Which of the following best explains why the Value Added Approach is preferred in national income accounting?

easy Q1 of 15

Economic Awareness - Sectors of Indian Economy

AIt avoids double counting by adding net value added at each production stage

BIt calculates GDP by summing all final goods and services only

CIt measures total income earned by factors of production

DIt sums all expenditures made on goods and services

Step-by-Step Solution

Step 1: Understand the purpose of Value Added Approach
The approach aims to calculate GDP without counting the same goods multiple times.
Step 2: Analyze options
It avoids double counting by adding net value added at each production stage, excluding intermediate goods. Summing final goods relates to another method, measuring incomes is the Income Approach, and summing expenditures is the Expenditure Approach.
Final Answer:
It avoids double counting by adding net value added at each production stage → Option A
Quick Check:
Value Added Approach = avoids double counting by summing net additions ✅

Quick Trick: Remember: Value Added sums net contributions, not total output.

Common Mistakes:

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