Question

When GDP statistics are calculated, care must be taken to avoid double counting. Describe the two major categories of goods are excluded to prevent double counting?

Answer 1

- GDP (gross domestic product) takes into consideration all the final products and services which are produced in a nation annually. Therefore, in order to avoid double counting, the sale of used goods for example, used cars, are not included in the computation of gross domestic product as they have already been counted at the time of manufacture. Therefore, their resale is not counted.

- In order to avoid double counting, GDP only includes the final or finished goods, which means that the raw materials required for the production of those goods are not counted. If we include both in the computation of the GDP, then there will be a problem of double counting. The raw materials (intermediate products) are not included as their value is already included in the price of the final goods purchased by the consumers.