In computing GDP, market prices are used to value final goods and services because
A) market prices reflect the values of goods and services to the buyer.
B) market prices do not change much over time, so it is easy to make comparisons between years.
C) if market prices are out of line with how people value goods, the government sets price ceilings and price floors.
D) None of the above is correct; market prices are not used in computing GDP.

Question

Quizplus · Accepted Answer

Market prices reflect the values of goods and services to the buyer, which is why they are used to value final goods and services in computing GDP. This method ensures that the value of goods and services produced is accurately reflected in the GDP calculation. Option B is incorrect because market prices can change significantly over time, leading to difficulties in making year-over-year comparisons. Option C is also incorrect because while the government may set price ceilings or floors, this is not relevant in computing GDP. Option D is incorrect because market prices are indeed used in computing GDP.

In Computing GDP, Market Prices Are Used to Value Final