BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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they represent goods that have never been purchased so they cannot be counted
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their inclusion would understate GDP
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their inclusion would involve double counting
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the premise of the question is incorrect because intermediate goods are directly included in calculating GDP
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Detailed explanation-1: -The reason why these goods are not part of the calculation is that they would be counted twice. So if a confectioner buys sugar to add it to her candy, it can only be counted once-when the candy is sold, rather than when she buys the sugar for production.
Detailed explanation-2: -Statisticians who calculate GDP must avoid the mistake of double counting-counting output more than once as it travels through the stages of production.
Detailed explanation-3: -If intermediate goods and services were included in GDP: the GDP would be overstated. the GDP would then have to be deflated for changes in the price level. nominal GDP would exceed real GDP.
Detailed explanation-4: -GDP is the total value of all goods and services produced in a particular country for a specific period. Suppose the intermediate goods are considered for calculating the GDP. In that case, it will result in the recounting of the value of goods and services as they are already added in the final value.
Detailed explanation-5: -Because intermediate goods are components of finished goods, they’re excluded by economists when calculating a country’s gross domestic product (GDP).