Question

The value-added method involves taking the cost of intermediate outputs (i.e., outputs that will, in turn, be used in the production of another good) and subtracting that cost from the value of the good being produced. In this way, only the value that is added at each step (the sale value minus the value of the intermediate goods that went into producing it) is summed up. This method gives us the same result as the standard method of only counting the value of final goods and services because: the system of accounting requires that they be the same. the only difference is that the value-added method adds up production in the economy as it is produced, and the standard method of counting only uses the completed value at the end of the production chain. the only difference is that the standard method of counting adds up production in the economy as it is produced, and the value-added method totals the value at the end of the production chain. both methods are used by the same agency, so the totals have to be equal.

Answer 1

the only difference is that the value added method adds up production in the economy as it is produced, and the standard method of counting only used the completed value at the end of the production chain.

Step-by-step explanation:

The value added method in the production process aims to measure the value added at each stage of production considering intermediate products as input.

For example if plastic is produced in a plant and it is in turn used to produce plates. Value added at stage of plate production is the value of plates less cost of producing plastic.

The standard method counts only value of final goods and services.

Both methods give the same result because summation of value in the value added approach will be the same as the value at the end of the production chain (standard method).