Q. Which of the following statements is/are correct regarding the Product (Value Added) Method of calculating national income?
1.Value Added of a firm is calculated by deducting the value of intermediate goods from the value of output.
2.Gross Value Added (GVA) includes depreciation, while Net Value Added (NVA) excludes depreciation.
3.An increase in inventories during a year is treated as part of the firm’s production.
Select the correct answer using the code below:
Quarterly-SFG-Jan-to-March
Red Book

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2, and 3

Answer: D
Notes:

Explanation:

  • Value Added = Value of Output – Value of Intermediate Goods.
  • GVA includes depreciation (consumption of fixed capital). NVA is GVA minus depreciation.
  • Any increase in inventories (finished, semi-finished goods, or raw materials) during the year is counted as additional production of that year.

Source- 12th NCERT: Economics: Macroeconomics

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