In calculating GDP, the value of intermediate goods is eliminated by using the
A) distributive method.
B) value association method.
C) value added method.
D) Federal Reserve method.

Question

Quizplus · Accepted Answer

The value added method is used to eliminate the value of intermediate goods in calculating GDP. This method adds up the value of all final goods and services produced in the economy and subtracts the value of intermediate goods used in their production. By doing this, GDP only includes the value added at each stage of production, which avoids double-counting of goods and services. The other choices (distributive method, value association method, Federal Reserve method) are not relevant to calculating GDP.

In Calculating GDP, the Value of Intermediate Goods Is Eliminated