the value added method used in measuring national income is to

Analyze the question: The question asks about the purpose of the value added method in national income measurement.

Explain the concept: The output (product) method of measuring national income adds up the value of goods and services produced in an economy. A problem arises if we add the full value of every product at every stage of production. For example, consider bread:

• Farmer sells wheat to the miller: ₦100
• Miller sells flour to the baker: ₦150
• Baker sells bread to the consumer: ₦220

If we add ₦100 + ₦150 + ₦220 = ₦470, we count the wheat and flour more than once. This is called double (multiple) counting, and it overstates national income.

Solution (value added at each stage):

• Farmer: ₦100 − 0 = ₦100
• Miller: ₦150 − ₦100 = ₦50
• Baker: ₦220 − ₦150 = ₦70

Total value added = ₦100 + ₦50 + ₦70 = ₦220, which equals the final price of the bread. So the value added method counts only the new value created at each stage, which gives the true output.

Checking the options:

• A. Measuring output at factor cost is an adjustment (removing taxes and subsidies), not the purpose of value added.
• B. Avoiding multiple counting of output is the main purpose of the value added method. ✔
• C. Deducting depreciation gives net national product, which is a different adjustment.
• D. Adding net factor income from abroad converts GDP to GNP, which is also a different step.

Exam tip: When you see "value added", think "avoid double counting". Value added = value of output − cost of intermediate goods.