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What are final goods? What are we trying to avoid by counting just final goods?

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Final answer:

Final goods are those ready for consumption or investment without further processing, and focusing on them avoids double counting in GDP calculations.

Step-by-step explanation:

Final goods are products that are at the furthest stage of production at the end of a year, and they are ready for consumption by the end-user or for investment without further processing. We must focus on final goods to avoid the problem of double counting when calculating a nation's Gross Domestic Product (GDP). Double counting occurs when the value of a good is counted multiple times at different stages of its production, which would inaccurately inflate the estimate of a nation's economic output. For example, if government statisticians counted both the tires produced by a tire manufacturer and the entire truck sold by an automaker, which includes those same tires, it would result in counting the value of the tires twice. Instead, to get an accurate measure of the economy's size, statisticians only count the value of the final product, such as the Ford truck, in GDP calculations and exclude the intermediate goods like the tires alone.

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