Value added can be determined by
A) summing the proﬁts of all enterprises in the economy.
B) subtracting the purchase of intermediate products from the value of the sales of ﬁnal products.
C) calculating the year-to-year changes in real GDP.
D) deﬂating nominal GDP.

Question

Quizplus · Accepted Answer

Value added is the increase in the value of a product at each stage of production. To determine value added, we need to subtract the value of intermediate goods from the value of final goods. Option A is incorrect because it only considers profits and not the value added by the production process. Option C is incorrect because it only considers the change in output over time and not the value added. Option D is incorrect because deflating nominal GDP helps to adjust for inflation but does not directly determine the value added.

Value Added Can Be Determined by