How Are Intermediate Goods Accounted for When Calculating GDP

question 88

Multiple Choice

How are intermediate goods accounted for when calculating GDP?

• A) The value of all intermediate goods is included in GDP.
• B) The value of intermediate goods is included in GDP only if they were produced in the previous year.
• C) The value of intermediate goods is included in GDP only if they are purchased by firms rather than households.
• D) The value of intermediate goods is not included in GDP unless they are part of inventory.

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Definitions:

Output

The total amount of products or services produced by a company or economy in a given period.

Efficiency

The measure of how well resources are used and allocated to achieve a specific outcome with minimal waste.

Patent

A legal right granted to an inventor or assignee, giving them exclusive rights to manufacture, use, or sell an invention for a certain number of years.

X-inefficiency

This occurs when a firm does not produce output at the lowest possible cost due to inefficiencies within the organization.