Economics

Question one The reason why gross domestic product great deal be measured in three ways is to revoke repeat counting, two-base hit counting is when bailiwick accountants overestimate or overdraw the value of GDP by counting received items much than once. To avoid this, three ways have been devised to purport GDP, and altogether these ways should produce the same answer. Consider the pursuit: * A farmer produces 1000 litres of milk which he shares to a dairy manufacturer at r6.00 per litre, yielding a wide of R6.000. * The dairy manufacturer processes the milk into yoghurt, which he then sells to a solid food distributor for R8.500. * A custard manufacturing company buys the yoghurt for R10.500 from the food distributor * afterwards making custard with the yoghurt, the company sells it to a food wholesaler for R15.000 * The wholesaler sells the custard to the shops for R18.000 * The shops then decide to sell the yoghurt to its utmost consumers for R20.000 The basic way to avoid two-bagger counting these items is therefore, to count, in to each one transaction merely the value added (i.e. the addition to the value of the output, our prototype yields an answer of R20.000) alone what has all this got to do with the adjective last(a) in the definition of GDP?

In our example, the value of the shops gross sales, to the final consumer amounts to R20.000. The fact that this is exactly advert to the total value added is no accident. Secondly, double counting evict be avoided by only counting the value of those sales where a dear(p) or service reaches its final destination. mu ch(prenominal) sales involve goods and work! which have to be secern from intermediate goods and work. Intermediate goods and services do not habitus part of GDP, thus the national accountants allow only be interested in the of the storekeeper to their consumers (i.e. the final sale) Note, however, that it is the final workout of a product that will determine if it is an intermediate good or final product. The trio way in which double counting can be avoided is by...If you want to get a full essay, order it on our website: BestEssayCheap.com

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