Answer:
The value-added method for calculating GDP involves adding up all the net value added at the different stages of production.
The formula used to calculate GDP using the value-added method:
GDP = ∑ (P x Q)
where:
- P = market price of goods and services
- Q = total output
The net value added at each stage of production = value of total output - cost of intermediate goods.
The main difficulty with this method is that it is more complex and requires more calculations, while other methods only add the value of final goods and doesn't account for the value of intermediate goods.
