The correct option is 2 only
Explanation
In National Income Accounting, goods are classified into
Final Goods and
Intermediate Goods based on their
end-use. This distinction is crucial for estimating Gross Domestic Product (GDP) to avoid the error of double counting.
Statement-wise Analysis
- Statement 1 is Incorrect. A good is designated as a final or intermediate good based on the economic nature of its use (end-use), not its physical characteristics. For example, sugar purchased by a household is a final good (consumption), whereas the same sugar purchased by a bakery to make cakes is an intermediate good (raw material).
- Statement 2 is Correct. In the context of national income accounting, goods purchased by an enterprise specifically for further production (as raw material inputs) or transformation (value addition) are classified as Intermediate Goods. They are "used up" in the production process.
- Statement 3 is Incorrect. Final goods are those that have crossed the production boundary. They are meant for final consumption or investment and do not remain in the active economic flow for further transformation. Goods that remain in the active flow for value addition are Intermediate Goods.
Key Takeaway
The
End-Use Method is the sole criterion for classifying goods.
Final Goods (Consumption + Investment) cross the production boundary, while
Intermediate Goods remain within the boundary for resale or transformation.