Why are the intermediate goods NOT included in the National Income?

Key Points

• Intermediate goods are not included in the National Income to prevent double accounting.
• Including intermediate goods would lead to double counting because their value is already embedded in the final goods and services.
• National Income is a measure of the total value of final goods and services produced in an economy over a specific period.
• Counting intermediate goods separately would inflate the National Income figures inaccurately.

Additional Information

• Intermediate goods are those goods that are used as inputs to produce other goods and services.
• Examples of intermediate goods include raw materials, components, and parts used in manufacturing.
• Final goods are those that are ready for consumption or investment and are included in the calculation of National Income.
• To accurately measure the economic activity and avoid overestimation, only the value of final goods and services is counted.