To calculate value added, we need to subtract
A)the cost of domestic- and foreign-produced intermediate inputs.
B)the cost of all goods and services exported.
C)only the cost of domestically produced intermediate inputs.
D)only the cost of foreign-produced intermediate inputs.
E)total imports.

Question

Quizplus · Accepted Answer

Value added is calculated by subtracting the cost of intermediate inputs (both domestic and foreign) from the total revenue of a firm or industry. This is because the value added by a firm or industry is the difference between the cost of inputs and the price of outputs. Therefore, the correct choice is A, which includes both the cost of domestic- and foreign-produced intermediate inputs.

To Calculate Value Added, We Need to Subtract