The term rent can be understood as the gain or the advantage that you get from something. National, for its part, is what is linked to a nation (country, town, community).
The idea of National rent refers to the income generated by the factors of production of a country in a certain period, without counting those services or intermediate goods that are used within the framework of the production process.
The most common method for calculating national income is to add all of the goods and of the services end in a year. Counting intermediate goods is avoided as otherwise they would be counted twice.
By performing the calculation every year, it is possible to estimate whether the economy the country in question grows or, conversely, contracts. In addition, you can know how the income distribution and what is the contribution of each productive sector to the national economy.
It is an instrument of great value to carry out the analysis of the result of the economic process, specifically by measuring the amount of goods and services that a country has used over a year.
When calculating the national income, the expenses of the State in goods and services, but not the funds that are destined to private citizens (such as pensions or retirements). On the other hand, the net exports (derived from total exports minus total imports).
National income can be used for consumption, to investment or to saving. Most of the national income is directed to the consumption of products and services: that is, it is spent. The rest is invested to generate future income or saved without being used for any productive purpose.
There is talk of investment precisely when the saving that represents the national income is used in order to acquire goods that are later applied to production. The consumption, for its part, has the objective of satisfying the diverse needs of the various agents of the economy, and is associated with the concept of “spending”, as mentioned in the previous paragraph.
Another destination that has the portion of the national income that is neither consumed nor invested, is the export to foreign countries. In this case, it is necessary to distinguish between two types of economy: a closed one, in which investing is equivalent to saving, since the saving that is destined to the purchase of capital goods is inevitably transformed into an investment; an open one, which contemplates the export and import of goods, and where the saving and investment are not usually equivalent.
The equation in which the latter case can be seen is the following: (GDP – C) – I = X – M. Let’s see what each variable corresponds to:
* GDP is he Gross domestic product, that is, the magnitude with which we can express the value in money of the production that a country carries out over a given period (usually one year) of products and services;
* C is he Consumption total, which includes both public and private;
* I represents the set of Investment public and private;
* X expresses the value of the total Exports from the country;
* M is the total of Imports carried out throughout the period.
It is also possible to say that the Saving (TO) is he GDP minus the Consumption, for which the previous equation could be expressed as follows: A – I = X – M.