Question

Attempting to calculate the value of an economy by adding up the value of every good and service produced would lead to what?

1) An accurate measure of the economy's value
2) An overestimate of the economy's value
3) An underestimate of the economy's value
4) Cannot be determined

Answer 1

Calculating the value of an economy by adding up the value of every good and service produced leads to an overestimate of the economy's value due to the potential for double counting.

Step-by-step explanation:

When calculating the value of an economy by adding up the value of every good and service produced, it would lead to an overestimate of the economy's value. This is because double counting can occur when output is counted more than once as it travels through the production stages. For example, if the value of tires produced by a tire manufacturer is counted, and then the value of a new truck that contains those tires is counted, the value of the tires would be double counted. This would result in an overestimated value of the economy.