double counting

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An error that occurs when a total is obtained by summing gross amounts instead of net amounts. For example, finding the total product of an economy by adding up the gross sales of each enterprise, without subtracting purchases of inputs from other enterprises, involves double counting. As firms buy large amounts of fuel, materials, and services from one another, simply adding gross outputs results in double, or multiple, counting of output. Double counting is avoided by subtracting purchased inputs from gross output to get value added for each enterprise. The national product is total value added.

Subjects: Economics.

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