What precautions are necessary while using value added method of … - Vidyadip

Question

What precautions are necessary while using value added method of measuring National Income?

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Answer

Following are the necessary precautions while using value added method of measuring National Income:

Avoid double counting, by considering only the final goods.
Sale of second hand goods should not be considered.
Production for self-consumption (like the farmer's family using their own farm output) must be considered.
Value addition should include imputed rent on vowner occupied houses, because imputed rent is taken as a part of factor income and factor income has got to be identical with value added.

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