ECONOMICS (CBSE/UGC NET)

ECONOMICS

BUSINESS CYCLES

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
GDP is an important economic measurement because it
A
provides valuable data on unemployment rates.
B
provides valuable data on unemployment rates.
C
measures all final goods and services produced by a country.
D
includes all economic activity, including financial transactions and purchases of used goods.
Explanation: 

Detailed explanation-1: -Definition: GDP is the final value of the goods and services produced within the geographic boundaries of a country during a specified period of time, normally a year. GDP growth rate is an important indicator of the economic performance of a country.

Detailed explanation-2: -GDP is important because it gives information about the size of the economy and how an economy is performing. The growth rate of real GDP is often used as an indicator of the general health of the economy. In broad terms, an increase in real GDP is interpreted as a sign that the economy is doing well.

Detailed explanation-3: -To avoid double counting-adding the value of output to the GDP more than once-GDP counts only final output of goods and services, not the production of intermediate goods or the value of labor in the chain of production. The gap between exports and imports is called the trade balance.

Detailed explanation-4: -Gross domestic product (GDP) is the standard measure of the value added created through the production of goods and services in a country during a certain period. As such, it also measures the income earned from that production, or the total amount spent on final goods and services (less imports).

Detailed explanation-5: -This is because the value of intermediate goods is already reflected in the value of the final goods. Thus, if the value of these goods is also included in the current year, it will lead to the problem of double counting of the value of those goods.

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