Assume a simple economy that produces wheat converts it to flour and then produces biscuits with the flour the value of wheat produced in the economy is rupees 10000 the value of flower produced is rupees 15000 and the value of biscuits produced is 27000 the economic plane GDP to be rupees 52000 however the international organization saw that the GDP of the country is 27000.

Choose if the given statement is True/False.

see full answer

Your Exam Success, Personally Taken Care Of

1:1 expert mentors customize learning to your strength and weaknesses – so you score higher in school , IIT JEE and NEET entrance exams.

An Intiative by Sri Chaitanya

True

False

answer is A.

(Unlock A.I Detailed Solution for FREE)

Best Courses for You

JEE

NEET

Foundation JEE

Foundation NEET

CBSE

Detailed Solution

The above statement is true.
The GDP is indeed calculated as the value of final goods produced in a year. As the final goods already include the cost of immediate goods, only the value of the final goods will be estimated. In the above example, the price of the biscuits already consists of the price of flour and wheat. If the economy is calculating the cost of flour, wheat, and biscuits separately, then the economy is making a mistake in guesstimating the same value three times. Therefore, since the cost of intermediate goods is already counted once in the final goods, it does not need to be measured again.

Watch 3-min video & get full concept clarity