What do you mean by the term Gross Domestic Product? What precaution should we take in calculating GDP?
Gross Domestic Product (GDP) It is the total
production in a country or state within a time period normally a year. It is the calculation of values of all final goods and services within a year.
Precaution in Calculating GDP:
There is a precaution one has to take. Not every good (or service) that is produced and sold needs to be counted. It only includes the final goods and services. Final goods include the values of all raw material and intermediate goods.
So, accounting these we can avoid multiple counting of intermediate goods. For instance, making of biscuit uses wheat, flour, sugar, oil etc. Biscuits are final goods, i.e. goods that reach the consumers. It already includes the value of all intermediate goods used in producing final goods and services.