Give an example of an economic activity included in GDP, and explain why it is included. Also give an example of an economic activity not included in GDP, and explain why it is not included. Text to speech

Economic activity : Final goods purchased - included in GDP

Economic activity : Intermediate goods purchased - not included in GDP

Explanation:

GDP is the total value of goods & services, produced by an economy, during a period of time. It shows the level of economic activity, done with the motive of earning money, within the economy.

Final goods are the goods used for final consumption, investment. Intermediate goods are the goods used for further resale, further processing for resale.

Final goods value are included in GDP. Intermediate goods value are not included in GDP. Such, because value of intermediate goods is already included in the final good; & including them at each stage leads to double counting, over estimation of GDP.

Eg : Milk purchased by sweet shop to make sweets is an intermediate good. Sweets made, purchased by final consumers is a final good. So, value of sweets (final good) will be included in GDP. And, value of milk (Intermediate good) won't be included in GDP. Since, value of milk & value addition by sweet seller is already included in sweets value.