How is GDP calculated?

1.	How is GDP calculated?
Answer» The sum of the value of all final goods and services produced in all 3 sectors in a particular year is called GDP. GDP = Consumption + Investment + Government spending + ( exports - imports) \tGross Domestic Product (GDP) is the market value of the final goods and services produced during a year within the domestic territory of a country.\tHere only final goods and services are counted to avoid the problem of double counting.\tFor e.g. a farmer sold wheat to flour mill for Rs. 10 per kg. The mill grinds the wheat and sold the flour to a biscuit company for Rs. 12 per kg. The biscuit company uses the flour, sugar and butter to make 5 biscuit packets. He sold the biscuit to the consumer at Rs. 15 per biscuit packet.Here biscuits are the final goods that are purchased by the consumer. Wheat and wheat flour are the intermediate goods used in the production of final good.The value of Rs. 75 already includes the value of flour Rs. 12.\xa0Hence only the value of final goods and services.\xa0\t\tTherefore, GDP = Value of output − Intermediate Consumption

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