Question

Discuss an instance in which a component of GDP is NOT calculated by market value.

Answer 1

A very good example of this would be inventory. This would be included in GDP but the value of inventory will be valued on either a LIFO or a FIFO basis.This will be thus based on prices of the different batches of stock that have come in and hence wont be at the prevailing market price. But this will still be a part of GDP. The black economy would be another example that is usually not included in GDP and even if it is it wont be at market price as there is no market for it legally.