Why are only final goods and services included in measuring GDP? ...

[storky111]

Why are only final goods and services included in measuring GDP? Give examples to complete your answer.
 
  What will be an ideal response?

Question 2

Which of the following statements is FALSE?
 
  A) Fiscal policy is the attempt to influence the economy using taxes, transfer payments, and government expenditures.
  B) Government expenditure affects aggregate demand directly because government expenditure is a component of aggregate demand.
  C) Taxes and transfer payments affect aggregate demand by changing disposable income.
  D) An increase in disposable income leads to a decrease in aggregate demand.

[stallen]

Answer to Question 1

We purposely leave intermediate goods or services out of our calculation of GDP so we don't double count. Examples of this are not counting the tires produced by Firestone that are then sold to Ford to be placed on their new cars. If we counted the tires when they were produced by Firestone and then also counted them when they were part of the Ford, we would be double counting them.

Answer to Question 2

D

[storky111]

Correct answers!

[stallen]

Great! Please up vote