Question

The Bureau of Economic Analysis excludes from its calculation of gross domestic product most of the goods produced that are not sold in markets because

a. there is no satisfactory way to measure their value.

b. their value is implicitly included in the prices of marketed goods.

c. this would be inappropriate for an exchange economy.

d. their production has no real costs.

e. they do not contribute to national welfare.

Answer 1

The GDP is ascertained through the value added method that includes the value of raw materials at each stage of production. Thus, even if the final value of the good that is not sold is not included, the GDP will still be accurate since the value added at each step of producing the good has been included. This is done to avoid the problem of double counting in the assessment of the country's GDP.

That is, the goods that are not sold are still implicitly included in GDP through value addition approach.

Therefore, the correct answer is option b. their value is implicitly included in the prices of marketed goods.