Which of the following statements best describes how economists calculate GDP?

• A. GDP is calculated by summing the market value of all final goods and services produced within a country during a specific period.
• B. GDP is calculated by adding the total value of all intermediate goods produced in a country.
• C. GDP is calculated by subtracting government spending from total national income.
• D. GDP is calculated by counting only the exports of a country.

Answer: (A)

Verified step by step guidance

1. Understand that GDP (Gross Domestic Product) measures the total economic output of a country within a specific time period, usually a year or a quarter.
2. Recognize that GDP includes only the market value of final goods and services to avoid double counting, since intermediate goods are used to produce final goods.
3. Recall the three main approaches to calculating GDP: the production (or output) approach, the income approach, and the expenditure approach, all of which should yield the same GDP value.
4. Focus on the production approach, which sums the market value of all final goods and services produced within the country during the period, excluding intermediate goods.
5. Conclude that the correct description of GDP calculation is summing the market value of all final goods and services produced within a country during a specific period.