Question

Which of the following is an accurate statement concerning double counting?

POSSIBLE ANS.

It should be used to calculate the GDP for goods, but not for services.

It is an appropriate method to account for the increased value of goods and services.

It is an appropriate method to calculate GDP for goods with more than one component.

It should be avoided when calculating the GDP because it inflates totals.

Answer 1

Double counting is a problem in GDP calculation that must be avoided as it leads to an overstatement of the economy's size. To prevent this, statisticians count only the value of final goods and services, excluding intermediate goods.

Step-by-step explanation:

Double counting should be avoided when calculating the Gross Domestic Product (GDP) because it inflates the totals. The accurate statement concerning double counting is: It should be avoided when calculating the GDP because it inflates totals.

When statisticians calculate GDP, they must exclude intermediate goods, which go into producing other goods, from their calculations to prevent double counting. Instead, they only account for the value of final goods and services that are sold for consumption, investment, government, and trade purposes. This method ensures that the total value of a nation's output matches the total value of a nation's income, without exaggeration due to repeated counting of the same items in the production chain.