Why do gross domestic product (GDP) calculations count only final goods and services?

• A. To avoid double counting, since intermediate goods are already included in the value of final goods.
• B. To ensure that only goods exported to other countries are measured.
• C. Because final goods and services are always more expensive than intermediate goods.
• D. Because intermediate goods are not produced within the country.

Answer: (A)

Verified step by step guidance

1. Understand the definition of GDP: Gross Domestic Product measures the total market value of all final goods and services produced within a country during a specific period.
2. Recognize the difference between final goods and intermediate goods: Final goods are products sold to the end user, while intermediate goods are used as inputs to produce final goods.
3. Identify why counting only final goods is important: If intermediate goods were counted separately along with final goods, their value would be included multiple times, leading to double counting.
4. Explain double counting: Since the value of intermediate goods is embedded in the price of final goods, including both would inflate GDP artificially.
5. Conclude that GDP calculations count only final goods and services to accurately reflect the true economic output without overestimating production.