Consider the following data, which shows the quantities and prices of two goods produced in the economy, to answer the next three questions:

-An accurate measure of GDP is derived by adding:

Question

Consider the following data, which shows the quantities and prices of two goods produced in the economy, to answer the next three questions:
 
-An accurate measure of GDP is derived by adding:

Quizplus · Accepted Answer

The best measure of GDP is obtained by adding the value added at each stage of production, which means the value of final goods minus the value of intermediate goods used in production. This method avoids double counting and provides a more accurate measure of the economy's total output of goods and services. Option A is incorrect because it includes non-market activities such as housework, and it also includes the value of intermediate goods, leading to double counting. Option C is incorrect because it includes the value of materials that were already accounted for in previous stages of production. Option D is incorrect because profit is only a part of the value added, and it does not reflect the value of intermediate goods. Option E is incorrect because it includes the value of intermediate goods, which would lead to double counting if added to the value of final goods.

Consider the Following Data, Which Shows the Quantities and Prices