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Gross Value Added (Gva)
Gross value added (GVA) is a measure of economic activity that is calculated by taking the value of all goods and services produced in a particular country or region in a particular period of time. It is a key indicator of a country’s economic growth and prosperity.
Formula for GVA:
GVA = NVA + Taxes – Subsidies
where:
- GVA is gross value added
- NVA is net value added
- Taxes are all taxes paid on goods and services
- Subsidies are all subsidies received for goods and services
Components of GVA:
GVA is composed of the following components:
- Primary production: The value of goods and services produced directly from natural resources, such as agriculture, mining, and forestry.
- Manufacturing: The value of goods and services produced by manufacturing industries, such as automotive, electronics, and clothing.
- Construction: The value of goods and services related to construction activities, such as building houses, roads, and bridges.
- Trade: The value of exports and imports of goods and services.
Uses of GVA:
- Measuring economic growth: GVA is a key indicator of economic growth. It is used to track changes in a country’s economic activity over time.
- Calculating GDP: GVA is used to calculate GDP, which is the total value of all goods and services produced in a country in a particular period of time.
- Understanding economic structure: GVA can be used to understand the structure of a country’s economy and to identify the sectors that are driving growth.
Examples:
- A country’s GVA in a particular year is $10,000. If its net value added is $8,000, then its taxes are $2,000.
- A manufacturing company’s GVA in a particular year is $20,000. If its cost of goods sold is $10,000, then its value added is $10,000.
Additional notes:
- GVA is a measure of economic activity at a particular point in time.
- GVA does not include indirect taxes or adjustments for inflation.
- GVA can be calculated for a specific industry, region, or country.