Answer to Question #34277 in Macroeconomics for Mikhail Barry

Question

Explain in your own words the necessity of using final good/services when calculating gross domestic product.

Answer 1

It is necessary that while calculating GDP all products and services produced this year are taken into account only once. Most products goes through several production stages before hits the market. Parts, components of the product or even the products are bought and sold several times. So, to avoid multiple accounting of products that are sold and resold when calculating GDP we take into account only the final product that refers to goods and services purchased for consumption and not for resale, further processing or refining.