3. One of the major principles used in calculating GDP is to value goods at thei

Question

3. One of the major principles used in calculating GDP is to value goods at their market prices. But the "outputs" of governmental offices are not sold, so they have no market prices. In the actual calculation of GDP a. they are valued at zero b. their value must be estimated from the market prices of similar privately provided services c. their value must be estimated from a survey of recipients of these services who are asked how much they think these services are worth and from which an average value is estimated. d. they are valued at the cost of the inputs needed to produce them e. current prices charged to final consumers

Explanation / Answer

Option (a).

The basic principle of computing GDP is that, if a good or service has no market price, they are excluded from GDP computation.

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