Which of the following goods is directly counted in GDP?
a. the lettuce that Subway purchases for its sandwiches
b. the plastic bags that Subway purchases to wrap its sandwiches
c. the bread that Subway purchases for its sandwiches
d. a 12 inch Subway sandwich purchased by a student
The Correct Answer and Explanation is :
The correct answer is:
d. a 12 inch Subway sandwich purchased by a student
Gross Domestic Product (GDP) measures the market value of all final goods and services produced within a country in a given period. It includes items that are sold directly to the end consumer and excludes intermediate goods, which are those used to produce other goods.
In the options provided:
- a. the lettuce that Subway purchases for its sandwiches,
- b. the plastic bags that Subway purchases to wrap its sandwiches, and
- c. the bread that Subway purchases for its sandwiches
are all examples of intermediate goods. Subway uses these items as inputs to create their final product, which is the sandwich. These items themselves do not count directly in GDP calculations because including them would result in double-counting. If the value of the final sandwich is included in GDP, then the individual values of the ingredients and packaging that go into making it are not counted separately. This avoids the issue of double-counting the same value.
- d. a 12 inch Subway sandwich purchased by a student
This option represents a final good. The sandwich is the end product sold directly to the consumer. The value of this sandwich includes all the inputs (lettuce, bread, and bags in their role as packaging if applicable) in its final price. It is this final sale that is counted in GDP, reflecting the total value added through the production process. Thus, it captures the economic activity related to the production and sale of new products and services within the economy.
This distinction ensures that GDP accurately reflects only the value of final outputs in an economy, providing a clear picture of economic activity and growth.