expenditure method
income method
output method
value-added method
Explanation
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Discussions (6)
The correct answer is:
C. output method
Explanation:
Double counting happens when the value of intermediate goods (goods used to produce final goods) is counted more than once while calculating national income. This inflates the actual value of the country's output.
This problem is most common in the output (or product) method of calculating national income because:
The output method adds up the value of all goods and services produced in an economy.
If we're not careful to exclude intermediate goods, they get counted along with the final goods, which leads to double counting.
Why the other options are wrong:
A. Expenditure method: This adds up spending on final goods and services only (like consumption, investment, government spending, and net exports), so it avoids double counting.
B. Income method: This calculates income earned (like wages, rent, interest, and profit), so there's no risk of counting intermediate goods multiple times.
D. Value-added method: This method was actually designed to avoid double counting by summing up only the value added at each stage of production.
Final Answer:
C. Output method is the method where double counting is a real issue if not handled carefully.
