Question

In Gross value added - A = Net value added, what is A?

• A. Depreciation
• B. Value added
• C. Sale of firm
• D. None of these

Hint:

Depreciation is the reduction in the value of an asset over time and is subtracted from gross value added to calculate net value added.

Answer 1

The Correct Option is A

Step 1: Understanding the Gross Value Added equation.
The equation \( \text{Gross Value Added} - A = \text{Net Value Added} \) is used in economics to calculate the net value produced by a firm or economy. In this equation, \( A \) represents the value that is subtracted to derive net value, and it corresponds to depreciation, which is a reduction in the value of assets over time.

Step 2: Analyzing the options.
(A) Depreciation: Correct. Depreciation represents the loss of value of capital goods over time, which is subtracted from gross value added to calculate net value added.
(B) Value added: This is incorrect because value added is what is derived after subtracting depreciation.
(C) Sale of firm: This is unrelated to the equation as it refers to the transaction of a firm's ownership rather than the calculation of net value.
(D) None of these: This is incorrect because the correct answer is (A).

Step 3: Conclusion.
In the equation, \( A \) represents depreciation. Therefore, the correct answer is (A) Depreciation.