The correct option is 1 and 3 only.
Explanation
In National Income Accounting, goods are classified into intermediate goods and final goods based on their end-use. Intermediate goods are those used for further production or resale in the same year, whereas final goods are meant for final consumption or investment.
Statement-wise Analysis:
- Statement 1 is Correct: Intermediate goods are used as raw materials or inputs in the production process of other goods. They lose their identity or are completely consumed during the creation of the final product.
- Statement 2 is Incorrect: The value of intermediate goods is not added separately to the Gross Domestic Product (GDP). Their value is already included in the price of the final good. Adding them separately would lead to the problem of double counting, inflating the national income estimates.
- Statement 3 is Correct: Wheat flour purchased by a biscuit manufacturing company is used as a raw material to produce biscuits. Since it is an input for further production and not for final consumption by the household, it is classified as an intermediate good.
Key Takeaway:
GDP calculations include only the market value of final goods and services to avoid double counting. The value of intermediate goods is inherently captured within the final price of the product.