The Reason Economists Include Only the Value of Final Goods

question 161

Multiple Choice

The reason economists include only the value of final goods and services when they calculate GDP is that intermediate goods:

• A)do not create value added.
• B)do not add to economic welfare.
• C)have no social value.
• D)would be double counted otherwise.

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Definitions:

Economic Efficiency

A condition where resources are allocated in a way that maximizes the production of goods and services at the lowest cost to society.

Opportunity Cost

The value of the next best alternative forgone as a result of making a decision.

Comparative Advantage

The ability for a particular individual, commercial entity, or country to produce a certain good or render a service with significantly less opportunity cost compared to opposition.

Domestic Opportunity Costs

The cost of forgoing the next best alternative use of a country's domestic resources.