1.3 What is national accounting?

The national accounts are a broad and comprehensive statistical system designed to describe the national economy and how it works. It uses data on economic activities and relevant classifications to provide a systematic picture of the structure of, and changes in, the national economy.

The national accounts aim to describe the economic activity (i.e. activity that can be measured in money terms) of all units in the national economy. This exclusive concern with activities that are measurable in money terms is at once a strength and a weakness of national accounting. It is a strength in the sense that most of the data are based on existing sources rather than tentative estimates, which makes for better historical and international comparability. It is a weakness in the sense that especially in countries where housework is a major part of everyday life, the picture drawn by the national accounts of the structure and operation of the national economy remains incomplete. This is because certain types of housework are not included in the national accounts.

One aspect of national accounting is macroeconomic analysis, where the concern is with larger groups of similar economic units rather than with individual units. In the latter case, if the focus is on one business enterprise, for example, we talk about microeconomic analysis.

The national accounts register the supply and demand of goods and services. Supply consists of goods and services produced domestically (output) and those imported from other countries (imports). The demand components (intermediate consumption, private consumption, public consumption, investment, exports and change in inventories) indicate the destination of goods and services from the Finnish market.

Using the demand and supply components, we can examine the structures of the goods and services economy and follow the changes taking place in those structures. Furthermore, the national accounts describe the economic situation and trends in different sectors, providing information on such key aspects as general government surplus/deficit and household disposable income.

The national accounts is a broad system which can take shorter and longer term views on different aspects of the economy and which can look at the same aspects from different vantage-points. One of the key basic principles of the national accounts is to facilitate historical and international comparisons: they allow us to see how the structure of a national economy has changed over time and to compare different national economies for any particular year.

Examples