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Definitions N

National Income and Product Accounts

The US National Income and Product Accounts, calculated by the Bureau of Economic Analysis, is a double entry accounting system of all US production of goods and services, and the income that results.

From the NIPA Handbook:

“The NIPAs display the value and composition of national output and the distributions of incomes generated in its production. … The NIPAs provide information to help answer three basic questions. First, what is the output of the economy—its size, its composition, and its use? Second, what are the sources and uses of national income? Third, what are the sources of saving, which provides for investment in future production? … The NIPAs feature some of the most closely watched economic statistics that influence the decisions made by government officials, business persons, and households. Foremost among these estimates is GDP, the most widely recognized measure of the nation’s production. In particular, the quarterly estimates of inflation-adjusted GDP provide the most comprehensive picture of current economic conditions in the United States. Other key NIPA estimates include the monthly estimates of personal income and outlays, which provide current information on consumer income, spending, and saving, and the quarterly estimates of corporate profits, which provide an economic measure of U.S. corporate financial performance.”

See also National income and product accounts background.

Negative equity

In real estate, the condition of owing more on the loan(s) than the house is worth.

From John Dean and Company:

“Equity: The sum of the market value of your property less the mortgage - if your mortgage is smaller than the market value of your home, the amount is referred to as equity. If larger, the difference is known as negative equity. …

Negative Equity: The shortfall between the value of a Borrower's property and the total amount secured on it i.e. when the borrower owes more than the house is worth.”

Net present value

The present value of a future obligation is the amount you must invest today to be sure you can meet that obligation. The present value of a future benefit is the amount you would be willing to accept today in its stead, so that, investing the same, you think you could come to an amount equivalent to the foregone future benefit. The investment rate of return you assume in thinking about either of these problems is called the discount rate.

Many financial undertakings entail future payments and receipts; it is a common activity to calculate some present value of each of these and assign, then, a net present value to the whole undertaking.

Here is a simple example. If there is a bill for $1000 that you will need to pay 30 years in the future, you need to set aside something less than $1000 now, because you can invest the money and earn something. For example, if you assume you can earn 4% per year, you only need to set aside $309 now. If you assume you can earn 8%, you only need to set aside $99 now. In standard terminology, if you assume a discount rate of 4%, the net present value of your $1000 obligation is $309, and with a discount rate of 8%, the NPV is $99.

From Investorwords:

“In finance, the net present value (NPV) is defined as “the present value of an investment’s future net cash flows minus the initial investment.””

From a South African government glossary:

“Today's value of future costs and benefits.”

From Deardorff's Glossary of International Economics:

“The value today of a stream of payments and/or receipts over time in the future and/or the past, converted to the present using an interest rate. If Xt is the amount in period t and r the interest rate, then present value at time t=0 is V = St (Xt)/(1+r)t. ”

And from Wikipedia :

“Net present value (NPV) or net present worth (NPW) is defined as the total present value (PV) of a time series of cash flows. It is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely throughout economics, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met.”

For an NPV calculator, see Business Analysis Made Easy.

Normal cost

From the treasury of the state of NJ:

“The employers' annual normal cost represents the present value of benefits that have accrued on behalf of the members during the valuation year.”

Nominal

In finance and economics, “nominal” means not adjusted for inflation.

North American Industry Classification System

From the NAICS home page:

The North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.

Precise definitions for each sector and subsector may be found either interactively or through pdf downloads at main page for the latest revision, the 2007 NAICS.