What is Gross Domestic Product (GDP)? How do we count the various goods and services for calculating Gross Domestic Product? Explain with examples.
What is Gross Domestic Product (GDP)? How do we count the various goods and services for calculating Gross Domestic Product?
GROSS Domestic Product (GDP) is the total sum of the values of the final goods and services of the primary, secondary and tertiary sector of economy of a country, produced during a year.
The counting of various goods and services for calculating GDP can be understood by the following example:
Wheat and flour are intermediate goods used for making final product like bread and biscuit. Intermediate product should not be counted in the figure of GDP. Biscuit and bread are the final products, prepared using flour and other ingredients like sugar, salt, oil etc.
Only the final products are reaching the actual consumer. The value of intermediate products is already counted in the final product and if this is again counted, it will lead to double counting, causing an error in the estimation of GDP.