Why are resold goods and intermediate goods not included in GDP, and what would happen if they were
Answer (2)
Resold goods and intermediate goods are not included in GDP because including them would lead to double-counting, which would make the economy look bigger than it actually is. GDP is meant to count only final goods and services—those that are ready for the end user or customer.Resold goods are things that were already counted in GDP during the year they were first made or sold. For example, if someone buys a brand-new car in 2020, that sale is included in 2020’s GDP. If the same car is sold again in 2023 as a second-hand vehicle, it is not counted again. Why? Because nothing new was produced—just a change in ownership. If we counted it again, we would be adding the same car’s value twice, which is misleading.Intermediate goods are items used to make other products. These are ingredients or raw materials, like flour used to bake bread or cloth used to make clothes. Only the final product—the bread or the clothes—is counted in GDP. Including the value of both the flour and the bread would be double-counting, because the price of the bread already includes the cost of the flour.For example, if a bakery buys flour, butter, and sugar for ₱100, and then sells the finished bread for ₱200, only the ₱200 is counted in GDP. That’s because it represents the final value of production.In the Philippines, this rule avoids overreporting income in industries like manufacturing or real estate. If we counted resale of old houses or all raw materials separately, GDP numbers would be too high and give a false picture of growth.By including only final goods and services, GDP stays accurate and fair—showing only what was truly newly produced in that year.
Resold goods and intermediate goods are not included in GDP because GDP measures the value of final goods and services produced within a country during a specific period.Resold GoodsThese are used goods sold again (like a used car or secondhand clothes). They were already counted in GDP when they were first sold as new goods. Including them again would double count economic activity that actually happened in a previous period, inflating GDP artificially.Intermediate GoodsThese are goods used as inputs to produce other goods (like steel used to make cars). They are not counted separately because their value is already included in the final product’s price. Counting intermediate goods separately would also cause double counting, since the value is captured at the final stage.If resold and intermediate goods were included in GDP,GDP would be overstated because the same value would be counted multiple times.It would no longer accurately represent the actual production output during the period.Economic comparisons over time or between countries would be misleading, as inflated GDP figures wouldn’t reflect real growth or production.
