What is the main reason for excluding intermediate goods while measuring national income in macroeconomics?
Answer and explanation
Correct answer: To avoid double counting
Intermediate goods are used as inputs in the production of other goods. If their full value and the value of the final product were both added, the same economic value would be counted more than once. National income therefore normally counts final goods and services, or adds only the value added at each production stage. This prevents overstatement of output and income.
Frequently asked questions
What is the correct answer to this question?
To avoid double counting
Why is this the correct answer?
Intermediate goods are used as inputs in the production of other goods. If their full value and the value of the final product were both added, the same economic value would be counted more than once. National income therefore normally counts final goods and services, or adds only the value added at each production stage. This prevents overstatement of output and income.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
