Government Services Are Valued in GDP at Cost Rather Than

question 31

Multiple Choice

Government services are valued in GDP at cost rather than at their market prices because

• A) price changes occur frequently as a result of inflation, which distorts the measurement of GDP.
• B) it is necessary to avoid counting intermediate goods in GDP.
• C) otherwise government and private transfer payments would end up being counted in GDP.
• D) most government services produced are not purchased by their users.
• E) the price of a service is not always a measure of the worth of a service.

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Definitions:

Accounts Payable Period

The average number of days it takes a company to pay off its suppliers and creditors.

Operating Cycle

The time period between the acquisition of inventory by a company and the receipt of cash from the sale of that inventory.

Payables Turnover

A financial efficiency ratio that measures how quickly a company pays off its suppliers by comparing net purchases to average accounts payable.