REGRESSION ANALYSIS ON NATIONAL INCOME (FROM 1999 – 2015)
CHAPTER ONE
INTRODUCTION
National income is the total monetary value of all commodities and services produced in a country over a specific time period, usually one year.
At this point, you might be wondering how an economy grows. It increases the amount of goods and services produced by an economy. It is not growing if it does not increase yearly; even if it is growing, the rate of growth may not be consistent across years. As a result, determining the state of the economy may be impossible.
In any case, an economy requires an indicator for measuring economic growth; this indicator is the monetary sum of all commodities and services produced in an economy over a specific time period.
Normally, a year.
To calculate a country’s national income, for example, we take a list of the goods and services produced in the country during the year, assign values to them, and add them up. If we can do this year after year, we will be able to compare Nigeria’s activities year after year. Then we will be able to determine whether Nigeria’s economy is growing, declining, or stagnant. It is growing if the national income rises year after year, declining if the national income falls year after year, and stagnant if there is no change in the national income for years.
Gross Domestic Product (GDP) at current prices is used to calculate national income. As a result of this,
It is critical to emphasize the role that prices may play in determining national income. Prices for goods and services fluctuate over time. These modifications may have an impact on any estimates that are made. Considerably. To get a sense of the real physical change in National Income from year to year, the effect of price changes must be subtracted.
National income should be measured in real terms, taking into account price changes. For example, when the economy experiences inflation, prices rise even if the quantity of goods and services remains constant. Assume that in 2000, the total number of units of goods and services sold in Nigeria was 50,000, and that number increased to 50,000 in 2001. Let us also assume that
In 2000, the average price per unit was N10.00, while in 2001, the price was N15,000.
In 2000, Nigeria’s income using GDP as an indicator was 50,000 units X N10.00 = N5000,000. In 2001, Nigeria’s income using GDP as an indicator was 50,000 units X N15.00 = N750,000.
If the two figures were presented to a layperson as the final products of overall estimates for 2000 and 2001, he might conclude that 2001’s national income was higher than 2000’s. This is so financially, but the income for both years is the same. The difference in value was caused by an increase in rice in 2001, despite the fact that the quantities of goods and services were the same in both years.
The same thing can happen be applicable when a country suffers from deflation or depression. As a result, when calculating national income for different years using GDP as an indicator, the effects of price changes must be given their proper weight. In this manner, economic changes can be accurately predicted.
STATEMENT OF PROBLEM/MOTIVATION
As a result of Nigeria’s poor economic situation, relevant information is of great interest to me for investigation to see if a viable economic solution can be discovered.
Nigeria has been classified as a third-world country based on its annual income. It is a simple logic of our existence that if a country’s income is high with a large population, the citizens’ enjoyment will be high, whereas enjoyment will be low with a low national income. On this point, I believe it is very important to analyze Nigeria’s national income and make necessary recommendations for the improvement of the economy for the benefit of the citizenry.
AIMS AND OBJECTIVES
Given Nigeria’s economic situation, the project’s goal is to investigate the relationship between disposable income, savings, and government final expenditure in order to propose solutions to our country’s economic problems.
Following the completion of the regression analysis, the following questions will be answered:
Is there a linear relationship between the listed variables?
How trustworthy is our regression coefficient?
Can we forecast the value of the dependent variable in the future?
How trustworthy will our estimate be?
SCOPE OF THE STUDY
The study focuses on “National Income, Savings, and Government Final Consumption Expenditure” from 1998 to 2003.
The raw data used are primary data collected by the Federal Office of Statistics and the Federal Ministry of Finance. The data is collected as primary data by the federal office of statistics and used as secondary data in this project focused on national accounts. Gross Domestic Product (GDP), final consumption expenditure, exports, and imports are some of the National Accounts Aggregates.
National Accounts data presents a systematic record of economic transactions and demonstrates the relationship between the various components of the economy. Economic transactions encompass all of an entity’s activities (Household, government, firm, financial institution)
that are economic in nature (production, distribution of consumption, savings, and foreign exchange transactions). These economic transactions of all the entities are combined and presented in order to inform of account.
The following data were gathered for analysis in this study:
The use of disposable income as a dependent variable.
Savings as an independent variable
Another independent variable is government final consumption expenditure.
SIGNIFICANCE OF THE STUDY
The study will aid in understanding the state of the Nigerian economy. The knowledge of the status will assist in making necessary recommendations to revitalize the country’s poor economic condition for a better future.
The study will also pave the way for future research.
DEFINITION OF CONCEPTS
Gross Domestic Product (GDP): The total monetary value of all locally produced goods and services. It excludes international transactions. GDP does not account for capital depreciation.
Gross National Product (GNP): This is the total monetary value of all final goods and services produced by nationals in a given period at current market prices. It includes net income from abroad in respect of the country’s nationals, excluding capital depreciation.
National Domestic Product (NDP): The total value of all goods and services produced in a country over a given time period. It excludes the value of net earnings and foreign income. A provision is made for capital depreciation.
Net
National Product (NNP): The monetary value of all goods and services produced within a country over a given time period. It includes net income and earnings from abroad, as well as provisions for capital depreciation replacement.
Disposable Income (DPI): This is the amount of money available to the private sector each year after depreciation of capital, all taxes, and all net profits made by firms but not distributed as divided are added to the disposable and transfer payments are subtracted. The result is the gross national product.
Net Economic Welfare (NEW): This examines the factors that are not taken into account when calculating the Gross National Product (GNP). Such factors as social cost (9pollution) and leisure time tend to remove the net economic welfare.
product (GNP) (GNP). A country’s GNP may be very high, but it may come at a high social cost, such as pollution, rising crime, and so on.
Income per capita (PCI) This is the gross domestic product divided by the country’s population. Once the population and GDP are known, per capita income can be calculated. As a result, PCI = GDP.
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