Which of the following goods needs further transformation in the economic process?

Correct — B. Intermediate goods are bought by one producer from another to be used up or transformed inside the production process — steel for a car body, flour for a bakery, yarn for cloth.

Because their value is already carried in the price of the final product, national income accounting treats them as intermediate consumption and keeps them out of GDP. Counting them separately would be double counting.

Why the others are wrong

• (a)
  Capital goods — Capital goods such as machines and buildings are used repeatedly in production but are not transformed into the product. Their wearing out is handled as depreciation.
• (c)
  Finished goods — Finished goods are by definition at the end of the process. Nothing further is done to them, which is exactly what the stem rules out.
• (d)
  Consumer durable goods — Consumer durables such as a refrigerator are final goods bought by households and used over years. They are consumed, not transformed into something else.

National income accounting has to avoid counting the same value twice, and the intermediate versus final distinction is how it does that.

A final good is one that has reached its last user, whether a household consuming it or a firm adding it to its fixed capital. An intermediate good is still in transit through the production chain.

The value added method makes the logic visible: each firm's contribution to GDP is its output minus what it bought from other firms, so intermediate purchases cancel out along the chain.

Key facts

• Intermediate goods are used up or transformed within the production process during the accounting year.
• The value of intermediate goods is excluded from GDP to avoid double counting.
• Capital goods are final goods used repeatedly in production and written down as depreciation.

Common traps

• Reading capital goods as intermediate because producers buy both, when only intermediate goods are transformed.
• Fixing a good's category by what it is rather than by the use it is put to.

No directly related past PYQ was found.