Question

State the steps pertaining to the estimation of National Income by the Value Added Method.

Hint:

The Value Added Method avoids double counting by focusing only on the additional value created at each production stage.

Answer 1

The steps involved in estimating National Income using the Value Added Method are: 
Identify Producing Units: Classify all producing units into primary, secondary, and tertiary sectors. 
Calculate Gross Value of Output: Add the value of all goods and services produced in each sector. 
Subtract Intermediate Consumption: Deduct the value of inputs used in production to get the gross value added. 
Adjust for Depreciation: Subtract depreciation from the gross value to get the net value added. 
Include Net Factor Income from Abroad (NFIA): Add NFIA to obtain the final National Income.