Question

How do we count various goods and services for calculating the Gross Domestic Product (G.D.P.) of a country? Explain with an example.

Answer 1

The various goods and services are counted on the basis of the value of each good or service, not on the basis of actual numbers.

• The value here is referred to as the value of final goods and services, not the value of intermediate goods.
• It is understood that the value of final goods already includes the value of all intermediate goods that are used in making the final goods.
• The total production of each sector is calculated by adding the value of all final goods and services of the sector in a year.
• The total production of all three sectors within a country is known as the Gross domestic product of the country.

Example:

Farmer sold wheat to a flour mill for 10 per kilogram.