Practicing Success
Value Added Method of calculating aggregate annual value of goods and services is also called _________. |
Product Method Income Method Expenditure Method Cost and Revenue Method |
Product Method |
The correct answer is Option 1: Product Method. The value-added method, also known as the product method, is one of the three main methods of calculating the aggregate annual value of goods and services produced in an economy. The other two methods are the income method and the expenditure method. The value-added method measures the total value added by all the producers in an economy. Value added is the difference between the value of the outputs produced by a firm and the value of the inputs it purchases from other firms. The value-added method is used to calculate gross domestic product (GDP), which is the total market value of all final goods and services produced in an economy in a given period. The value-added method is considered to be a more accurate measure of GDP than the income method or the expenditure method because it avoids the double counting of intermediate goods. Intermediate goods are goods that are used as inputs in the production of other goods. When the value-added method is used, the value of intermediate goods is only counted once, at the stage where they are finally sold as final goods. |