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BREAKING DOWN 'Intermediate Good'

What is an 'Intermediate Good'
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When an intermediate good is produced, but not sold, it is added to inventory. This change in inventory is recorded in GDP as a change in inventory under investment. The next year, when it moves out of inventory and into a final good, it is subtracted from change in inventory under investment.

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Gross domestic product (GDP) is a measurement of the market value of final goods. If intermediate goods were included in the calculation, the intermediate goods would be counted twice in the GDP calculation giving an inaccurate value.

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Intermediate goods are not counted in a country's GDP, as that would mean double counting, as the final product only should be counted, and the value of the intermediate good is included in the value of the final good. However, if the good is used for resale or further production (in the same year), then it is an intermediate good. National Income includes only Final Goods: Only final goods are included in national income.

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Intermediate goods- Goods which are used up during the process of production of other goods. Final goods-Goods which do not undergo any firther transformation in the production process. Gross Domestic Product (GDP)- It measures the aggregate production of final goods and services taking place within. Intermediate goods and services, which are used in the production of final goods and services, are not included in the expenditure approach to GDP because expenditures on intermediate goods and services are included in the market value of expenditures made on final goods and services.