Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
Question
Book Icon
Chapter 21, Problem 1.1P
To determine

To define double counting and its impact on GDP.

Expert Solution & Answer
Check Mark

Explanation of Solution

Double counting is the phenomenon which occurs when the price of an intermediate commodity is counted twice. An intermediate is defined as a commodity which is used for further production of some other good. GDP is calculated as the total value of all final goods and services produced within the territory of a country in a given financial year.

The total sales include the sale of intermediate goods also. GDP is different from the total sales because the total sales include intermediate goods while the GDP takes into account only final goods.

Economics Concept Introduction

Concept Introduction:

Double counting: Double counting is an accounting error in which the value of intermediate goods are accounted more than one time.

GDP (Gross Domestic Product): GDP refers to the market value of all final goods and services that are produced in an economy during an accounting year. It is equated as GDP=Consumption (C)+Investment (I)+Government expenditure (G)+Net export.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co
Text book image
Survey of Economics (MindTap Course List)
Economics
ISBN:9781305260948
Author:Irvin B. Tucker
Publisher:Cengage Learning
Text book image
MACROECONOMICS FOR TODAY
Economics
ISBN:9781337613057
Author:Tucker
Publisher:CENGAGE L
Text book image
Economics For Today
Economics
ISBN:9781337613040
Author:Tucker
Publisher:Cengage Learning
Text book image
Survey Of Economics
Economics
ISBN:9781337111522
Author:Tucker, Irvin B.
Publisher:Cengage,
Text book image
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning