Which of the following is NOT directly included in the calculation of Gross Domestic Product (GDP)?

• A. Business investment in new equipment
• B. Consumer spending on final goods and services
• C. Government purchases of final goods and services
• D. The value of intermediate goods used in production

Answer: (D)

Verified step by step guidance

1. Step 1: Understand what Gross Domestic Product (GDP) measures. GDP is the total market value of all final goods and services produced within a country in a given period.
2. Step 2: Identify the components included in GDP calculation. These are typically: Consumer spending (C), Business investment (I), Government purchases (G), and Net exports (NX).
3. Step 3: Recognize that GDP only includes the value of final goods and services to avoid double counting. Intermediate goods, which are used as inputs in the production of final goods, are excluded.
4. Step 4: Analyze each option: Business investment in new equipment is included as part of investment (I); Consumer spending on final goods and services is included as consumption (C); Government purchases of final goods and services are included as government spending (G).
5. Step 5: Conclude that the value of intermediate goods is NOT directly included in GDP because their value is already embedded in the final goods to prevent double counting.