Suppose a good is produced in a country from a combination of foreign parts and domestic inputs. If the good sells for $900 but requires $400 of imported parts. The domestic value added is $

Domestic Value added = = $500

Explanation:

Gross domestic product (GDP) which is the total market value of all the final goods and services produced in a country over a given period of time. The GDP can be calculated using the value added approach.

Here the GDP figure is ascertained by summing the amount of additional value created by each factor of production at each stage of the production process of the final product.

Only the values added are summed, the cost of the inputs or intermediate goods are not included.

Value added at a stage = Market value and the end of the stage - value of input at the beginning of the stage

So we can apply this to the question

Domestic Value added

= $900 - $400

=$500