Why are the intermediate goods NOT included in the National Income?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. For the prevention of double accounting.
- Intermediate goods are not included in the National Income to prevent double counting.
- These goods are used as inputs in the production of final goods, and their value is already reflected in the price of the final goods.
- Including intermediate goods would lead to counting their value multiple times, which would inflate the National Income.
- Therefore, only the value of final goods is considered to avoid duplication and ensure an accurate measure of the economy's total output.