1. The goods and services produced in an economy are of two kinds - intermediate goods, which are used up in producing other goods, and final goods, which reach the ultimate consumer. 2. The value of the final goods and services ALREADY INCLUDES the value of all the intermediate goods and services that were used in producing them. 3. If the intermediate goods were also counted separately, their value would be counted twice - this is called DOUBLE COUNTING - and the GDP would be wrongly inflated. 4. Example: while measuring the value of a shirt (a final good), the value of the cotton and the yarn used in making it is already included in the price of the shirt; counting the cotton and the yarn again would exaggerate the total value. 5. Hence, to get the true value of what is produced in a country during a year, only the value of final goods and services is counted in GDP.