GDP includes only final goods and services, while excluding intermediate goods. Which statement best reflects this principle?

GDP includes only final goods and services, while excluding intermediate goods. Which statement best reflects this principle?

• A. GDP includes only final goods and services
• B. GDP includes only intermediate goods
• C. GDP includes both final and intermediate goods equally
• D. GDP counts only final goods to avoid double counting

Answer: (D)

GDP measures the value of what an economy produces by counting only final goods and services. This approach avoids double counting because intermediate goods—inputs used to make other goods—have their value embedded in the final product’s price. For example, counting both tires sold to a car maker and the finished car would add the same value twice; by focusing on final goods, or by summing the value added at each production stage, GDP reflects the true market value of production without duplication. So the statement that GDP counts only final goods to avoid double counting best captures this principle.

GDP measures the value of what an economy produces by counting only final goods and services. This approach avoids double counting because intermediate goods—inputs used to make other goods—have their value embedded in the final product’s price. For example, counting both tires sold to a car maker and the finished car would add the same value twice; by focusing on final goods, or by summing the value added at each production stage, GDP reflects the true market value of production without duplication. So the statement that GDP counts only final goods to avoid double counting best captures this principle.