Answer to Question #189791 in Macroeconomics for zohan

Question

What is the difference between intermediate and final goods? Why is the distinction between intermediate and final goods important for measuring GDP?

Answer 1

final goods while final goods are directly used by consumers.

(2) Intermediate goods may either finisher or unfinished, but final goods are finished goods.

(3) Final goods are an important part of national income, but, intermediate goods are not part of the national income.

(4) Final goods are not for resale or further processing while intermediate goods are used for resale or further processing.

Thus the distinction between intermediate and final goods is important for measuring GDP.

The sale of intermediate goods is excluded from the national income accounting to avoid double-counting. If one includes both of them, then there will be an exaggregate estimate of the GDP.

As the value of final goods already involves the value of intermediate goods, so it is not necessary to add the value of the intermediate goods in the accounting of the GDP.