The Problem of “Double Counting”
We defined GOP as the total production of final goods and services. A final product is one that is produced and sold for consumption or investment. GOP excludes in goods goods that are used up to produce other goods. GOP therefore includes bread but not wheat, and home computers but not computer chips.
What has happened to products like flour and computer chips? They are intermediate products and are simply cycling around inside the block marked “Producers.” If they are not bought by consumers, they never show up as final products in GOP.
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