.                                  taxation.
 Government current expenditure on                 Gross domestic product (GDP)
       goods and services
                                               The unduplicated value of production
All current outlays for goods and services     originating within a particular geographi-
by the government sector, covering wages       cal area for a specific time period,
and salaries of government employees,          regardless of the residence of the own-
office supplies and maintenance and re-        ers. Transfers between factors of
pair costs. Also includes defence              production (such as unemployment or
expenditures and an imputation for depre-      other social insurance payments) are
ciation of capital equipment. Government       excluded because they do not represent
spending on capital equipment is ex-           payment for current productive activity.
cluded.                                        GDP can be measured at factor cost or
                                               in market prices, and in current dollars
   Government investment income
                                               or constant dollars. The GDP concept is
Investment income of the government            used in the income, expenditure and
sector including: interest on government-      industry accounts in the BCEA.
held public funds, interest on loans and
                                                   Gross fixed capital formation
advances, royalties, sales of natural re-
source rights, and remittances from            See Investment in Fixed Capital
government business enterprises.
                                                   Gross national product (GNP)
          Government sector
                                               The unduplicated value of production
Federal, provincial and local govern-          originated by residents of a specific
ments and their agencies, including            geographical area, regardless of where
schools and hospitals.                         the production occurs. In the BCEA, the
                                               GNP concept is used only in the per-
     Government sector accounts
                                               sonal income account; all other series
Accounts which outline the sources and         are reported on a GDP basis.
disposition of all income earned by the
                                                        Implicit price indexes
government sector. Includes transfers
paid to and received from the personal,        Variable-weighted indexes which are a
business and non-resident sectors, cur-        by-product of the deflation procedure
rent and capital expenditures made by          and are obtained by dividing the value
governments, and income originating            series (measured at current prices) by
from current production, such as income        the volume series (measured at con-
and other taxes.                               stant prices).
                                               "Estimated" or "approximated".

BC STATS: British Columbia Economic Accounts                                           3
Glossary of Terms

                 Income                       value added by that industry to the
                                              economy as a whole.
Earnings of factors of production from
the current production of goods and                 Interest and miscellaneous
services. See also Income Account.                      investment income
             Income Account                   Personal earnings in the form of bond,
                                              mortgage, deposit and imputed interest
An economic account which records
                                              and other investment income, such as
earned income or income received in-
                                              the yield on Treasury Bills, government
kind by all sectors from a variety of
                                              annuities, royalties, etc. Also includes
sources. The two other accounts in the
                                              investment income of life insurance
BCEA are the Expenditure Account and
                                              companies, fraternal societies, trusteed
the Industry Account.
                                              pension plans and mutual non-life in-
              Indirect taxes                  surance companies, interest receipts of
                                              persons from non-residents, and gov-
All taxes representing a business cost that
                                              ernment investment income. Does not
are likely to be reflected in the market
                                              include interest on public or consumer
price paid by the purchaser. Includes the
                                              debt, which are viewed as transfers
GST, provincial social service taxes, cus-
                                              between factors of production.
toms duties, customs and excise duties,
natural resource taxes, property taxes,             Interest on consumer debt
and profits of liquor boards.
                                              Interest payments to the corporate and
            Industry Account                  government business enterprise sector
                                              which are incurred by persons to fi-
An economic account which records the
                                              nance purchases of goods and services.
value added by individual industries to
the total value of British Columbia's pro-          Interest on the public debt
ductive activity.
                                              Interest payments made on funds bor-
    Industry product price index (IPPI)       rowed by the government sector.
A measure of price changes for major          Inventory valuation adjustment (IVA)
commodities sold by Canadian manu-
                                              Difference between the change in in-
                                              ventory book values and the value of
             In-kind income                   physical change in inventories. Re-
                                              moved from corporate profits before
Non-monetary income, such as the
                                              taxes and other income aggregates to
value of farm produce consumed by a
                                              eliminate any gains or losses arising
farmer or the imputed value of free
                                              from price changes on inventories.
lodging provided by employers.
                                                    Investment in fixed capital
          Input-output accounts
                                              Expenditures by business and govern-
A system of measuring GDP in an econ-
                                              ment on durable assets and on building
omy which focuses on the commodity
                                              and engineering construction of all types
transactions between industries. Tables
                                              except for government expenditure on
show the total output, or "make", of in-
                                              defence construction and equipment. It
dustries and what they use from other
                                              also includes residential construction by
industries. As well, input-output analysis
                                              individuals, alterations and improve-
shows the flow of commodities to final
                                              ments made to the stock of buildings
demand, or consumer, sectors and the
                                              and transfer costs paid on the sale of
cost of primary inputs to industries.
                                              existing fixed assets.
When "what is used" by an industry is
subtracted from "what is made" by an
industry, a measure is obtained of the

4                                             BC STATS: British Columbia Economic Accounts
Glossary of Terms

             Labour income                     Net income of non-farm unincor-po-
                                                        rated business
Wages and salaries, supplementary la-
bour income, and military pay and              Earnings of unincorporated proprietors,
allowances.                                    except farm operators, from their busi-
                                               nesses. It also includes the net income
              Make matrix
                                               of independent professional practitio-
See Input-output accounts                      ners such as doctors and dentists, and
                                               rental income from residential and non-
              Market price
                                               residential property.
Prices actually paid by the purchaser,
                                                         Non-durable goods
including the net effect of all indirect
taxes and subsidies. See also factor           Goods which can be used only once,
cost.                                          such as food or gasoline.
      Merchandise trade balance                   Non-merchandise trade balance
The difference between exports and im-         The difference between receipts and
ports of goods.                                payments arising out of transactions in
                                               services between residents and non-
     Military pay and allowances
                                               residents. Included are travel expendi-
Payments to members of the Armed               tures, freight and shipping charges and
Forces serving in British Columbia. In-        business, government and other serv-
cludes military pay and various                ices which are traded or included in the
allowances and benefits. Veterans' al-         cost of exports and imports.
lowances are excluded because they
                                                        Non-business sector
represent a transfer payment.
                                               In the Industry Account, industries that
  Miscellaneous investment income
                                               do not operate on a for-profit basis.
See Interest and miscellaneous invest-         Major industries in the non-business
ment income                                    sector are public administration and
                                               defence, as well as some health and
                                               education services.
See Gross; net
                                                   Non-residential construction
 Net domestic income at factor cost
                                               New industrial, commercial and institu-
The sum of all incomes arising from            tional building construction, as well as
productive activities in a given area at a     additions, major renovations, conversions
given time, whether owned by residents         and alterations. Includes both contract
or non-residents. Differs from GDP at          work and work done by a firm's own la-
factor cost in that it excludes capital        bour force, as well as the costs of site
consumption allowances.                        preparation and land improvement.
 Net income of farm operators from                         Non-residents
          farm production
                                               All transactors who normally reside out-
An aggregate which includes cash re-           side British Columbia. Businesses are
ceipts from the sale of farm products          "residents" of the province if their pro-
and supplementary farm payments, less          ductive activity takes place in British
farm expenses and capital consumption          Columbia, regardless of the residency of
allowances. It also includes the imputed       their owners.
value of farm products consumed by
farm families, the value of the physical
change in farm inventories, and accrued        See production
earnings from the Canadian Wheat

BC STATS: British Columbia Economic Accounts                                          5
Glossary of Terms

     Personal disposable income             BCEA are the consumer price index
                                            (CPI) and the industry product price in-
Personal income left after payment of
                                            dex (IPPI).
direct taxes and various fees, such as
medical insurance premiums, to gov-                        Production
                                            Goods and services produced by the
Personal expenditures on goods and          economy and exchanged for money, as
             services                       well as income in kind. Includes most
                                            goods and services produced by the per-
All purchases by the personal sector of
                                            sonal, business and government sectors.
durable, semi-durable, and non-durable
                                            The fees, commissions and profit gained
goods, as well as services.
                                            from the sale of used goods (including
           Personal income                  housing) are included in production, but
                                            the value of the goods is not. Used goods
All income received by persons, both as
                                            have already been included in the econ-
earnings and transfers. Includes: wages
                                            omy’s output in the year in which they
and salaries, supplementary labour in-
                                            were produced. Imported goods are ex-
come, military pay and allowances, net
                                            cluded from production, as are illegal
income of farm operators, net income of
                                            activities. Also referred to as output.
non-farm unincorporated businesses,
dividends, interest and miscellaneous                        Profits
investment income, and all transfer
                                            See Corporation profits before taxes
payments (such as unemployment and
other social insurance benefits) received                 Real dollars
by persons. Personal income is calcu-
                                            See Constant dollars
lated on a GNP basis.
      Personal Income Account
                                            Payment for rental housing or for the
An account which outlines the sources
                                            use of a factor of production.
and disposition of all income earned by
the personal sector. It is expressed on a          Residential construction
GNP basis.
                                            All expenditures for new housing including
           Personal savings                 single dwellings, multiple-unit dwellings
                                            and garages, major improvements, and
Personal savings is what is left of per-
                                            alterations, and transfer costs, such as
sonal disposable income after deducting
                                            legal fees and real estate commissions.
personal expenditures on consumer
goods and services, current transfers                       Royalties
from person to corporations, and current
                                            Income from legal property, such as the
transfers from persons to non-residents.
                                            use of natural resources, or patented or
           Personal sector                  copyrighted material.
Persons, households, unincorporated                          Savings
businesses and societies of individuals
                                            See Personal savings
such as non-profit organizations. Also
included are universities, private pen-              Seasonal adjustment
sion funds and the investment income of
                                            The process of "smoothing out" monthly
life insurance companies.
                                            or quarterly time series to remove the
              Price index                   effect of regular, or "seasonal" cycles.
A number that shows the average per-
centage change that has occurred in a
group of prices over a period of time.
Examples of price indexes used in the

6                                           BC STATS: British Columbia Economic Accounts
Glossary of Terms

                 Sectors                          Transfers to business from
See Transactors                                              persons
          Semi-durable goods                     Interest on consumer debt less
                                                  administrative charges.
Goods which can be used on multiple
occasions, but which have an expected             Transfers to government from
lifetime of approximately one year. Ex-
amples: clothing, toys.
        Statistical discrepancy                  Direct taxes and other current
                                                 transfers to government such as
Difference between GDP as calculated in          medical insurance premiums.
the Income Account and GDP as calcu-
lated in the Expenditure Account. Reflects          Transfers to non-residents
imperfections in the basic statistics, flaws              from persons
in the estimation techniques and discrep-
ancies in the timing with which the income       Personal remittances to non-
and expenditure data are recorded. The            resident governments, corpora-
statistical discrepancy is allocated evenly       tions and persons.
between the Income and Expenditure Ac-
counts.                                             Transfers to persons from
                                                 Charitable contributions from cor-
All transfers to business by government          porations to persons and unincor-
toward current costs of production.              porated business, plus bad debt
    Supplementary labour income                  allowances charged by busi-
Contributions by employers, on behalf of         nesses for non-remitting personal
their employees, to pension funds,               accounts.
health and other casualty insurance, life
insurance, welfare funds, unemployment              Transfers to persons from
insurance and workers' compensation.                       government
               Transactors                       Direct payments from governments
                                                 to persons, such as family and
The economic agents who engage in
                                                 youth allowances, unemployment
the production, purchase and sale of
goods and services and the payment               insurance benefits, general wel-
and receipt of factor incomes and                fare payments, etc.
transfers. The transactors in the BCEA
are the personal sector, the corporate              Transfers to persons from
and government business enterprise                        non-residents
sector, the non-business or non-profit           Pensions paid by foreign gov-
sector, the government sector, and the            ernments plus cash payments
non-resident sector.
                                                  made by relatives or friends liv-
                Transfers                         ing out-side British Columbia.
                                                 Unincorporated business income
Payments made by one economic sec-
tor to another for which there is not a        See Net income of non-farm unincorpo-
commensurate exchange of services.             rated business
This includes:

BC STATS: British Columbia Economic Accounts                                          7
Glossary of Terms

                Use matrix                                                Wages and salaries
See Input-output accounts                                    All earnings from employment of British
                                                             Columbia residents, whether they are
               Value added
                                                             paid in cash or in kind. Calculated be-
See Input-output accounts                                    fore deductions for income tax and all
                                                             social insurance schemes. Includes
      Value of physical change
                                                             military pay and allowances, commis-
           in inventories
                                                             sions, tips and bonuses, directors' fees,
Change in the physical volume of in-                         and taxable allowances. In the income
ventories, valued at the average market                      account, wages and salaries are re-
price of the period.                                         ported on a GDP basis. In the personal
                                                             income account, they are reported on a
                                                             GNP basis.

       United Nations. Department of Economic and Social Affairs. A System of National Accounts. (Cat. E.69.XVII.
       3). New York, 1968.

       Commission of the European Communities, International Monetary Fund, Organisation for Economic Co-
       operation Development, United Nations and World Bank. System of National Accounts 1993 (Cat.
       E.94.XVII.4). New York, 1993.

       Statistics Canada. Gross National Product Division. National Income and Expenditure Accounts : Volume 3 :
       Definitions, Concepts, Sources, Methods. Ottawa, 1975.

                        . System of National Accounts Branch. A User's Guide to the Canadian System of National
       Accounts. (Cat. 13-589E). Ottawa, 1989.

                        . Income and Expenditure Accounts Division. Provincial Economic Accounts : Annual
       Estimates, 1984-1989. (Cat. 13-213). Ottawa, 1991.
                        . Income and Expenditure Accounts Division. Guide to the Income and Expenditure
       Accounts. (Cat. 13-603E, No. 1). Ottawa, 1990;

8                                                            BC STATS: British Columbia Economic Accounts

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