Question

While estimating Gross Domestic Product, the monetary value of only final goods are considered because,................

• A. its immobility, the active economic flow is ended.
• B. of the issues of double counting
• C. the value added at each stage of the production process is included
• D. None of these

Answer 1

Answer:

B. of the issues of double counting

• Double Counting: The primary reason for considering only final goods and services when calculating the Gross Domestic Product (GDP) is to avoid the problem of double counting. • Intermediate Goods: Intermediate goods are those goods that are used as inputs in the production of other goods and services. For instance, the flour used by a baker to make bread is an intermediate good. • Value Chain: If the value of intermediate goods were included in GDP along with the value of the final goods, their value would be counted multiple times. The value of the flour would be counted when it's sold to the baker, and then the value of the bread (which already includes the cost of the flour) would be counted again. This would artificially inflate the GDP figure.