Consider the following statements regarding GDP 1 It is the value added by all the firms in th...........

Economic Affairs Growth and Indicators

Download Solution PDF

Consider the following statements regarding GDP:

1 It is the value added by all the firms in the economy

2 It is the final value of goods and services produced in the economy

3 It is the sum of final consumption and investment expenditure and net of exports and imports

4 It is the income received by all the factors of production

Select the correct answer using the code given below:

1 and 2 only

1, 2 and 3 only

1, 2 and 4 only

All of the above

छोटे Courses बड़े Results

Master Growth and Indicators

Prepare through Micro-courses

Try Now

Explanation:

Only statements 1,2&4 are correct.

An economy produces two types of final goods i.e. consumption and capital goods. Consumption goods get consumed and capital goods are used for further production process (capital goods are also called investment). These two types of goods are purchased by the four sectors of the economy

Household sector (consumption goods)
Private sector (capital goods)
Government sector (consumption and capital both)
External sector (consumption and capital booth)

GDP is the sum of the final value of all goods and services (consumption and capital) produced in the economy or it can also be defined as value added by all the enterprises in the economy. So (i) & (ii) statements are true. Whatever goods and services (consumption and capital) are produced in the economy is ultimately purchased by household, private, government sector and the rest is exported. (iii) statement is true.[Ref: 12th new NCERT Macro, Page 22], GDP = C + I + G + X-M

By Income method, GDP is also equal to the income received by the four factors of production.So (iv) statement is also true. [Ref: 12th new NCERT Macro, Page 22], GDP = Profit + Wages + Interest + Rent

Hence option 3rd is correct.